<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED AUGUST 31, 2000
Seeking growth of capital
KEMPER S&P 500
INDEX FUND
"... The fund began operating in a challenging market environment marked by
increased volatility, weakness in many Internet-related stocks and higher
short-term interest rates. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
7
PERFORMANCE UPDATE
11
INDUSTRY SECTORS
12
LARGEST HOLDINGS
13
PORTFOLIO OF INVESTMENTS
25
FINANCIAL STATEMENTS
28
FINANCIAL HIGHLIGHTS
29
NOTES TO FINANCIAL STATEMENTS
33
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
KEMPER S&P 500 INDEX FUND CUMULATIVE TOTAL RETURNS
FOR THE FIVE-MONTH PERIOD ENDED AUGUST 31, 2000 (UNADJUSTED FOR ANY SALES
CHARGE)
[BAR GRAPH]
<TABLE>
<S> <C>
Kemper S&P 500 Index Fund Class A 0.95%
Kemper S&P 500 Index Fund Class B 0.74%
Kemper S&P 500 Index Fund Class C 0.74%
S&P 500 Index 0.78%
Lipper S&P Funds Category Average* 1.53%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*LIPPER, INC. RETURNS AND RANKINGS ARE BASED UPON CHANGES IN NET ASSET VALUE
WITH ALL DIVIDENDS REINVESTED AND DO NOT INCLUDE THE EFFECT OF SALES CHARGES; IF
SALES CHARGES HAD BEEN INCLUDED, RESULTS MIGHT HAVE BEEN LESS FAVORABLE. LIPPER
DATA ARE FOR THE PERIOD 3/31/00 TO 8/31/00.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
8/31/00 4/3/00
.........................................................
<S> <C> <C> <C> <C>
KEMPER S&P 500 INDEX FUND
CLASS A $9.59 $9.50
.........................................................
KEMPER S&P 500 INDEX FUND
CLASS B $9.57 $9.50
.........................................................
KEMPER S&P 500 INDEX FUND
CLASS C $9.57 $9.50
.........................................................
</TABLE>
TERMS TO KNOW
BALANCE SHEET A condensed financial statement showing what a company owns, what
it owes and the ownership interest in the company of its stockholders, at a
certain time.
LIQUIDITY The ease with which a stock can be bought or sold. Due to higher
recognition and a greater quantity of shares, large-cap stocks are typically
more liquid than small-cap stocks. Reduced liquidity offers the potential of
greater risk and return: Investors who wish to sell a less liquid stock may find
it difficult to find a buyer, but they may also be able to dictate a higher
price if the stock is in demand.
MARKET CAPITALIZATION A measure of the size of a company that offers publicly
traded stock, as determined by multiplying the current share price by the number
of shares outstanding.
VOLATILITY The characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile due to
uncertainty in a company, industry, market or economy. Compared with many other
types of stocks, technology stocks are subject to a higher degree of volatility.
<PAGE> 3
ECONOMIC OVERVIEW
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.
DEAR KEMPER FUNDS SHAREHOLDER:
Times have been good. During the first half of 2000, the global economy put on
more speed than it has in over a decade. All regions participated. The United
States, of course, was still powering ahead. The growth rate in Europe was
nearly 4 percent. Asia fed off an electronics boom and a revitalized China.
South America got a boost from an improved credit rating. New money pumped up
energy producers from Mexico to the Middle East.
Now for the bad news, which is that the best news is probably behind us.
Global growth peaked in the spring, and in the United States, at least, the
slowdown was abrupt. After 6 percent growth in the year ending June 30, we
estimate that the economy grew at a rate of less 3 percent rate during the
summer. It seems that expensive energy, currency volatility and more widespread
profit problems, are bringing the exuberant global economy, including the United
States, to heel. Let's explore these factors in more detail.
OIL, OIL, TOIL AND TROUBLE
Everyone's talking about oil prices, and with good reason: They have a
particularly pernicious history of disrupting the economy. Of the seven
recessions since World War II, six were preceded by a spike in crude oil prices.
Oil prices have already been strong enough for long enough to crimp growth,
and they're biting the rest of the world even harder than the United States. But
there are two factors working to our advantage. First, oil prices are still
historically low. Oil is slightly more than $30 per barrel today, but it peaked
at over $75 per barrel back in 1980 (stated in today's dollars). Second, our
dependence on oil has decreased: The United States uses only roughly half as
much oil to produce a unit of gross domestic product (GDP) as it did thirty
years ago. This gives us hope that the economy can escape recession this time
around.
What would make us worry more? Outright energy shortages or a political
crisis. If either happens, the odds of a recession occurring would rise steeply.
People panic or become excessively cautious when they have to fret. Can I fill
up my oil tank? Will there be a war? Their loss of confidence can be much more
devastating than price increases alone.
CURRENCY CONCERNS
Currency turmoil is a second danger to the economy. Central bankers have
intervened to halt the euro's decline, and they're right that the euro is
fundamentally undervalued. But intervention is a hazardous game. Let's hope they
don't convince the markets that the euro should rise a lot very quickly. A
suddenly weak dollar might make Europeans think about selling all those American
stocks and bonds they've been buying, and would greatly complicate the Fed's
inflation fight.
BUSINESS: BIG PLANS BUT PROFIT DISAPPOINTMENTS
Profit warnings escalated late this summer, and we believe there's fire amid
that smoke.
Sure, businesses have had a voracious appetite for money -- and corporate
treasurers are finding it easily. Banks increased business lending by 11.5
percent in the past year, and the bond markets are healthy, with only the lowest
credit-quality companies experiencing any difficulty issuing bonds. Capital
goods orders reflect executives' enthusiasm -- they've been accelerating since
early in the year, and in August were up more than 15 percent compared to a year
ago.
Still, we expect total capital spending to slow, from this year's estimated 14
percent to 12.5 percent in 2001. The reason? A profit squeeze is about to take
some of the edge off executives' animal spirits.
We've always been more cautious than Wall Street about 2001 profits, and our
forecast hasn't changed. Profits are likely to be flat to down next year for
several reasons. First, growth slowdown will make it harder to keep up the
productivity gains that have kept labor costs under control. Second, interest
expense will surge (thanks to higher rates and all that new debt). Third,
depreciation costs are escalating. And finally, the excessively weak euro and
higher oil costs will sap earnings.
SAVING GRACES: FISCAL POLICY AND CONSUMER SPENDING
While growth has peaked and is now slowing, we can be thankful that growth
probably won't slow too much, thanks in part to a more stimulative fiscal policy
and consumer spending.
3
<PAGE> 4
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND
SHAREHOLDER DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR
DEFLATION, CREDIT EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON
MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE
10-YEAR TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES.
THE OTHER DATA REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (9/30/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.80 6.30 5.90 4.80
Prime rate (2) 9.50 9.00 8.25 8.50
Inflation rate (3)* 3.30 3.20 2.30 1.70
The U.S. dollar (4) 8.40 0.60 -3.30 4.10
Capital goods orders (5)* 16.10 8.40 1.90 15.60
Industrial production (5)* 5.80 5.30 3.10 4.40
Employment growth (6) 1.90 2.30 2.20 2.50
</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 8/31/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Fiscal policy is likely to be more stimulative no matter who wins the
presidential election. Of course, most economists agree that the last thing this
pumped-up economy needs is another shot of stimulants -- too much stimulus,
after all, is widely believed to cause inflation. But economists aren't running
for office. Politicians are. And inflation risk is about the last thing on the
minds of politicians in the heat of their election campaigns. They want to win
votes, and the time-tested way to do so is to make promises. Whatever their
political differences, neither candidate is planning a lot of fiscal restraint.
The good news is that neither candidate's plan is likely to be enacted until
2002 at the earliest. And even then, each candidate's plan maintains a portion
of the surplus stemming from Social Security receipts -- a surplus that should
reach new heights in 2001.
Second, consumers continue to spend, spend, spend. The personal savings rate
keeps falling, from an already low 2.2 percent last year to a nearly invisible
0.1 percent this year. Critics of this admittedly squishy statistic claim it
doesn't adequately capture households' growing wealth. As it turns out, however,
the average American not only doesn't save much, but he's not getting wealthier
in leaps and bounds, either.
Net worth for the median family where the head of the household is over 45
(and where thoughts are presumably beginning to turn to retirement) rose less
than $13,000 between 1995 and 1998. That's less than a 12 percent gain during
the same three years the stock market nearly doubled and the market value of
owner-occupied homes jumped 21 percent. Why didn't the average family get
richer? Because they were borrowing and spending like crazy. House values were
up 21 percent -- but mortgage debt rose even faster, by 25 percent!
Consumers' profligacy worries many financial professionals. Some people aren't
saving enough for retirement because they have inflated expectations of future
investment returns. Other people aren't saving enough for retirement because
they don't realize just how much money they'll need. Either way, people aren't
saving.
Still, no one wants consumers to change their profligate ways too fast. After
all, hearty consumer spending is a prime reason America's growth has stayed on a
fast track so far. Most economists would like to see shoppers be a bit more
moderate -- but only a bit. If Americans suddenly turned thrifty, the economy
would lurch into reverse.
4
<PAGE> 5
ECONOMIC OVERVIEW
Luckily, there's little chance of that happening, unless lenders get cold
feet. So far, they're hot to trot. In the past year, mortgage lending by banks
rocketed nearly 17 percent while loans to consumers jumped 10 percent. Brokers
are selling the loans banks don't want on their balance sheets to mortgage pools
and the asset-backed securities market, where eager non-bank lenders are
snapping them up. In the past year, these markets provided $625 billion of new
credit, a leap of more than 12 percent.
With so much money at their disposal, consumers won't stay out of the shopping
centers and restaurants for long. We expect consumer spending growth to move
back above 3 percent by early next year and stay there.
OMINOUS SIGNS?
Decelerations are always tricky, to be sure. But barring some unexpected
shock, growth should pop back into the 3.5 percent to 4 percent range in 2001.
Why? Borrowing costs a little more than it did last year, but banks and the bond
market are still lending freely. Capital goods orders are strong, so there's a
lot of life left in business spending. Shoppers are a little pickier, but
they're still more interested in visiting the mall than in filling their piggy
banks. And after the election, no matter who wins, fiscal policy is likely to be
more stimulative than it has been for years. The price to pay will likely be a
rise in core inflation (inflation excluding food and energy). We expect it to
hit 3 percent next year, up from its recent rate of 2.5 percent. We believe
we'll make it safely through 2001, but investors should keep their hands on the
wheel and their eyes peeled.
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 OCTOBER 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.
5
<PAGE> 6
ECONOMIC OVERVIEW
[THIS PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
PERFORMANCE UPDATE
JAMES A. CREIGHTON IS THE LEAD PORTFOLIO MANAGER FOR THE KEMPER S&P 500 INDEX
FUND, WHICH IS SUBADVISED BY BANKERS TRUST COMPANY. CREIGHTON IS A MANAGING
DIRECTOR AND HEAD OF GLOBAL INDEX MANAGEMENT FOR DEUTSCHE ASSET MANAGEMENT. HE
RECEIVED HIS MSC IN ACTUARIAL SCIENCE FROM NORTHEASTERN UNIVERSITY AND BSC IN
MATHEMATICS FROM DALHOUSIE.
THE SUBADVISOR FOR KEMPER S&P 500 INDEX FUND IS BANKERS TRUST COMPANY, 885 THIRD
AVENUE, 32ND FLOOR, NEW YORK, NY. BANKERS TRUST COMPANY MANAGES THE FUND IN
ACCORDANCE WITH THE FUND'S INVESTMENT OBJECTIVE AND STATED INVESTMENT POLICIES.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEW IS SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE S&P 500 INDEX HIT AN ALL-TIME HIGH OF 1552.87
THE WEEK BEFORE THE FUND BEGAN OPERATIONS ON APRIL
3, 2000. FROM APRIL THROUGH JULY 31 THE INDEX
DECLINED AMID TECHNOLOGY STOCK WEAKNESS. THE INDEX
BOUNCED BACK DURING AUGUST AS IT APPEARED THAT THE
FEDERAL RESERVE HAD EFFECTIVELY SLOWED U.S.
ECONOMIC GROWTH.
Q HOW DID THE OVERALL EQUITY MARKET AND KEMPER S&P 500 INDEX FUND PERFORM
BETWEEN APRIL 3, 2000, AND AUGUST 31, 2000?
A Kemper S&P 500 Index Fund began operating in a challenging market environment
marked by increased volatility, weakness in many Internet-related stocks and
higher short-term interest rates. The fund's total return was 0.95 percent
(Class A shares, unadjusted for a sales charge) for its initial fiscal period
from April 3, 2000, to August 31, 2000. This slightly outpaced the 0.78 percent
total return of the unmanaged Standard & Poor's 500 index, a group of
established large-company stocks, for the same period.
We attribute the funds better-than-benchmark results of 8.8 percent of net
assets as of August 31, 2000, to several reasons. The composition of the S&P 500
index and the stocks held by the fund may occasionally diverge. The timing of
cash inflows from investors buying shares could create balances of uninvested
cash. Conversely, the timing and magnitude of cash outflows to investors selling
shares could require ready reserves of uninvested cash. Either situation would
likely cause the fund's performance to deviate from the fully invested S&P 500
index. To maintain a certain amount of liquidity, the fund will make a limited
(or minimal) investment in stock index futures or options. The fund will not use
these derivatives for speculative purposes or as a leveraged investment that
magnify the gains or losses of an investment. The fund invests in derivatives to
keep cash on hand to meet shareholder redemptions. The Kemper S&P 500 Index
Fund's objective is to match, as closely as possible, before the deductions of
expenses, the performance of the S&P 500 index.
The S&P 500 index hit an all-time high of 1552.87 the week before the fund
began operations on April 3, 2000. From April through July 31 the index
declined, in part as a result of uncertain earnings prospects for some
technology stocks. The index bounced back during August as it appeared that the
Federal Reserve had effectively slowed U.S. economic growth to a more
sustainable, noninflationary pace.
Q HOW CLOSELY DOES THE FUND'S PORTFOLIO MIRROR THE S&P 500 INDEX?
A It's not an exact duplicate. In some sectors such as technology and
financials, the portfolio's weightings were less than the index as of August 31,
2000. The management team's goal is to create a portfolio that mirrors many of
the characteristics of the S&P 500, while minimizing costs and avoiding stocks
that may be difficult to trade efficiently. To build the portfolio, the
management team buys the stocks that make up the larger portions of the S&P
500's value, in roughly the same proportions as in the index. Next, the team
analyzes and selects stock with lower market capitalizations, seeking to match
the industry and risk characteristics of
7
<PAGE> 8
PERFORMANCE UPDATE
the index without purchasing every stock in its exact weighting.
Q MANY S&P 500 COMPANIES ARE MERGING, SELLING AND SPINNING OFF PARTS OF
THEMSELVES AND MAKING ACQUISITIONS ALL THE TIME. WHAT DOES THIS MEAN FOR THE
FUND?
A Since Standard & Poor's periodically changes the components of the S&P 500
index, we expect that the fund will have modest annual portfolio turnover. Our
holdings will change over time to reflect the changes of stocks being added to
and deleted from the index. The effect on fund performance will vary, depending
on investors' perceptions and market reactions to specific changes to the S&P
500 index. For example, one of the best-performing stocks in both the index and
the fund during the fund's initial fiscal period was Nabisco Holdings, a cookie
and snack maker, which agreed to be acquired by Philip Morris, the tobacco and
food company, another index component and fund holding. A transaction that had a
negative effect on fund and index performance was computer printer maker
Hewlett-Packard's spin-off of Agilent Technologies.
One long-term trend is that technology firms represent a growing portion of
the S&P 500. As of August 31, 2000, technology firms represented 32.56 percent
of the index. Just 12 years ago, technology firms made up only 10.3 percent of
the index. This trend reflects changes in America's economy as well as the
relatively greater confidence that investors have in technology-sector growth
compared with so-called Old Economy industries such as steel, autos, paper and
chemicals.
Q REALIZING THAT THE FUND DOES NOT SELECT STOCKS IN THE SAME WAY AS A MORE
ACTIVELY MANAGED MUTUAL FUND, WHAT IS YOUR OUTLOOK FOR THE YEAR AHEAD?
A The consensus estimate among securities analysts is that stocks in the S&P 500
can expand profits (as measured by earnings per share) by 10.5 percent over the
next five years. This compares with what analysts expect will be a 13.5 percent
increase in average earnings per share for the 12 months ending October 2000.
Given this view and what many economists believe is a slowdown in overall U.S.
economic growth, we believe it is reasonable to assume that the high returns
many stock market investors have reaped over the past five years will be
difficult to achieve in the months ahead. Indeed, this past summer some of the
many multinational companies that make up the S&P 500 index reduced their growth
forecasts because of the devaluation of the euro and higher energy costs.
Stocks of all sizes have been hurt by the Federal Reserve Board's efforts to
raise interest rates since last summer. Between June 1999 and August 2000, the
cumulative increase in short-term interest rates was 175 basis points. While
most of the increase occurred before the fund began operating, the effects take
time to wind their way through the economy. Fortunately, we think we are close
to or at an end of the cycle for domestic interest-rate increases. In our view,
the market is looking ahead and sees potential stability in rates. Over the
long-term, that should create a positive framework for large-company stocks.
8
<PAGE> 9
PERFORMANCE UPDATE
COMPOSITION OF THE S&P 500 INDEX
[BARCHART]
<TABLE>
<CAPTION>
ON 8/31/00
----------
<S> <C>
TECHNOLOGY 32.6%
FINANCIALS 14.1%
HEALTH CARE 10.9%
CONSUMER STAPLES 10.1%
CAPITAL GOODS 8.0%
CONSUMER CYCLICALS 7.3%
COMMUNICATION SERVICES 6.6%
ENERGY 5.3%
UTILITIES 2.6%
BASIC MATERIALS 1.9%
TRANSPORTATION 0.6%
</TABLE>
INDEX COMPOSITION IS SUBJECT TO MARKET CHANGE.
TOP FIVE PERFORMING S&P 500 INDEX STOCKS
APRIL 3, 2000, TO AUGUST 31, 2000
<TABLE>
<S> <C> <C> <C>
NABISCO GROUP HOLDINGS 131.44%
.............................................................................
REEBOK INTERNATIONAL 103.31%
.............................................................................
SANMINA 96.46%
.............................................................................
MERCURY INTERACTIVE 96.29%
.............................................................................
ALZA 95.16%
.............................................................................
</TABLE>
TOP PERFORMING S&P 500 INDEX STOCKS FROM 4/3/00 TO 8/31/00
WORST FIVE PERFORMING S&P 500 INDEX STOCKS
APRIL 3, 2000, TO AUGUST 31, 2000
<TABLE>
<S> <C> <C> <C>
OWENS CORNING -74.54%
.............................................................................
CITRIX SYSTEMS -66.92%
.............................................................................
QUALCOMM -57.46%
.............................................................................
GAP -55.13%
.............................................................................
CIRCUIT CITY -54.89%
.............................................................................
</TABLE>
WORST PERFORMING S&P 500 INDEX STOCKS FROM 4/3/00 TO 8/31/00
SOURCE: BLOOMBERG BUSINESS NEWS. RETURNS FROM ANY OF THE ABOVE STOCKS HELD BY
THE FUND DURING ITS INITIAL PERIOD MAY DIFFER FROM MARKET RESULTS.
9
<PAGE> 10
PERFORMANCE UPDATE
CUMULATIVE TOTAL RETURNS*
FOR THE FOUR-MONTH PERIOD ENDED AUGUST 31, 2000 (ADJUSTED FOR THE MAXIMUM SALES
CHARGE)
<TABLE>
<CAPTION>
LIFE OF FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER S&P 500 INDEX FUND CLASS A -3.62% (since 4/3/00)
...................................................................................................
KEMPER S&P 500 INDEX FUND CLASS B 0.74 (since 4/3/00)
...................................................................................................
KEMPER S&P 500 INDEX FUND CLASS C 0.74 (since 4/3/00)
...................................................................................................
</TABLE>
* RETURNS ARE HISTORICAL AND DO NOT
GUARANTEE FUTURE PERFORMANCE.
INVESTMENT RETURNS AND PRINCIPAL VALUE
WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS
THAN ORIGINAL COST.
10
<PAGE> 11
INDUSTRY SECTORS
A SECTOR BREAKOUT FOR YOUR FUND*
Data shows the percentage of the common stocks in the portfolio that each sector
represented on August 31, 2000.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER S&P 500 INDEX FUND ON 8/31/00
------------------------------------
<S> <C>
Technology 27.4%
Consumer nondurable 14.7%
Finance 13.4%
Capital goods 12.4%
Communication services 12.3%
Health care 10.5%
Energy 6.2%
Other 2.4%
Basic materials 0.7%
</TABLE>
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
11
<PAGE> 12
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 23.7 percent of the fund's total net assets on August 31, 2000
<TABLE>
<CAPTION>
HOLDINGS DESCRIPTION PERCENT
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
1. GENERAL ELECTRIC General Electric Company develops, 3.9%
manufactures, and markets products for the
generation, distribution, and utilization of
electricity. The Company, through General
Electric Capital Services, Inc., offers a
variety of financial services including
mutual fund management, financing, asset
management, and insurance, General Electric
also owns the National Broadcasting Company.
---------------------------------------------------------------------------------------------
2. INTEL Intel Corporation designs, manufactures, and 3.4%
sells computer components and related
products. The Company's major products
include microprocessors, chipsets, embedded
processors and microcontrollers, flash memory
products, graphics products, network and
communications products, systems management
software, conferencing products, and digital
imaging products.
---------------------------------------------------------------------------------------------
3. CISCO SYSTEMS Cisco Systems, Inc. supplies data networking 3.3%
products to the corporate enterprise and
public wide area service provider markets.
The Company's products offer a variety of
end-to-end networking hardware, software, and
services. Cisco's clients include utilities,
corporations, universities, governments, and
small to medium-size businesses worldwide.
---------------------------------------------------------------------------------------------
4. MICROSOFT Microsoft Corporation develops, manufactures, 2.5%
licenses, sells, and supports software
products. The Company offers operating system
software, server application software,
business and consumer applications software,
software development tools, and Internet and
intranet software. Microsoft also develops
the MSN network of Internet products and
services.
---------------------------------------------------------------------------------------------
5. EXXON MOBIL Exxon Mobil Corporation operates petroleum 1.9%
and petrochemicals businesses on a worldwide
basis. The Company's operations include
exploration and production of oil and gas,
electric power generation, and coal and
minerals operations. Exxon Mobil also
manufactures and markets fuels, lubricants,
and chemicals.
---------------------------------------------------------------------------------------------
6. PFIZER Pfizer Inc. is a research-based, global 1.8%
pharmaceutical company that discovers,
develops, manufactures, and markets medicines
for humans and animals. The Company's
products include prescription
pharmaceuticals, non-prescription
self-medications, and animal health products
such as anti-infective medicines and
vaccines.
---------------------------------------------------------------------------------------------
7. CITIGROUP Citigroup Inc. is a diversified financial 1.8%
services holding company that provides a
broad range of financial services to consumer
and corporate customers around the world. The
Company's services include investment
banking, retail brokerage, corporate banking,
and cash management products and services.
---------------------------------------------------------------------------------------------
8. ORACLE Oracle Corporation supplies software for 1.8%
enterprise information management. The
Company offers databases and relational
servers, application development and decision
support tools, and enterprise business
applications. Oracle's software runs on
network computers, personal digital
assistants, set-top devices, work-stations,
PCs, minicomputers, mainframes, and massively
parallel computers.
---------------------------------------------------------------------------------------------
9. NORTEL NETWORKS Nortel Networks Corporation is an Internet 1.7%
and communications provider with capabilities
spanning optical, wireless, local Internet,
and electronic business. The Company serves
carrier, service provider, and enterprise
customers around the world. Nortel provides
access products, business applications and
services, data and Internet products, and
other products and services.
---------------------------------------------------------------------------------------------
10. INTERNATIONAL BUSINESS International Business Machines Corporation 1.6%
MACHINES (IBM) provides customer solutions through the
use of advanced information technology. The
Company's solutions include technologies,
systems, products, services, software, and
financing. IBM offers its products through
its global sales and distribution
organization, as well as through a variety of
third party distributors and resellers.
---------------------------------------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
KEMPER S&P 500 INDEX FUND
Portfolio of Investments at August 31, 2000
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS--8.3% PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company, 6.57%,
to be repurchased at $2,219,405 on 9/1/2000**
(Cost $2,219,000) $2,219,000 $ 2,219,000
-----------------------------------------------------------------------------------
<CAPTION>
SHORT-TERM INVESTMENTS--0.5%
<S> <C> <C> <C> <C> <C>
U.S. Treasury Bill, 5.93%, 10/19/2000
(Cost $138,888) 140,000 138,888
-----------------------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--91.2% NUMBER OF SHARES
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--4.8%
APPAREL & SHOES--0.1%
Liz Claiborne, Inc. 129 5,668
Nike, Inc. "B" 559 22,115
Reebok International Ltd.* 56 1,075
-----------------------------------------------------------------------------------
28,858
DEPARTMENT & CHAIN STORES--3.7%
Bed Bath & Beyond, Inc.* 596 10,467
Best Buy Co., Inc.* 346 21,365
CVS Corp. 673 24,985
Costco Wholesale Corp.* 741 25,518
Dollar General Corp. 715 14,702
Federated Department Stores, Inc.* 476 13,149
Gap, Inc. 1,580 35,451
Home Depot, Inc. 4,174 200,613
J.C. Penney Co., Inc. 632 8,848
Kmart Corp.* 1,185 8,295
Kohl's Corp.* 608 34,048
Lowe's Companies, Inc. 760 34,057
May Department Stores 771 17,685
Nordstrom, Inc. 121 2,087
Sears, Roebuck & Co. 767 23,921
TJX Companies, Inc. (New) 540 10,159
Target Corp. 1,547 35,968
The Limited, Inc. 773 15,460
Wal-Mart Stores, Inc. 8,073 382,963
Walgreen Co. 1,942 63,843
-----------------------------------------------------------------------------------
983,584
HOME FURNISHINGS--0.1%
Newell Rubbermaid, Inc. 568 14,733
-----------------------------------------------------------------------------------
HOTELS & CASINOS--0.2%
Carnival Corp. "A" 1,213 24,184
Harrah's Entertainment, Inc.* 237 6,725
Hilton Hotels Corp. 808 8,080
Marriott International, Inc. "A" 379 14,971
-----------------------------------------------------------------------------------
53,960
RECREATIONAL PRODUCTS--0.1%
Brunswick Corp. 82 1,538
Harley-Davidson, Inc. 589 29,340
Mattel, Inc. 732 7,229
-----------------------------------------------------------------------------------
38,107
</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>
RESTAURANTS--0.4%
McDonald's Corp. 2,508 $ 74,926
Starbucks Corp.* 395 14,467
Tricon Global Restaurants* 267 7,776
Wendy's International, Inc. 97 1,831
-----------------------------------------------------------------------------------
99,000
SPECIALTY RETAIL--0.2%
AutoZone, Inc.* 298 6,705
Circuit City Stores, Inc. 419 10,868
Office Depot, Inc.* 707 5,170
Staples, Inc.* 960 14,760
Tiffany & Co. 213 8,866
Toys "R" Us, Inc.* 447 8,130
-----------------------------------------------------------------------------------
54,499
------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.4%
ALCOHOL & TOBACCO--1.0%
Adolph Coors Company 94 5,599
Anheuser-Busch Companies, Inc. 848 66,833
Brown-Forman Corp. "B" 36 1,908
Philip Morris Companies, Inc. 4,289 127,062
Seagram Co., Ltd. 872 52,483
UST, Inc. 142 3,071
-----------------------------------------------------------------------------------
256,956
CONSUMER ELECTRONICS &
PHOTOGRAPHIC--0.2%
Eastman Kodak Co. 639 39,778
Energizer Holdings, Inc.* 1 20
Maytag Corp. 200 7,625
Whirlpool Corp. 200 7,600
-----------------------------------------------------------------------------------
55,023
FARMING--0.0%
Archer-Daniels-Midland Co. 1,255 11,057
-----------------------------------------------------------------------------------
FOOD & BEVERAGE--2.6%
Albertson's, Inc. 883 18,985
Bestfoods 439 31,004
Campbell Soup Co. 603 15,301
Coca-Cola Co. 4,448 234,076
Coca-Cola Enterprises 620 11,547
ConAgra, Inc. 991 18,148
General Mills, Inc. 651 20,913
H.J. Heinz Co. 752 28,670
Hershey Foods Corp. 299 12,764
Kellogg Co. 573 13,286
Kroger Co.* 1,682 38,160
Nabisco Group Holdings 677 18,998
PepsiCo, Inc. 2,735 116,579
Quaker Oats Co. 287 19,498
Ralston Purina Group 402 9,095
Safeway, Inc.* 922 45,466
Sara Lee Corp. 1,760 32,780
William Wrigley Jr. Co. 141 10,443
-----------------------------------------------------------------------------------
695,713
PACKAGE GOODS/
COSMETICS--1.6%
Avon Products, Inc. 465 18,222
Clorox Co. 521 18,854
Colgate-Palmolive Co. 1,132 57,661
Gillette Co. 2,024 60,720
Kimberly-Clark Corp. 1,106 64,701
Procter & Gamble Co. 2,319 143,343
Unilever NV (New York Shares) 1,142 53,959
-----------------------------------------------------------------------------------
417,460
</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>
TEXTILES--0.0%
VF Corp. 132 $ 3,020
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
HEALTH--9.6%
BIOTECHNOLOGY--1.3%
Amgen, Inc.* 1,845 139,874
Biogen, Inc.* 239 16,521
MedImmune, Inc.* 352 29,612
PE Corp-PE Biosystems Group 378 37,186
Pharmacia Corp. 2,250 131,766
-----------------------------------------------------------------------------------
354,959
HEALTH INDUSTRY SERVICES--0.4%
Cardinal Health, Inc. 549 44,915
HEALTHSOUTH Corp.* 255 1,562
Humana Inc.* 442 3,785
IMS Health, Inc. 341 6,436
McKesson HBOC, Inc. 612 15,262
PerkinElmer, Inc. 126 11,332
Quintiles Transnational Corp.* 271 3,777
Wellpoint Health Networks, Inc.* 88 7,596
-----------------------------------------------------------------------------------
94,665
HOSPITAL MANAGEMENT--0.3%
HCA--The Healthcare Corporation 1,072 36,984
Tenet Healthcare Corp. 683 21,173
UnitedHealth Group Inc. 263 24,854
-----------------------------------------------------------------------------------
83,011
MEDICAL SUPPLY & SPECIALTY--1.0%
Bausch & Lomb, Inc. 41 1,466
Baxter International, Inc. 554 46,120
Becton, Dickinson & Co. 350 10,544
Biomet, Inc. 417 14,083
Boston Scientific Corp.* 805 15,245
C.R. Bard, Inc. 142 6,931
Guidant Corp.* 529 35,608
Mallinckrodt, Inc. 180 8,111
Medtronic, Inc. 2,113 108,291
St. Jude Medical, Inc.* 183 7,251
-----------------------------------------------------------------------------------
253,650
PHARMACEUTICALS--6.6%
Abbott Laboratories 2,918 127,662
Allergan, Inc. 264 19,305
Alza Corp.* 146 11,041
American Home Products Corp. 2,461 133,355
Bristol-Myers Squibb Co. 3,527 186,931
Eli Lilly & Co. 2,123 154,979
Johnson & Johnson 2,495 229,384
Merck & Co., Inc. 4,142 289,422
Pfizer, Inc. 11,421 493,958
Schering-Plough Corp. 2,767 111,026
Watson Pharmaceuticals, Inc.* 228 14,065
-----------------------------------------------------------------------------------
1,771,128
------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--8.1%
CELLULAR TELEPHONE--0.6%
Nextel Communications, Inc. "A"* 1,342 74,397
Sprint Corp. (PCS Group)* 1,704 85,519
-----------------------------------------------------------------------------------
159,916
</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>
TELEPHONE/
COMMUNICATIONS--7.5%
ADC Telecommunications, Inc.* (b) 1,282 $ 52,482
AT&T Corp. 6,755 212,782
Alltel Corp. 655 33,118
BellSouth Corp. 3,576 133,429
CenturyTel, Inc. 148 4,264
Global Crossing Ltd.* 1,669 50,174
JDS Uniphase Corp.* 1,686 210,118
Nortel Networks Corp. 5,460 445,331
Qwest Communications International Inc.* 2,925 151,003
SBC Communications, Inc. 6,127 255,802
Sprint Corp. 1,678 56,213
Verizon Communications 4,872 212,541
WorldCom, Inc.* 5,301 193,486
-----------------------------------------------------------------------------------
2,010,743
------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--12.2%
BANKS--4.7%
AmSouth Bancorp. 424 7,738
BB&T Corp. 484 13,098
Bank One Corp. 2,248 79,242
Bank of America Corp. 2,919 156,349
Bank of New York Co., Inc. 1,328 69,637
Chase Manhattan Corp. 2,266 126,613
Comerica, Inc. 350 19,709
Fifth Third Bancorp. 956 44,155
First Union Corp. 1,994 57,701
Firstar Corp. 1,918 45,792
FleetBoston Financial Corp. 1,794 76,581
Golden West Financial Corp. 169 8,049
Huntington Bancshares, Inc. 205 3,459
J.P. Morgan & Co., Inc. 254 42,466
KeyCorp 881 17,785
MBNA Corp. 1,649 58,230
National City Corp. 907 18,990
Northern Trust Corp. 475 40,048
Old Kent Financial Corp. 101 2,961
PNC Bank Corp. 636 37,484
Regions Financial Corp. 172 3,741
SouthTrust Corp. 472 13,305
State Street Corp. 299 35,207
Summit Bancorp. 127 3,516
SunTrust Banks, Inc. 655 32,341
US Bancorp 1,567 34,082
Union Planters Corp. 78 2,364
Wachovia Corp. 472 27,051
Washington Mutual, Inc. 1,187 41,545
Wells Fargo Co. 3,084 133,190
-----------------------------------------------------------------------------------
1,252,429
</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>
CONSUMER FINANCE--2.9%
American Express Co. 2,362 $ 139,653
Associates First Capital Corp. 1,442 40,556
Capital One Finance Corp. 293 17,672
Citigroup, Inc. 8,134 474,822
Household International, Inc. 951 45,648
Mellon Financial Corp. 918 41,539
Synovus Financial Corp. 264 5,198
-----------------------------------------------------------------------------------
765,088
INSURANCE--2.8%
AFLAC, Inc. (b) 554 29,916
Aetna, Inc. 204 11,411
Allstate Corp. 1,408 40,920
American General Corp. 527 38,372
American International Group, Inc. 4,161 370,849
Aon Corp. 544 20,298
Chubb Corp. 348 26,644
Cigna Corp. 348 33,843
Cincinnati Financial Corp. 301 11,701
Conseco, Inc. 684 5,771
Hartford Financial Services Group, Inc. 401 26,717
Jefferson Pilot Corp. 105 6,950
Lincoln National Corp. 431 23,274
MBIA, Inc. 120 7,890
MGIC Investment Corp. 223 13,115
Progressive Corp. 90 6,823
Providian Financial Corp. 230 26,436
Safeco Corp. 326 8,578
St. Paul Companies, Inc. 435 20,717
Torchmark Corp. 94 2,638
UnumProvident Corp. 340 7,374
-----------------------------------------------------------------------------------
740,237
OTHER FINANCIAL COMPANIES--1.8%
CIT Group, Inc. 576 10,080
Charter One Financial, Inc. 191 4,536
Countrywide Credit Industries, Inc. 248 9,393
Federal Home Loan Mortgage Corp. 1,362 57,374
Federal National Mortgage Association 1,843 99,061
Lehman Brothers Holdings, Inc. 197 28,565
Marsh & McLennan Companies, Inc. 526 62,462
Morgan Stanley Dean Witter & Co. 2,028 218,137
USA Education Inc. 202 7,916
-----------------------------------------------------------------------------------
497,524
------------------------------------------------------------------------------------------------------------------------------
MEDIA--3.1%
ADVERTISING--0.2%
Interpublic Group of Companies, Inc. 640 24,480
Omnicom Group, Inc. 348 29,036
Young & Rubicam, Inc. 78 4,563
-----------------------------------------------------------------------------------
58,079
BROADCASTING & ENTERTAINMENT--2.3%
Clear Channel Communications, Inc.* 1,039 75,198
The Walt Disney Co. 3,681 143,329
Time Warner, Inc. 2,351 201,010
Viacom, Inc "B"* 2,761 185,850
-----------------------------------------------------------------------------------
605,387
CABLE TELEVISION--0.3%
Comcast Corp. "A" * 1,753 65,299
-----------------------------------------------------------------------------------
</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>
PRINT MEDIA--0.3%
Gannett Co., Inc. 572 $ 32,390
Harcourt General, Inc. 165 9,787
Knight-Ridder, Inc. 184 10,051
New York Times Co. "A" 182 7,132
Tribune Co. 678 24,196
-----------------------------------------------------------------------------------
83,556
------------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.3%
EDP SERVICES--0.6%
Automatic Data Processing, Inc. 1,200 71,550
Electronic Data Systems Corp. 811 40,398
First Data Corp. 662 31,569
Sapient Corp.* 240 12,600
-----------------------------------------------------------------------------------
156,117
ENVIRONMENTAL SERVICES--0.2%
Transocean Sedo Forex, Inc. 312 18,642
Waste Management, Inc. 1,262 23,899
-----------------------------------------------------------------------------------
42,541
INVESTMENT--1.1%
Bear Stearns Companies, Inc. 247 16,564
Charles Schwab Corp. 2,447 93,445
Franklin Resources, Inc. 548 20,824
Merrill Lynch & Co., Inc. 679 98,455
Paine Webber Group, Inc. 300 21,450
Stilwell Financial, Inc.* 484 23,413
T. Rowe Price & Associates, Inc. 283 12,806
-----------------------------------------------------------------------------------
286,957
MISCELLANEOUS COMMERCIAL
SERVICES--0.6%
Convergys Corp.* 311 12,168
Ecolab, Inc. 122 4,750
NCR Corp.* 203 8,196
Paychex, Inc. 752 33,558
Sabre Group Holdings, Inc. "A" 158 4,404
Siebel Systems, Inc.* 354 69,738
Sysco Corp. 709 30,000
Tektronix Inc. 117 8,914
-----------------------------------------------------------------------------------
171,728
MISCELLANEOUS CONSUMER SERVICES--0.6%
Cendant Corp.* 1,378 18,172
H & R Block, Inc. 85 3,049
Txu Corp. 567 19,810
Yahoo!, Inc.* 981 119,191
-----------------------------------------------------------------------------------
160,222
PRINTING/PUBLISHING--0.2%
Dow Jones & Co., Inc. 226 14,139
Dun & Bradstreet Corp. (New) 143 4,719
Equifax, Inc. 118 3,002
McGraw-Hill, Inc. 427 26,447
-----------------------------------------------------------------------------------
48,307
------------------------------------------------------------------------------------------------------------------------------
DURABLES--2.8%
AEROSPACE--0.7%
B.F. Goodrich Co. 88 3,592
Boeing Co. 1,565 83,923
Lockheed Martin Corp. 783 22,218
Northrop Grumman Corp. 171 13,306
Rockwell International Corp. 380 15,366
United Technologies Corp. 936 58,442
-----------------------------------------------------------------------------------
196,847
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<PAGE> 19
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
AUTOMOBILES--0.7%
Cummins Engine Co., Inc. 129 $ 4,580
Dana Corp. 349 8,616
Delphi Automotive Systems Corp. 978 16,076
Eaton Corp. 186 12,346
Ford Motor Co. 3,317 80,230
General Motors Corp. 907 65,474
Genuine Parts Co. 124 2,550
-----------------------------------------------------------------------------------
189,872
CONSTRUCTION/AGRICULTURAL
EQUIPMENT--0.2%
Caterpillar, Inc. 745 27,379
Deere & Co. 304 10,013
PACCAR, Inc. 225 9,548
-----------------------------------------------------------------------------------
46,940
LEASING COMPANIES--0.0%
Ryder System, Inc. 209 4,010
-----------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT--1.2%
Andrew Corp.* 176 5,214
Lucent Technologies, Inc. 5,895 246,485
Scientific-Atlanta, Inc. 264 20,576
Tellabs, Inc.* 713 40,062
-----------------------------------------------------------------------------------
312,337
TIRES--0.0%
Goodyear Tire & Rubber Co. 363 8,485
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--8.5%
CHEMICALS--0.7%
Dow Chemical Co. 1,300 34,044
E.I. du Pont de Nemours & Co. 2,005 89,974
Eastman Chemical Co. 181 7,806
Hercules, Inc. 347 4,598
Mead Corp. 309 8,285
Praxair, Inc. 365 16,151
Rohm & Haas Co. 466 13,485
Sigma-Aldrich Corp. 253 7,353
Union Carbide Corp. 149 5,969
-----------------------------------------------------------------------------------
187,665
CONTAINERS & PAPER--0.3%
Boise Cascade Corp. 175 5,228
Crown Cork & Seal Co. 107 1,384
Fort James Corp. 408 12,903
International Paper Co. 773 24,639
Sealed Air Corp.* 182 9,339
Temple-Inland, Inc. 145 6,153
Willamette Industries 265 8,083
-----------------------------------------------------------------------------------
67,729
DIVERSIFIED MANUFACTURING--5.4%
Cooper Industries, Inc. 51 1,801
Dover Corp. 444 21,700
Fortune Brands, Inc. 229 5,840
General Electric Co. 18,003 1,056,551
Honeywell International, Inc. 1,433 55,260
ITT Industries, Inc. 210 7,061
Leggett & Platt 284 5,023
Loews Corp. 229 18,535
Minnesota Mining & Manufacturing Co. 659 61,287
TRW, Inc. 156 7,127
Textron, Inc. 279 15,641
Thermo Electron Corp.* 378 8,789
Tyco International Ltd. 3,021 172,197
-----------------------------------------------------------------------------------
1,436,812
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE> 20
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
ELECTRICAL PRODUCTS--0.2%
American Power Conversion Corp.* 418 $ 9,954
Emerson Electric Co. 853 56,458
-----------------------------------------------------------------------------------
66,412
HAND TOOLS--0.1%
Black & Decker Corp. 146 5,849
Danaher Corp. 313 17,587
Stanley Works 21 562
-----------------------------------------------------------------------------------
23,998
INDUSTRIAL SPECIALTY--1.2%
Avery Dennison Corp. 259 14,002
Corning, Inc. 528 173,151
Johnson Controls, Inc. 192 10,260
Novellus Systems* 257 15,822
PPG Industries, Inc. 395 15,998
Pall Corp. 353 7,545
QUALCOMM Inc.* 1,327 79,454
Sherwin-Williams Co. 376 8,648
-----------------------------------------------------------------------------------
324,880
MACHINERY/COMPONENTS/ CONTROLS--0.4%
Illinois Tool Works, Inc. 623 34,927
Ingersoll-Rand Co. 352 16,038
Millipore Corp. 123 7,488
Parker-Hannifin Corp. 291 10,130
Pitney Bowes, Inc. 522 19,086
Visteon Corporation 349 5,483
-----------------------------------------------------------------------------------
93,152
OFFICE EQUIPMENT/ SUPPLIES--0.1%
Lexmark International Group, Inc. "A"* 272 18,445
Xerox Corp. 1,294 20,785
-----------------------------------------------------------------------------------
39,230
SPECIALTY CHEMICALS--0.1%
Air Products & Chemicals, Inc. 453 16,450
F M C Corp. 40 2,713
-----------------------------------------------------------------------------------
19,163
WHOLESALE DISTRIBUTORS--0.0%
W.W. Grainger, Inc. 196 5,660
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--24.9%
COMPUTER SOFTWARE--5.8%
Adobe Systems, Inc. 221 28,730
America Online, Inc.* 4,215 247,104
Autodesk, Inc. 172 4,838
BMC Software, Inc.* 481 12,987
Citrix Systems, Inc.* 398 8,756
Computer Associates International, Inc. 1,145 36,354
Compuware Corp.* 728 7,690
Comverse Technologies, Inc.* 308 28,317
Microsoft Corp.* 9,594 669,781
Oracle Corp.* 5,166 469,783
Parametric Technology Corp.* 540 7,223
PeopleSoft, Inc.* 583 18,802
-----------------------------------------------------------------------------------
1,540,365
DIVERSE ELECTRONIC PRODUCTS--2.1%
Applied Materials, Inc.* 1,442 124,463
Dell Computer Corp.* 4,645 202,638
Molex Incorporated 385 20,333
Motorola, Inc. 3,863 139,309
Solectron Corp.* 1,101 49,889
Teradyne, Inc.* 271 17,564
-----------------------------------------------------------------------------------
554,196
</TABLE>
20 The accompanying notes are an integral part of the financial statements.
<PAGE> 21
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
EDP PERIPHERALS--2.1%
EMC Corp.* 3,942 $ 386,316
Mercury Interactive Corp.* 164 20,039
Network Appliance, Inc.* 578 67,626
VERITAS Software Corp.* 696 83,912
-----------------------------------------------------------------------------------
557,893
ELECTRONIC COMPONENTS/
DISTRIBUTORS--4.2%
Adaptec, Inc.* 234 5,733
Altera Corp.* 683 44,267
Analog Devices, Inc.* 663 66,631
Broadcom Corp. "A"* 402 100,500
Cisco Systems, Inc.* 12,687 869,059
Gateway, Inc.* 628 42,767
-----------------------------------------------------------------------------------
1,128,957
ELECTRONIC DATA PROCESSING--4.5%
Apple Computer, Inc.* 546 33,272
Ceridian Corp.* 143 3,459
Compaq Computer Corp. 3,027 103,107
Hewlett-Packard Co. 1,856 224,112
International Business Machines Corp. 3,210 423,720
Radio Shack Corp. 308 18,172
Seagate Technology, Inc.* 400 23,750
Sun Microsystems, Inc.* 2,879 365,453
Unisys Corp.* 701 9,113
-----------------------------------------------------------------------------------
1,204,158
MILITARY ELECTRONICS--0.2%
Computer Sciences Corp.* 269 21,268
General Dynamics Corp. 435 27,378
Raytheon Co. "B" 737 20,498
-----------------------------------------------------------------------------------
69,144
OFFICE/PLANT AUTOMATION--0.3%
Cabletron Systems, Inc.* 391 14,638
Novell, Inc.* 664 8,134
Palm, Inc.* 1,086 47,784
-----------------------------------------------------------------------------------
70,556
SEMICONDUCTORS--5.5%
Advanced Micro Devices, Inc.* 622 23,403
Conexant Systems, Inc.* 425 15,805
Intel Corp. 12,201 913,550
KLA Tencor Corp.* 289 18,966
LSI Logic Corp.* 611 21,958
Linear Technology Corp. 609 43,810
Maxim Integrated Products Inc.* 555 48,667
Micron Technology, Inc.* 987 80,687
National Semiconductor Corp.* 369 16,421
Sanmina Corp.* 275 32,450
Texas Instruments, Inc. 3,148 210,719
Xilinx, Inc.* 559 49,681
-----------------------------------------------------------------------------------
1,476,117
MISCELLANEOUS--0.2%
Agilent Technologies, Inc.* 790 47,645
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
ENERGY--5.6%
ENGINEERING--0.0%
Fluor Corp. 208 6,227
-----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 21
<PAGE> 22
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
OIL & GAS PRODUCTION--3.6%
Anadarko Petroleum Corp. 409 $ 26,960
Apache Corp. 171 10,773
Burlington Resources, Inc. 422 16,590
Coastal Corp. 431 29,685
Conoco, Inc. "B" 1,198 31,298
Devon Energy Corp.* 223 13,059
Exxon Mobil Corp. 6,297 513,993
Kerr-McGee Corp. 89 5,624
Occidental Petroleum Corp. 753 16,284
Royal Dutch Petroleum Co. (New York shares) 4,020 245,974
Texaco, Inc. 887 45,680
Tosco Corp. 381 11,621
-----------------------------------------------------------------------------------
967,541
OIL COMPANIES--0.7%
Amerada Hess Corp. 226 15,467
Chevron Corp. 1,119 94,555
Phillips Petroleum Co. 560 34,650
USX Marathon Group 618 16,956
Unocal Corp. 527 17,589
-----------------------------------------------------------------------------------
179,217
OIL/GAS TRANSMISSION--0.7%
El Paso Energy Corporation 449 26,154
Enron Corp. 1,304 110,677
Sempra Energy 491 9,575
Williams Companies, Inc. 888 40,903
-----------------------------------------------------------------------------------
187,309
OILFIELD SERVICES/ EQUIPMENT--0.6%
Baker Hughes, Inc. 683 24,972
Halliburton Co. 864 45,792
Rowan Companies, Inc.* 240 7,440
Schlumberger Ltd. 975 83,180
-----------------------------------------------------------------------------------
161,384
------------------------------------------------------------------------------------------------------------------------------
METALS & MINERALS--0.5%
PRECIOUS METALS--0.1%
Barrick Gold Corp. 832 13,260
Newmont Mining Corp. 427 7,926
Placer Dome Inc. 270 2,413
-----------------------------------------------------------------------------------
23,599
STEEL & METALS--0.4%
Alcan Aluminium Ltd. 535 17,542
Alcoa, Inc. 1,700 56,525
Nucor Corp. 207 7,607
Phelps Dodge Corp. 197 8,767
USX-US Steel Group, Inc. 359 6,238
-----------------------------------------------------------------------------------
96,679
------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--0.2%
BUILDING MATERIALS--0.0%
Vulcan Materials Co. 79 3,501
-----------------------------------------------------------------------------------
BUILDING PRODUCTS--0.1%
Georgia-Pacific Group 241 6,447
Masco Corp. 1,016 19,812
Owens Corning 57 296
-----------------------------------------------------------------------------------
26,555
FOREST PRODUCTS--0.1%
Westvaco Corp. 269 7,364
Weyerhaeuser Co. 444 20,563
-----------------------------------------------------------------------------------
27,927
</TABLE>
22 The accompanying notes are an integral part of the financial statements.
<PAGE> 23
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C> <C>
TRANSPORTATION--0.5%
AIR FREIGHT--0.1%
FedEx Corp.* 462 $ 18,642
-----------------------------------------------------------------------------------
AIRLINES--0.2%
AMR Corp. (b) 327 10,730
Delta Air Lines, Inc. 163 8,069
Southwest Airlines Co. 1,053 23,824
US Airways Group, Inc.* 69 2,346
-----------------------------------------------------------------------------------
44,969
RAILROADS--0.2%
Burlington Northern Santa Fe Corp. 683 15,282
CSX Corp. 462 11,030
Norfolk Southern Corp. 510 8,192
Union Pacific Corp. 560 22,260
-----------------------------------------------------------------------------------
56,764
------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.7%
ELECTRIC UTILITIES--1.5%
AES Corp.* (b) 839 53,486
Ameren Corp. 79 3,195
American Electric Power Co. 637 22,454
CINergy Corp. 137 4,024
CMS Energy Corp. 286 7,472
Carolina Power and Light, Inc. 92 3,404
Consolidated Edison, Inc. 486 15,218
Constellation Energy Group 386 14,764
DTE Energy Co. 139 4,830
Dominion Resources, Inc. 554 29,362
Duke Energy Corp. 763 57,082
Edison International 746 15,433
Entergy Corp. 537 16,345
FPL Group, Inc. 438 23,378
FirstEnergy Corp. 271 6,707
Florida Progress Corp. 257 13,332
GPU, Inc. 409 12,526
PG&E Corp. 465 13,456
Peco Energy Co. 248 11,951
Pinnacle West Capital Corp. 74 3,048
Public Service Enterprise Group 473 17,146
Southern Co. 1,330 39,817
Unicom Corp. 402 18,366
-----------------------------------------------------------------------------------
406,796
NATURAL GAS DISTRIBUTION--0.2%
Columbia Energy Group 198 13,897
Eastern Enterprises 24 1,518
KeySpan Corporation 244 8,403
PPL Corp. 74 2,479
Reliant Energy, Inc. 614 22,795
-----------------------------------------------------------------------------------
49,092
MISCELLANEOUS--0.0%
Xcel Energy Inc. 149 3,734
-----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $23,800,260) 24,305,672
-----------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $26,158,148) (a) 26,663,560
-----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 23
<PAGE> 24
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
(a) The cost for federal income tax purposes was $26,161,638. At August 31,
2000, net unrealized appreciation for all securities based on tax cost was
$501,922. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$1,617,312 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $1,115,390.
(b) At August 31, 2000, this security has been pledged to cover, in whole or in
part, initial margin requirements for open futures contracts.
At August 31, 2000, open futures contracts purchased were as follows:
<TABLE>
<CAPTION>
AGGREGATE MARKET
FUTURES EXPIRATION CONTRACTS FACE VALUE($) VALUE($)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 Index 9/15/2000 6 2,210,736 $2,281,500
---------------------------------------------------------------------------------------------------------------------
Total unrealized appreciation on open futures
contracts 70,764
---------------------------------------------------------------------------------------------------------------------
</TABLE>
24 The accompanying notes are an integral part of the financial statements.
<PAGE> 25
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
as of August 31, 2000
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $26,158,148) $26,663,560
---------------------------------------------------------------------------
Cash 284
---------------------------------------------------------------------------
Dividends receivable 29,456
---------------------------------------------------------------------------
Interest receivable 707
---------------------------------------------------------------------------
Receivable for Fund shares sold 24,050
---------------------------------------------------------------------------
Receivable for daily variation margin on open futures
contracts 26,100
---------------------------------------------------------------------------
Due from Adviser 64,785
---------------------------------------------------------------------------
TOTAL ASSETS 26,808,942
---------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 50,665
---------------------------------------------------------------------------
Payable for Fund shares redeemed 101,060
---------------------------------------------------------------------------
Other accrued expenses 20,480
---------------------------------------------------------------------------
Total liabilities 172,205
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $26,636,737
---------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed net investment income $ 34,228
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 505,412
---------------------------------------------------------------------------
Futures 70,764
---------------------------------------------------------------------------
Accumulated net realized gain (loss) (18,362)
---------------------------------------------------------------------------
Paid-in capital 26,044,695
---------------------------------------------------------------------------
NET ASSETS, AT VALUE $26,636,737
---------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($21,780,877/2,270,454 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares
authorized) $ 9.59
---------------------------------------------------------------------------
Maximum offering price per share (100/95.50 of $9.59) $10.04
---------------------------------------------------------------------------
CLASS B SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge)
per share ($2,524,702/263,891 outstanding shares of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $ 9.57
---------------------------------------------------------------------------
CLASS C SHARES
Net asset value, offering and redemption price (subject to
contingent deferred sales charge)
per share ($2,331,158/243,670 outstanding shares of
beneficial interest, $.01 par value, unlimited number of
shares authorized) $ 9.57
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 25
<PAGE> 26
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the period April 3, 2000 (commencement of operations) to August 31,
2000
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $537) $ 57,126
-------------------------------------------------------------------------
Interest 40,204
-------------------------------------------------------------------------
Total income 97,330
-------------------------------------------------------------------------
Expenses:
Management fee 20,347
-------------------------------------------------------------------------
Services to shareholders 15,044
-------------------------------------------------------------------------
Custodian and accounting fees 17,114
-------------------------------------------------------------------------
Distribution services fees 11,373
-------------------------------------------------------------------------
Administrative services fees 12,616
-------------------------------------------------------------------------
Auditing 10,300
-------------------------------------------------------------------------
Legal 11,700
-------------------------------------------------------------------------
Trustees' fees 5,000
-------------------------------------------------------------------------
Reports to shareholders 11,422
-------------------------------------------------------------------------
Registration fees 55,800
-------------------------------------------------------------------------
Other 9,050
-------------------------------------------------------------------------
Total expenses, before expense reductions 179,766
-------------------------------------------------------------------------
Expense reductions (116,664)
-------------------------------------------------------------------------
Total expenses, after expense reductions 63,102
-------------------------------------------------------------------------
NET INVESTMENT INCOME 34,228
-------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments 1,474
-------------------------------------------------------------------------
Futures (19,836)
-------------------------------------------------------------------------
(18,362)
-------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments 505,412
-------------------------------------------------------------------------
Futures 70,764
-------------------------------------------------------------------------
576,176
-------------------------------------------------------------------------
Net gain (loss) on investment transactions 557,814
-------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 592,042
-------------------------------------------------------------------------
</TABLE>
26 The accompanying notes are an integral part of the financial statements.
<PAGE> 27
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 3, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 34,228
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (18,362)
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investment
transactions during the period 576,176
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 592,042
------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 23,369,331
------------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,324,636)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions 21,044,695
------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 21,636,737
------------------------------------------------------------------------------------------------------
Net assets at beginning of period 5,000,000
------------------------------------------------------------------------------------------------------
Net assets at end of period (including undistributed net
investment income of $34,228) 26,636,737
------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 27
<PAGE> 28
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
THE PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
2000(a) 2000(a) 2000(a)
<S> <C> <C> <C>
Net asset value, beginning of period $9.50 9.50 9.50
-------------------------------------------------------- ---------------- ---------------- ----------------
Income from investment operations:
Net investment income (b) 0.03 0.00 0.00
-------------------------------------------------------- ---------------- ---------------- ----------------
Net realized and unrealized gain (loss) on investment
transactions 0.06 0.07 0.07
-------------------------------------------------------- ---------------- ---------------- ----------------
Total from investment operations 0.09 0.07 0.07
-------------------------------------------------------- ---------------- ---------------- ----------------
Net asset value, end of period $9.59 9.57 9.57
-------------------------------------------------------- ---------------- ---------------- ----------------
TOTAL RETURN (%)(C)(D) 0.95** 0.74** 0.74**
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
Net assets, end of period ($ thousands) 21,781 2,525 2,331
-------------------------------------------------------- ---------------- ---------------- ----------------
Ratio of expenses before expense reductions (%) 3.19* 4.18* 4.13*
-------------------------------------------------------- ---------------- ---------------- ----------------
Ratio of expenses after expense reductions (%) 1.00* 1.75* 1.75*
-------------------------------------------------------- ---------------- ---------------- ----------------
Ratio of net investment income (%) 0.90* 0.09* 0.09*
-------------------------------------------------------- ---------------- ---------------- ----------------
Portfolio turnover rate (%) 43* 43* 43*
-------------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>
* Annualized
** Not annualized
(a) For the period April 3, 2000 (commencement of operations) to August 31,
2000.
(b) Based on monthly average shares outstanding during the period.
(c) Total return does not reflect the effect of sales charge.
(d) Total return would have been lower had certain expenses not been waived.
28 The accompanying notes are an integral part of the financial statements.
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES Kemper S&P 500 Index Fund (the "Fund") is a
diversified series of Kemper Funds Trust (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 Fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Fund have
equal rights with respect to voting subject to
class specific arrangements.
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 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. 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.
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
29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
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.
FUTURES CONTRACTS. A futures contract is an
agreement between a buyer or seller and an
established futures exchange or its clearinghouse
in which the buyer or seller agrees to take or make
a delivery of a specific amount of a financial
instrument at a specified price on a specific date
(settlement date). During the period, the Fund
purchased index futures as a temporary substitute
for purchasing selected investments.
Upon entering into a futures contract, the Fund is
required to deposit with a financial intermediary
an amount ("initial margin") equal to a certain
percentage of the face value indicated in the
futures contract. Subsequent payments ("variation
margin") are made or received by the Fund dependent
upon the daily fluctuations in the value of the
underlying security and are recorded for financial
reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction,
the Fund will realize a gain or loss equal to the
difference between the value of the futures
contract to sell and the futures contract to buy.
Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures
contracts, including the risk that an illiquid
secondary market will limit the Fund's ability to
close out a futures contract prior to the
settlement date and that a change in the value of a
futures contract may not correlate exactly with the
changes in the value of the securities or
currencies hedged. When utilizing futures contracts
to hedge, the Fund gives up the opportunity to
profit from favorable price movements in the hedged
positions during the term of the contract.
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.
From April 3, 2000 (commencement of operations)
through August 31, 2000, the Fund incurred
approximately $14,872 of net realized capital
losses. As permitted by tax regulations, the Fund
intends to elect to defer these losses and treat
them as arising in the fiscal year ended August 31,
2001.
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 accounting principles
generally accepted in the United States. 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.
30
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
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. Realized gains and losses
from investment transactions are recorded on an
identified cost basis. All 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.
--------------------------------------------------------------------------------
2 PURCHASES AND SALES
OF SECURITIES For the period ended August 31, 2000, investment
transactions (excluding short-term investments) are
as follows:
Purchases $26,120,119
Proceeds from
sales 2,321,333
--------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment
management fee of 1/12 of the annual rate of .40%
of the first $100 million of average daily net
assets, .36% of the next $100 million, and .34% of
average daily net assets in excess of $200 million.
Bankers Trust Company serves as sub-adviser with
respect to the investment and reinvestment of
assets in the Fund, and is paid by Scudder Kemper
for its services. The Adviser has agreed to
maintain the annualized expenses of the classes of
the Fund until April 3, 2001 as follows: Class A
shares 1.00%, Class B shares 1.75% and Class C
shares 1.75%. The Fund incurred no management fee
after an expense waiver by Scudder Kemper for the
period ended August 31, 2000.
Scudder Kemper agreed to temporarily waive and
reimburse certain operating expenses of the Fund.
Under this arrangement, Scudder Kemper waived
expenses of $71,364 for the period ended August 31,
2000.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of Class A shares for the period ended August 31,
2000 aggregated $2,084.
For services under the distribution services
agreement, the Fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
(CDSC) from redemptions of Class B and Class C
shares. For the period ended August 31, 2000, the
Distribution Fees for Class B shares and Class C
shares were $5,716 and $5,657, respectively.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with 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 of the Fund. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of fund accounts the firms service.
Administrative services were not
31
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
imposed after an expense waiver by Scudder Kemper
for the period ended August 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,
shareholder services fees of $10,892 were not
imposed after an expense waiver by Scudder Kemper
for the period ended August 31, 2000.
FUND ACCOUNTING FEES. Scudder Fund Accounting
Corporation ("SFAC"), a subsidiary of Scudder
Kemper, is responsible for determining the daily
net asset value per share and maintaining the
portfolio and general accounting records of the
fund. Fund accounting fees of $1,292 were not
imposed after an expense waiver by Scudder Kemper
for the period ended August 31, 2000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the period ended August 31,
2000, the Fund made no payments to its officers and
trustees.
--------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the Fund:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 3, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
-----------------------------
SHARES AMOUNT
<S> <C> <C>
SHARES SOLD
Class A 2,498,742 $18,423,848
----------------------------------------------------------------------------
Class B 271,874 2,565,854
----------------------------------------------------------------------------
Class C 251,264 2,363,275
----------------------------------------------------------------------------
SHARES REDEEMED
Class A (230,036) (2,174,460)
----------------------------------------------------------------------------
Class B (6,231) (59,889)
----------------------------------------------------------------------------
Class C (7,594) (73,933)
----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 1,748 16,354
----------------------------------------------------------------------------
Class B (1,752) (16,354)
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $21,044,695
----------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS The Fund has entered into an arrangement with its
custodian whereby credits realized as a result of
uninvested cash balances were used to reduce a
portion of the Fund's expense. During the period
ended August 31, 2000, the Fund's custodian fees
were reduced by $153 under this arrangement.
32
<PAGE> 33
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER S&P 500 INDEX FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper S&P 500 Index Fund, as of
August 31, 2000, the related statements of operations and changes in net assets,
and the financial highlights for the period April 3, 2000 to August 31, 2000.
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 audit in accordance with accounting principles 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 August 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 audit provides 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
S&P 500 Index Fund at August 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for the period April 3,
2000 to August 31, 2000, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LOGO
Chicago, Illinois
October 18, 2000
33
<PAGE> 34
NOTES
34
<PAGE> 35
NOTES
35
<PAGE> 36
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY
Trustee President CAROLINE PEARSON
Assistant Secretary
LINDA C. COUGHLIN PHILIP J. COLLORA
Trustee Vice President and Secretary BRENDA LYONS
Assistant Treasurer
JAMES R. EDGAR JOHN R. HEBBLE
Trustee Treasurer
ARTHUR R. GOTTSCHALK ANN M. MCCREARY
Trustee Vice President
FREDERICK T. KELSEY WILLIAM F. TRUSCOTT
Trustee Vice President
THOMAS W. LITTAUER LINDA J. WONDRACK
Chairman, Trustee and Vice President
Vice President
MAUREEN E. KANE
KATHRYN L. QUIRK Assistant Secretary
Trustee and Vice President
FRED B. RENWICK
Trustee
JOHN G. WEITHERS
Trustee
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL DECHERT
Ten Post Office Square South
Boston, MA 02109
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
CUSTODIAN AND STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT 225 Franklin Street
Boston, MA 02110
.............................................................................................
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>
[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 Equity Funds/Growth
Style prospectus.
KSPF - 2 (10/25/00) 1123120
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
