Annual Report to
Shareholders For The Year
August 31, 1999
Kemper Small Capitalization Value+Growth Fund
<PAGE>
Kemper Small Capitalization Value+Growth Fund
Average Annual Total Returns*
For period ended August 31, 1999 (adjusted for the maximum sales charge)
Life Of Class
-------------
Kemper Small Capitalization -5.95% (since 12/31/98)
Value+Growth Fund Class A Shares
Kemper Small Capitalization -4.84% (since 12/31/98)
Value+Growth Fund Class B Shares
Kemper Small Capitalization -1.84% (since 12/31/98)
Value+Growth Fund Class C Shares
Returns are historical and do not guarantee future results. Investment returns
and principal values will fluctuate so that shares, when redeemed, may be worth
more or less than original cost. Investing in securities of small companies may
involve a greater risk of loss and more abrupt fluctuations in the market price
than investments in larger companies
Performance
In a difficult market environment for seemingly all but large technology and
Internet stocks, Kemper Small Cap Value + Growth Fund slipped 0.21 (Class A
shares unadjusted for sales charge) percent during its first eight months of
operations - January 1, 1999 through August 31, 1999. By comparison, the Russell
2000 index gained 4.32 percent, the Russell 2000 Value index was flat and the
Russell 2000 Growth index gained 8.17 percent.
General Market Commentary
A two-tier market, where a small group of large growth stocks outperformed
nearly all other types of stocks, was in place during the lion's share of the
fund's abbreviated fiscal year. There was, however, a brief rally in the value
segment of the market during the second quarter as fears of a global economic
downturn abated. Small-cap stocks also flexed their muscles in the second
quarter and outperformed large-cap stocks. In July and August, however,
large-cap growth stocks regained their vigor. Although small-cap stocks
maintained some of the ground gained earlier, value stocks declined.
Fund Analysis
The value portion of Kemper Small Cap Value+Growth Fund outperformed the Russell
2000 Value index, while the growth portion of the portfolio underperformed the
Russell 2000 Growth index.
Lead Portfolio Manager James ("Mac") Eysenbach humbly attributes this
outperformance in value to the fact that the value benchmark was easier to beat
than the growth benchmark. He explains, "We were successful at identifying value
stocks that were cheap, but also had
<PAGE>
the potential to rebound or at least hold up better than the typical value
stock. On the value side, our stocks selection helped us out."
On the growth side, says Eysenbach, the fund's investment process was too
conservative for the "growth-at-any-price" momentum market that was in place
during most of the period. A small group of growth stocks had significant gains,
propelling the growth index returns during the period. These were technology and
Internet-related stocks with the highest perceived growth prospects and little,
if any, earnings. "Because we look for a demonstrated record of growth, our
investment process precluded us from owning these stocks," Eysenbach explains.
"Consequently, the fund's growth portfolio did not keep pace with the Russell
2000 Growth index."
On a sector basis, technology was the most significant headwind to the fund's
performance. Although there were gains in other sectors, including consumer
staples and basic materials, these were not large enough to offset the fund's
underperformance in technology. Eysenbach explains that he held true to the
fund's investment process and valuation disciplines. "We were underweighted in
technology, particularly Internet stocks, because they did not fit our valuation
criteria. Even though valuation carries less weight in our growth model than in
our value model, we don't ignore it altogether. We're not momentum or
growth-at-any-price managers. We only buy growth stocks where their valuations
are reasonable and justified given their record of growth and future prospects.
Our conviction and adherence to this philosophy kept us out of the
best-performing Internet stocks and dampened the fund's performance."
Investment Philosophy
Kemper Small Capitalization Value + Growth Fund follows a quantitative
investment approach, while investing in both growth and value stocks. A specific
quantitative value model is used in selecting value stocks, while a different
and distinct quantitative growth model is used to select growth stocks. In the
growth model, more emphasis is placed on earnings and sales growth along with
momentum measures, while the value model emphasizes traditional value
measurements such as price-to-earnings and price-to-sales.
The first step in the fund's stock selection is to apply these specific
quantitative stock evaluation models to the growth and value universes of the
Russell 2000 index. In each case, we are looking for stocks with above-average
return potential relative to their
<PAGE>
respective universes. These promising growth and value stocks are then combined
into a single portfolio, which remains roughly balanced between growth and
value.
A portfolio optimizer is used to build a diversified portfolio. As of August 31,
there were 141 names in the portfolio. Despite this diversification in names,
there are no sector constraints on the fund. The managers may invest heavily in
sectors where they see the best opportunities.
Outlook
Eysenbach believes strongly in the long-term prospects of small-cap stocks, and
is heartened by the market's recent transition where performance is no longer
dominated solely by stocks with the largest market capitalizations. He believes
the market will continue to broaden, and, as it does, he expects to see
improving performance among a larger number of growth stocks and in value stocks
relative to their growth counterparts.
<PAGE>
Growth of an assumed $10,000 investment in Kemper Small Capitalization
Value+Growth Fund Class A from 12/31/98 through 8/31/99. Adjusted for the
maximum sales charge.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
12/30/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Small Capitalization
Value+Growth Fund Class A* $10,000 $9,177 $9,405
Russell 2000 Index** $10,000 $10,305 $10,235
Consumer Price Index*** $10,000 $10,140 $10,195
Growth of an assumed $10,000 investment in Kemper Small Capitalization
Value+Growth Fund Class B from 12/31/98 through 8/31/99. Adjusted for the
maximum sales charge.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
12/30/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Small Capitalization
Value+Growth Fund Class B* $10,000 $9,705 $9,916
Russell 2000 Index** $10,000 $10,305 $10,235
Consumer Price Index*** $10,000 $10,140 $10,195
<PAGE>
Growth of an assumed $10,000 investment in Kemper Small
CapitalizationValue+Growth Fund Class C from 12/31/98 through 8/31/99. Adjusted
for the maximum sales charge.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
12/30/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Small Capitalization
Value+Growth Fund Class C* $10,000 $9,705 $9,816
Russell 2000 Index** $10,000 $10,305 $10,235
Consumer Price Index*** $10,000 $10,140 $10,195
* Average annual total return and total return measures net investment income
and capital gain or loss from portfolio investments over the periods specified,
assuming reinvestment of all dividends and, where indicated, adjustment for the
maximum sales charge. The maximum sales charge for Class A shares is 5.75%. For
Class B shares the maximum contingent deferred sales charge (CDSC) is 4%. Class
C shares have no sales charge adjustment, but redemptions within one year of
purchase may be subject to a contingent deferred sales charge of 1%. Share
classes invest in the same underlying portfolio. Average annual total return
reflects annualized change while total return reflects aggregate change. During
the periods noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information and the Financial
Highlights at the end of this report. Returns are historical and do not
guarantee future results. Investment returns and principal values will fluctuate
so that shares when redeemed may be worth more or less than original cost.
** The Russell 1000 Growth Index is an unmanaged index comprised of common
stocks of larger U.S. companies with greater than average growth orientation and
represents the universe of stocks from which "earnings/growth" money managers
typically select. Source is CDA Wiesenberger.
***The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. It is generally considered to be a measure of inflation. Source is
CDA Wiesenberger.
<PAGE>
Kemper Small Cap Value + Growth Fund
Portfolio of Investments at August 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Common Stocks Number of shares Value ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communications 1.4% (a) MasTec, Inc. 100 2,794
Telephone/ North Pittsburgh Systems, Inc. 500 6,531
communications (a) Xircom, Inc. 100 3,981
-------------------------------------------------------------------
13,306
- -------------------------------------------------------------------------------------------------------
Consumer discretionary 21.9% (a) Chico's Fas, Inc. 200 4,437
Apparel & shoes 5.4% (a) Genesco, Inc. 900 10,687
(a) Guess ?, Inc. 300 3,956
(a) Hartmarx Corp. 600 2,475
Kellwood Company 100 2,387
(a) Kenneth Cole Productions, Inc. 200 6,837
OshKosh B'Gosh 400 6,450
Oxford Industries, Inc. 300 6,487
(a) Quicksilver, Inc. 300 5,175
(a) The Buckle, Inc. 200 3,375
-------------------------------------------------------------------
52,266
Department & chain 1.0% Casey's General Stores, Inc. 700 9,363
-------------------------------------------------------------------
Home furnishings 1.6% American Woodmark Corp. 200 5,425
Haverty Furniture Co, Inc. 600 9,712
-------------------------------------------------------------------
15,137
Hotels & casinos .7% (a) Aztar Corp. 500 4,594
(a) Trendwest Resorts, Inc. 100 2,475
-------------------------------------------------------------------
7,069
Recreational products 4.6% (a) Acclaim Entertainment, Inc. 700 4,944
(a) Bally Total Fitness Centers Corp. 300 9,619
Churchill Downs, Inc. 200 5,200
Coachmen Industries, Inc. 300 4,744
(a) National R.V. Holdings, Inc. 400 9,650
(a) THQ, Inc. 200 6,325
Winnebago Industries 200 4,788
-------------------------------------------------------------------
45,270
Restaurants 4.5% (a) CEC Entertainment, Inc. 600 16,725
(a) Consolidated Products 400 5,800
(a) Dave & Buster's, Inc. 300 3,525
(a) Lone Star Steakhouse & Saloon, Inc. 800 6,100
(a) Ryan's Family Steak Houses, Inc. 600 5,812
(a) Sonic Corp. 200 6,125
-------------------------------------------------------------------
44,087
<PAGE>
- -------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- -------------------------------------------------------------------------------------------------------
Specialty retail 4.1% (a) Action Performance Companies, Inc. 250 6,172
(a) CSK Auto Corp. 200 4,750
(a) Fossil, Inc. 300 9,356
(a) SCP Pool Corp. 200 4,600
(a) Topps Company (The) 500 4,437
(a) Trans World Entertainment Corp. 400 4,800
(a) Whitehall Jewelers, Inc. 200 5,625
-------------------------------------------------------------------
39,740
- -------------------------------------------------------------------------------------------------------
Consumer staples 2.3%
Consumer electronic (a) Salton, Inc. 200 5,575
& photographic .6% -------------------------------------------------------------------
Food & beverage .5% Imperial Sugar Co. 800 4,900
-------------------------------------------------------------------
Packaged good/ (a) Chattem, Inc. 200 4,825
cosmetics .5% -------------------------------------------------------------------
Textiles .7% (a) Polymer Group, Inc. 500 7,000
-------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Construction 9.4% Ameron International Corp. 300 13,725
Building materials 3.3% Florida Rock Industries, Inc. 200 7,987
Lone Star Industries, Inc. 300 10,312
-------------------------------------------------------------------
32,024
Building products 3.7% (a) Genlyte Group, Inc. 500 12,250
LSI Industries, Inc. 200 4,737
(a) Nortek, Inc. 300 10,687
TJ International, Inc. 300 8,737
-------------------------------------------------------------------
36,411
Homebuilding 2.4% MDC Holdings, Inc. 400 7,525
Ryland Group, Inc. 300 7,219
(a) U.S. Home Corp. 300 9,000
-------------------------------------------------------------------
23,744
- -------------------------------------------------------------------------------------------------------
Durables 5.0% Kaman Corp. "A" 700 9,144
Aerospace 2.0% (a) Sequa Corp. "A" 150 10,144
-------------------------------------------------------------------
19,288
Automobiles 1.8% (a) Dura Automotive Systems, Inc. 189 4,890
(a) Monaco Coach Corp. 200 5,800
Wynn's International, Inc. 400 7,200
-------------------------------------------------------------------
17,890
Construction/ (a) Terex Corp. 300 8,062
agricultural equipment .8% -------------------------------------------------------------------
Leasing companies .4% (a) Neff Corp. 300 3,750
-------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- -------------------------------------------------------------------------------------------------------
Energy 2.1% (a) Parker Drilling Co. 900 4,500
Oilfield services/ (a) Seacor Smit, Inc. 200 10,387
equipment (a) Veritas DGC, Inc. 300 5,362
-------------------------------------------------------------------
20,249
- -------------------------------------------------------------------------------------------------------
Financial 12.4% Brenton Banks 300 4,144
Banks 5.3% (a) Columbia Banking System, Inc. 300 4,331
First Source Corp. 330 9,735
JSB Financial, Inc. 200 10,625
MAF Bancorp, Inc. 300 6,375
(a) National Discount Brokers 100 3,056
Pacific Capital Bancorp 300 9,225
The Trust Company of N.J. 200 4,437
-------------------------------------------------------------------
51,928
Business finance .5% Morgan Keegan 300 5,081
-------------------------------------------------------------------
Insurance 5.5% Chartwell Re Corp. 300 4,800
Fidelity National Financial, Inc. 200 3,075
Hilb, Rogal & Hamilton Co. 300 7,237
Kansas City Life Insurance Co. 200 8,162
LandAmerica Financial Group, Inc. 250 5,781
SCPIE Holdings, Inc. 300 9,094
Stewart Information Services Corp. 400 8,325
The Midland Company 300 7,050
-------------------------------------------------------------------
53,524
Other financial Advanta Corp. "A" 200 3,938
companies .8% Resource America, Inc. "A" 400 4,000
-------------------------------------------------------------------
7,938
Real estate .3% (a) Grubb & Ellis Co. 500 2,500
-------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Health 5.2% Hooper Holmes 600 13,725
Health industry services 3.3% (a) Magellan Health Services, Inc. 400 3,650
(a) Res-Care, Inc. 400 7,550
(a) Syncor International Corp. 200 7,200
-------------------------------------------------------------------
32,125
Medical supply (a) Techne Corp. 400 12,400
& specialty 1.9% (a) Wesley Jessen VisionCare, Inc. 200 6,138
-------------------------------------------------------------------
18,538
- -------------------------------------------------------------------------------------------------------
Manufacturing 13.0% P.H. Glatfelter Company 900 11,869
Containers & paper 1.2% -------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- -------------------------------------------------------------------------------------------------------
Diversified (a) Griffon Corp. 700 4,988
manufacturing 2.9% Justin Industries 500 7,141
Matthews International Corp. 300 8,138
(a) SPS Technologies, Inc. 200 7,838
-------------------------------------------------------------------
28,105
Electrical products 2.3% Ametek, Inc. 500 10,406
Franklin Electric Co. 100 7,050
(a) Stoneridge, Inc. 300 5,400
-------------------------------------------------------------------
22,856
Industrial specialty 1.9% (a) Gardner Denver, Inc. 400 7,675
Milacron, Inc. 100 1,800
(a) O'Sullivan Industries Holdings, Inc. 600 9,450
-------------------------------------------------------------------
18,925
Machinery/components/ (a) Astec Industries 200 6,775
controls 4% DT Industries, Inc. 400 2,850
Hardinge, Inc. 200 3,050
(a) Mueller Industries, Inc. 200 6,200
Reliance Steel & Aluminum Co. 300 9,938
Woodward Governor Co. 400 9,950
-------------------------------------------------------------------
38,763
Wholesale distributors .7% Hughes Supply, Inc. 300 6,975
-------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Media 1.1% Grey Advertising, Inc. 30 11,130
-------------------------------------------------------------------
Advertising
- -------------------------------------------------------------------------------------------------------
Metals & minerals 2.9% (a) Armco, Inc. 1,500 10,313
Steel & metals Commercial Metals Co. 400 12,250
National Steel Corp. "B" 700 5,688
-------------------------------------------------------------------
28,251
- -------------------------------------------------------------------------------------------------------
Service industries 8.2% Schawk, Inc. 500 4,469
Edp services .5% -------------------------------------------------------------------
Environmental services 1% (a) URS Corp. 400 9,900
-------------------------------------------------------------------
Investments 1.1% Advest Group, Inc. 400 7,650
Southwest Securities Group, Inc. 100 3,375
-------------------------------------------------------------------
11,025
<PAGE>
- -------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- -------------------------------------------------------------------------------------------------------
Miscellaneous commercial Computer Task Group, Inc. 400 6,700
services 4.8% Duff & Phelps Credit Rating Co. 200 15,225
(a) IT Group, Inc. 400 4,775
(a) Labor Ready, Inc. 200 3,213
(a) Morrison Knudsen Corp. 600 6,450
(a) Plexus Corp. 200 5,950
(a) West Teleservices Corp. 400 4,250
-------------------------------------------------------------------
46,563
Printing/publishing .8% Value Line, Inc. 200 7,450
-------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Technology 8.1% (a) 3DFX Interactive, Inc. 400 4,450
Computer software 2% (a) MAPICS, Inc. 400 3,450
(a) MTI Technology Corp. 300 6,694
(a) Structural Dynamics Research Corp. 300 4,838
-------------------------------------------------------------------
19,432
Diverse electronics (a) Esterline Technologies Corp. 500 8,188
products .8% -------------------------------------------------------------------
Electronic components/ (a) Aavid Thermal Technologies, Inc. 500 11,375
distributors 3.6% Harmon Industries, Inc. 500 8,688
Pioneer-Standard Electronics, Inc. 300 4,238
Technitrol, Inc. 300 10,500
-------------------------------------------------------------------
34,801
Electronic data (a) Computer Network Technology, Corp. 300 4,744
processing .5% -------------------------------------------------------------------
Semiconductors 1.2% (a) Alpha Industries 200 11,388
-------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Transportation 2.7%
Air Freight .7% (a) Offshore Logistics, Inc. 600 7,013
-------------------------------------------------------------------
Trucking 2% (a) Consolidated Freightways Corp. 400 4,325
(a) Forward Air Corp. 200 4,500
Roadway Express, Inc. 500 10,531
-------------------------------------------------------------------
19,356
- -------------------------------------------------------------------------------------------------------
Utilities 4.3% (a) El Paso Electric Co. 1,100 10,106
Electric utilities 3.2% Public Service Co. of New Mexico 500 9,406
TNP Enterprises, Inc. 300 11,213
-------------------------------------------------------------------
30,725
Natural gas distribution 1.1% NUI Corp. 400 10,250
-------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100%
(Cost: $980,708) 973,768
-------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $980,708 for federal income tax purposes at
August 31, 1999, the gross unrealized appreciation was $90,258, the gross
unrealized depreciation was $97,198 and the net unrealized depreciation on
investments was $6,940.
See accompanying Notes to Financial Statements.
<PAGE>
The Board of Trustees and Shareholders
Kemper Small Cap Value + Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Small Cap Value + Growth Fund
(one of the portfolios constituting Kemper Funds Trust Series) as of August 31,
1999, the related statements of operations, changes in net assets and the
financial highlights for the period from December 31, 1998 (commencement of
operations) to August 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned as of August 31, 1999, 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 Small Cap Value + Growth Fund at August 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period from December 31, 1998 (commencement of operations) to August 31, 1999,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 15, 1999
<PAGE>
Kemper Small Cap Value + Growth
Statement of Assets & Liabilities
August 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at value
(Cost: $980,708) $ 973,768
- --------------------------------------------------------------------------------
Cash 8,642
- --------------------------------------------------------------------------------
Dividends receivable 574
- --------------------------------------------------------------------------------
Due from advisor 14,500
- --------------------------------------------------------------------------------
Total assets 997,484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for:
Management fee 384
- --------------------------------------------------------------------------------
Distribution services fee 2,049
- --------------------------------------------------------------------------------
Transfer agent fees 472
- --------------------------------------------------------------------------------
Trustees' fees and other 565
- --------------------------------------------------------------------------------
Total liabilities 3,470
- --------------------------------------------------------------------------------
Net assets, at market value $ 994,014
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net assets
- --------------------------------------------------------------------------------
Net assets consist of:
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments $ 774
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (6,940)
- --------------------------------------------------------------------------------
Paid-in capital 1,000,180
- --------------------------------------------------------------------------------
Net assets, at market value $ 994,014
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The pricing of shares
- --------------------------------------------------------------------------------
Class A Shares
Net asset value and redemption price per share
($332,676 / 35,094 shares outstanding) $9.48
- --------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.06
- --------------------------------------------------------------------------------
Class B Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($330,669 / 35,094 shares outstanding) $9.42
- --------------------------------------------------------------------------------
Class C Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($330,669 / 35,094 shares outstanding) $9.42
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Operations
For the period from December 31, 1998 (commencement of operations) to August 31,
1999
- -------------------------------------------------------------------------------
Investment income
- -------------------------------------------------------------------------------
Dividends $ 5,945
- -------------------------------------------------------------------------------
Interest income 536
- -------------------------------------------------------------------------------
Total investment income 6,481
- -------------------------------------------------------------------------------
Expenses:
Management fee 4,792
- -------------------------------------------------------------------------------
Distribution services fee 3,192
- -------------------------------------------------------------------------------
Administrative services fee 1,597
- -------------------------------------------------------------------------------
Transfer agent fees 978
- -------------------------------------------------------------------------------
Custodian fees and accounting fees 6,077
- -------------------------------------------------------------------------------
Trustees fees 5,834
- -------------------------------------------------------------------------------
Auditing 6,667
- -------------------------------------------------------------------------------
Legal 1,245
- -------------------------------------------------------------------------------
Reports to shareholders 500
- -------------------------------------------------------------------------------
Other 1,627
- -------------------------------------------------------------------------------
Total expenses before expense waiver 32,509
- -------------------------------------------------------------------------------
Less expense waived and absorbed by investment manager (18,333)
- -------------------------------------------------------------------------------
Total expenses after expense waiver 14,176
- -------------------------------------------------------------------------------
Net investment income (loss) (7,695)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
- -------------------------------------------------------------------------------
Net realized gain (loss) from investments 8,469
- -------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on investments (6,940)
- -------------------------------------------------------------------------------
Net gain (loss) on investments 1,529
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (6,166)
- -------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Changes in Net Assets
For the period from December 31, 1999 (commencement of operations) to August 31,
1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Operations and capital share activity
- -------------------------------------------------------------------------------------------------------
<S> <C>
Net investment income (loss) $ (7,695)
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 8,469
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on investments (6,940)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (6,166)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 966,846
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 960,680
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 33,334
- -------------------------------------------------------------------------------------------------------
End of period $ 994,014
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Notes to financial statements
1. Description of the fund
Kemper Small Cap Value + Growth 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. Currently, shares of the
fund are available only of Scudder Kemper Investments, Inc. employees in the
following states: California, Connecticut, Florida, Illinois, Kansas,
Massachusetts, Missouri, New Hampshire, New Jersey and New York.
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 generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the fund in the preparation of its
financial statements.
2. Significant accounting polices
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.
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
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.
<PAGE>
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. 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. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
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.
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 .75% of the first $250 million of average daily
net assets declining to .68% of average daily net assets in excess of $2.5
billion. The fund incurred a management fee of $2,556 for the period ended
August 31, 1999, after a fee waiver by Scudder Kemper.
Scudder Kemper has agreed to temporarily absorb certain operating expenses of
the fund. Under these arrangements, Scudder Kemper waived and absorbed expenses
of $18,333 for the period ended August 31, 1999.
Underwriting and distribution services agreement. The fund has an underwriting
and distribution services agreement with Kemper Distributors, Inc. (KDI). For
services under the distribution services agreement, the fund pays KDI a fee of
.75% of average daily net assets of 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. Distribution fees
received by KDI for the period ended August 31, 1999 are $3,192.
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 each class. 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. The fund incurred no
administrative services fees for the period ended August 31, 1999, after an
expense absorption by Scudder Kemper.
Shareholder services agreement. Pursuant to an agency agreement with the fund,
Kemper Service Company (KSvC) is the transfer agent and shareholder service
agent of the fund. Under the agreement, KSvC earned transfer agency fees of $978
for the period ended August 31, 1999.
Fund accounting agent. Scudder Fund Accounting Corporation (SFAC) is responsible
for determining the daily net asset value per share and maintaining the
portfolio and general accounting records of the fund. The fund incurred no
accounting fees for the period ended August 31, 1999, after an expense
absorption by Scudder Kemper.
Officers and trustees. Certain officers or trustees of the fund are also
officers or trustees of Scudder Kemper. During the period ended August 31, 1999,
the fund made no payments to its officers and incurred trustees' fees of $5,834
to independent trustees.
<PAGE>
4. Investment transactions
For the period ended August 31, 1999, investment transactions (excluding
short-term instruments) are as follows:
Purchases $1,208,695
Proceeds from sales 230,706
5. Capital share transactions
The following table summarizes the activity in capital shares of the fund:
For the period December 31, 1998
(commencement of operations)
to August 31, 1999
------------------
Shares Amount
- ----------------------------------------------------------------------------
Shares sold
- ----------------------------------------------------------------------------
Class A 34,659 $329,370
- ----------------------------------------------------------------------------
Class B 34,659 329,325
- ----------------------------------------------------------------------------
Class C 34,987 332,468
- ----------------------------------------------------------------------------
Shares redeemed
- ----------------------------------------------------------------------------
Class A (735) (7,088)
- ----------------------------------------------------------------------------
Class B (735) (7,043)
- ----------------------------------------------------------------------------
Class C (1,063) (10,186)
- ----------------------------------------------------------------------------
Net increase from
capital share transactions $966,846
- ----------------------------------------------------------------------------
<PAGE>
Kemper Small Cap Value + Growth Fund
Financial Highlights
For the period from December 31, 1998 (commencement of operations) to August 31,
1999
<TABLE>
<CAPTION>
Class A Class B Class C
- ----------------------------------------------------------------------- -------------- -------------
Per share operating performance
- ----------------------------------------------------------------------- -------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.50 9.50 9.50
- ----------------------------------------------------------------------- -------------- -------------
Income from investment operations:
Net investment income (loss) (.04) (.09) (.09)
- ----------------------------------------------------------------------- -------------- -------------
Net realized and unrealized gain (loss) .02 .01 .01
- ----------------------------------------------------------------------- -------------- -------------
Total from investment operations (.02) (.08) (.08)
- ----------------------------------------------------------------------- -------------- -------------
Net asset value, end of period $9.48 9.42 9.42
- ----------------------------------------------------------------------- -------------- -------------
Total return (not annualized) (.21)% (.84) (.84)
- ----------------------------------------------------------------------- -------------- -------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------- -------------- -------------
Expenses 1.63% 2.52 2.52
- ----------------------------------------------------------------------- -------------- -------------
Net investment income (loss) (.62)% (1.51) (1.51)
- ----------------------------------------------------------------------- -------------- -------------
- ----------------------------------------------------------------------- -------------- -------------
Other ratios to average net assets (annualized)
- ----------------------------------------------------------------------- -------------- -------------
Expenses 4.49% 5.38 5.38
- ----------------------------------------------------------------------- -------------- -------------
Net investment income (loss) (3.48)% (4.37) (4.37)
- ----------------------------------------------------------------------- -------------- -------------
- ---------------------------------------------------------------------------------------------------------------
Supplemental data for all classes
- ---------------------------------------------------------------------------------------------------------------
Net assets at end of period $994,014
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 36%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive 0.35% of its management
fee and absorb certain operating expenses of the fund. The other ratios to
average net assets are computed without this expense waiver or absorption. Per
share data for the period ended August 31, 1999 was determined based on average
shares outstanding.
<PAGE>
Trustees & Officers
-------------------
Trustees Officers
James E. Akins Mark S. Casady Maureen E. Kane
Trustee President Assistant Secretary
James R. Edgar Philip J. Collora Caroline Pearson
Trustee Vice President and Assistant Secretary
Secretary
Arthur R. Gottschalk
Trustee John R. Hebble
Treasurer
Frederick T. Kelsey
Trustee Brenda Lyons
Assistant Treasurer
Thomas W. Littauer
Trustee and Valerie Malter
Vice President Vice President
Kathryn L. Quirk Ann M. McCreary
Trustee and Vice President
Vice President
Elizabeth D. Smith
Fred B. Renwick Vice President
Trustee
William F. Truscott
Cornelia Small Vice President
Trustee and
Vice President Robert Tymoczko
Vice President
John G Weithers
Trustee Linda J. Wondrack
Vice President
- --------------------------------------------------------------------------------
Legal Counsel Dechert Price & Rhodes
Ten Post Office Square
Boston, MA. 02109
Shareholder Kemper Service Company
Service Agent P.O. Box 419557
And Transfer Agent Kansas City, MO 64141
Custodian State Street Bank and Trust Company
225 Franklin Street
Boston, Ma 02110
Independent Ernst & Young LLP
Auditors 233 South Wacker Drive
Chicago, Il 60606
Principal Kemper Distributors, Inc.
Underwriter 222 South Riverside Plaza Chicago, Il 60606-5808
www.kemper.com
This report is not to be distributed unless preceded or accompanied by a Kemper
Syle prospectus.