Kemper Research Fund
Semiannual Report to Shareholders
February 28, 1999
<PAGE>
Kemper Research Fund
Portfolio of Investments at February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Common stocks Number of shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic industries-3.1% Allegheny Teledyne Inc. 590 12,169
Ecolab, Inc. 630 25,121
E.I. du Pont de Nemours & Co. 345 17,703
Southdown, Inc. 345 16,280
Weyerhaeuser Co. 365 20,349
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91,622
- ---------------------------------------------------------------------------------------------------------------------------
Capital goods-7.8% Corning Inc. 370 19,795
Emerson Electric Co. 735 42,216
Lockheed Martin Corp. 470 17,713
Parker-Hannifin Corp. 1,230 45,664
Rockwell International Corp. 520 23,108
Textron, Inc. 180 14,040
Thomas & Betts Corp. 545 22,720
United Technologies Corp. 375 46,453
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231,709
- ---------------------------------------------------------------------------------------------------------------------------
Communications-8.5% Bell Atlantic Corp. 860 49,396
BellSouth Corp. 385 17,806
Frontier Corp. 605 21,742
GTE Corp. 210 13,624
(a) MCI WorldCom, Inc. 985 81,263
(a) Millicom International Cellular S.A. 255 6,821
(a) Orange plc 140 10,028
SBC Communicatons, Inc. 750 39,656
Telecom Italia S.p.A. 110 11,605
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251,941
- ---------------------------------------------------------------------------------------------------------------------------
Consumer cyclicals-9.3% Black & Decker Corp. 160 7,800
Dayton Hudson Corp. 500 31,281
Dollar General Corp. 890 26,644
Federal-Mogul Corp. 155 7,624
Ford Motor Co. 585 34,698
Gap Inc. 115 7,439
Home Depot, Inc. 435 25,964
IMS Health Inc. 360 12,780
Leggett & Platt 355 7,433
May Department Stores 270 15,998
(a) Metzler Group, Inc. 330 14,025
(a) Mirage Resorts, Inc. 665 12,968
Tribune Co. 270 17,904
Wal-Mart Stores Inc. 625 53,984
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276,542
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------------
Consumer staples-14.7% Albertson's Inc. 365 20,805
Anheuser-Busch Companies, Inc. 130 9,969
Cardinal Health, Inc. 365 26,348
(a) Chancellor Media Corp. 220 9,625
Coca-Cola Co., Inc. 750 47,953
Colgate-Palmolive Co. 160 13,580
ConAgra, Inc. 980 29,522
Gillette Co. 325 17,428
H.J. Heinz Co. 665 36,201
PepsiCo Inc. 430 16,179
Philip Morris Companies, Inc. 395 15,454
Procter & Gamble Co. 455 40,723
Rite Aid Corp. 605 25,032
(a) Tele-Comm Liberty Media Group "A" 1,010 54,414
(a) Tele-Communications TCI Ventures Group "A" 2,130 58,974
Unilever NV 220 15,936
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438,143
- ---------------------------------------------------------------------------------------------------------------------------
Energy-4.8% Atlantic Richfield Co. 360 19,665
BP Amoco Plc 205 17,425
Exxon Corp. 445 29,620
Halliburton Co. 185 5,226
Mobil Corp. 280 23,293
Royal Dutch Petroleum Co. 795 34,881
Texaco Inc. 310 14,434
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144,544
- ---------------------------------------------------------------------------------------------------------------------------
Finance-15.4% AFLAC, Inc. 460 20,297
Allstate Corp. 725 27,187
American Express Co. 275 29,837
American International Group, Inc. 390 44,436
Associates First Capital Corp. 400 16,250
Bank One Corp. 590 31,712
BankAmerica Corp. 905 59,108
BankBoston Corp. 460 18,601
Chase Manhattan Corp. 395 31,452
Citigroup Inc. 410 24,087
Federal National Mortgage Association 545 38,150
First Union Corp. 665 35,453
Household International, Inc. 710 28,844
North Fork Bancorporation, Inc. 680 14,960
XL Capital Ltd. " A" 630 38,587
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458,961
- ---------------------------------------------------------------------------------------------------------------------------
Health care-11.0% Abbott Laboratories 365 16,950
Allergan, Inc. 290 23,635
American Home Products Corp. 500 29,750
(a) Amgen Inc. 135 16,858
Baxter International Inc. 310 21,816
Bristol-Myers Squibb Co. 120 15,112
Eli Lilly & Co. 350 33,141
Medtronic Inc. 361 25,496
Pfizer, Inc. 390 51,456
Schering-Plough Corp. 555 31,045
SmithKline Beecham PLC (ADR) 220 15,648
Warner-Lambert Co. 675 46,617
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327,524
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------------
Number of shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------------
Technology-18.9% (a) Altera Corp. 265 12,886
America Online Inc. 400 35,575
(a) Check Point Software Technologies Ltd. 300 11,512
(a) Cisco Systems, Inc. 450 44,016
Compaq Computer Corp. 540 19,035
Computer Associates International, Inc. 305 12,810
(a) Dell Computer Corp. 280 22,435
(a) EMC Corp. 220 22,522
Hewlett-Packard Co. 230 15,281
Intel Corp. 480 57,570
International Business Machines Corp. 185 31,450
(a) Keane, Inc. 385 11,911
Lucent Technologies Inc. 205 20,820
(a) Microsoft Corp. 405 60,801
Motorola Inc. 390 27,398
(a) Network Appliance, Inc. 735 30,870
Nokia AB Oy "A" (ADR) 270 36,619
(a) Oracle Systems Corp. 505 28,217
(a) Sterling Commerce, Inc. 470 12,220
(a) Sun Microsystems, Inc. 365 35,519
Xerox Corp. 250 13,797
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563,264
- ---------------------------------------------------------------------------------------------------------------------------
Transportation-1.0% Canadian National Railway Co. 325 15,687
(a) US Airways Group, Inc. 175 8,291
(a) Wisconsin Central Transportation Co. 585 8,044
--------------------------------------------------------------------------------------
32,022
- ---------------------------------------------------------------------------------------------------------------------------
Utilities-2.8% CINergy Corp. 610 17,804
(a) Niagara Mohawk Power Corp. 890 13,016
(a) Northeast Utilities 925 13,817
PacifiCorp 420 7,534
Unicom Corp. 360 12,803
Williams Cos., Inc. 480 17,760
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82,734
- ---------------------------------------------------------------------------------------------------------------------------
Miscellaneous-2.7% Standard & Poor's 500 Depository Receipt 640 79,200
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TOTAL INVESTMENT PORTFOLIO - 100%
(Cost: $2,986,851) 2,978,206
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</TABLE>
- --------------------------------------------------------------------------------
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $2,986,851 for federal income tax purposes
at February 28, 1999, the gross unrealized appreciation was $127,493, the gross
unrealized depreciation was $136,138 and the net unrealized depreciation on
investments was $8,645.
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities
February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $2,986,851) $2,978,206
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Cash 11,294
- ----------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 10,558
- ----------------------------------------------------------------------------------------------------------
Dividends 3,771
- ----------------------------------------------------------------------------------------------------------
Total assets 3,003,829
- ----------------------------------------------------------------------------------------------------------
Liabilities and net assets
- ----------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 12,385
- ----------------------------------------------------------------------------------------------------------
Management fee 1,612
- -----------------------------------------------------------------------------------------------------------
Distribution services fee 1,151
- ----------------------------------------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related expenses 2,351
- ----------------------------------------------------------------------------------------------------------
Other 608
- ----------------------------------------------------------------------------------------------------------
Total liabilities 18,107
- ----------------------------------------------------------------------------------------------------------
Net assets $2,985,722
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Analysis of net assets
- ----------------------------------------------------------------------------------------------------------
Paid-in capital $3,000,180
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Accumulated net realized loss on investments (3,642)
- ----------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (8,645)
- ----------------------------------------------------------------------------------------------------------
Accumulated net investment loss (2,171)
- ----------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,985,722
- ----------------------------------------------------------------------------------------------------------
The pricing of shares
- ----------------------------------------------------------------------------------------------------------
Class A Shares
Net asset value and redemption price per share
($996,200 / 105,269 shares outstanding) $9.46
- ----------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.04
- ----------------------------------------------------------------------------------------------------------
Class B Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($994,761 / 105,269 shares outstanding) $9.45
- ----------------------------------------------------------------------------------------------------------
Class C Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($994,761/ 105,269 shares outstanding) $9.45
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Operations
For the period from December 31, 1998 (commencement of operations) to February
28, 1999 (unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Investment income
- ------------------------------------------------------------------------------------------------------
<S> <C>
Dividends $ 6,126
- ------------------------------------------------------------------------------------------------------
Interest 1,211
- ------------------------------------------------------------------------------------------------------
Total investment income 7,337
- ------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------------------
Management fee 3,170
- ------------------------------------------------------------------------------------------------------
Distribution services fee 2,264
- ------------------------------------------------------------------------------------------------------
Administrative services fee 1,132
- ------------------------------------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related expenses 2,494
- ------------------------------------------------------------------------------------------------------
Professional fees 1,783
- ------------------------------------------------------------------------------------------------------
Other 76
- ------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 10,919
- ------------------------------------------------------------------------------------------------------
Less expenses waived and absorbed by investment manager (1,411)
- ------------------------------------------------------------------------------------------------------
Total expenses after expense waiver 9,508
- ------------------------------------------------------------------------------------------------------
Net investment loss (2,171)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments
- ------------------------------------------------------------------------------------------------------
Net realized loss on sales of investments (3,642)
- ------------------------------------------------------------------------------------------------------
Change in net unrealized depreciation on investments (8,645)
- ------------------------------------------------------------------------------------------------------
Net loss on investments (12,287)
- ------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(14,458)
- ------------------------------------------------------------------------------------------------------
<PAGE>
Statement of Changes in Net Assets
For the period from December 31, 1998 (commencement of operations) to February
28, 1999 (unaudited)
- ------------------------------------------------------------------------------------------------------
Operations and capital share activity
- ------------------------------------------------------------------------------------------------------
Net investment loss $ (2,171)
- ------------------------------------------------------------------------------------------------------
Net realized loss (3,642)
- ------------------------------------------------------------------------------------------------------
Change in net unrealized depreciation (8,645)
- ------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (14,458)
- ------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 2,966,847
- ------------------------------------------------------------------------------------------------------
Total increase in net assets 2,952,389
- ------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------
Beginning of period 33,333
- ------------------------------------------------------------------------------------------------------
End of period $2,985,722
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</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
Notes to financial statements
1. Description of the fund
Kemper Research Fund (the fund) is a series of Kemper Funds Trust (the trust),
an open-end management investment company organized as a business trust under
the laws of Massachusetts. The fund commenced operations on December 31, 1998.
The fund currently offers three classes of shares. Class A shares are sold to
investors subject to an initial sales charge. Class B shares are sold 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 sold 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. Differences in class expenses will
result in the payment of different per share income dividends by class. All
shares of the fund have equal rights with respect to voting, dividends and
assets, subject to class specific preferences.
2. Significant accounting polices
Security valuation. Investments are stated at value. Portfolio 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 on such market. 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 shall be used.
All other securities are valued at their fair market value as determined in good
faith by the Valuation Committee of the Board of Trustees.
Investment transactions and investment income. Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date, and interest income is recorded on the accrual basis. Realized gains and
losses from investment transactions are reported on an identified cost basis.
Fund share valuation. Fund shares are sold and redeemed on a continuous basis at
net asset value (plus an initial sales charge on most sales of Class A shares).
Proceeds payable on redemption of Class B and Class C shares will be reduced by
the amount of any applicable contingent deferred sales charge. On each day the
New York Stock Exchange is open for trading, the net asset value per share is
determined as of the close of the Exchange. The net asset value per share is
determined separately for each class by dividing the fund's net assets
attributable to that class by the number of shares of the class outstanding.
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.
Dividends to shareholders. The fund declares and pays dividends of net
investment income and net realized capital gains annually, which are recorded on
the ex-dividend date. Dividends are determined in accordance with income tax
principles which may treat certain transactions differently from generally
accepted accounting principles.
<PAGE>
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 .70% of the first $250 million of average daily
net assets declining to .63% of average daily net assets in excess of $2.5
billion. The fund incurred a management fee of $3,170 for the period ended
February 28, 1999.
Scudder Kemper has agreed to temporarily absorb certain operating expenses of
the fund. Under this arrangement, Scudder Kemper waived and absorbed expenses of
$1,411 for the period ended February 28, 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. In addition, KDI
receives any contingent deferred sales charges from redemptions of Class B and
Class C shares. Distribution fees received by KDI for the period ended February
28, 1999 are $2,264.
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 February 28, 1999, after an
expense absorption by Scudder Kemper.
Shareholder services agreement. Pursuant to a services agreement with the fund's
transfer agent, Kemper Service Company (KSvC) is the shareholder service agent
of the fund. Under the agreement, KSvC earned shareholder services fees of $624
for the period ended February 28, 1999, all of which is unpaid.
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
accounting fees of $1,721 after a partial fee waiver by Scudder Kemper for the
period ended February 28, 1999, all of which is unpaid.
Officers and trustees. Certain officers or trustees of the fund are also
officers or directors of Scudder Kemper. During the period ended February 28,
1999, the fund made no payments to its officers or trustees.
4. Investment transactions
For the period ended February 28, 1999, investment transactions (excluding
short-term instruments) are as follows:
Purchases $3,317,201
Proceeds from sales 326,708
<PAGE>
5. Capital share transactions
The following table summarizes the activity in capital shares of the fund:
December 31, 1998
to February 28, 1999
--------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares sold
- --------------------------------------------------------------------------------
Class A 104,100 $ 988,949
- --------------------------------------------------------------------------------
Class B 104,100 988,949
- --------------------------------------------------------------------------------
Class C 104,100 988,949
- --------------------------------------------------------------------------------
Net increase from
capital share transactions $2,966,847
- --------------------------------------------------------------------------------
<PAGE>
Financial Highlights
For the period from December 31, 1998 (commencement of operations) to February
28, 1999 (unaudited)
<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 loss - (.01) (.01)
- ----------------------------------------------------------------------------- ------------- ---------------
Net realized and unrealized loss (.04) (.04) (.04)
- ----------------------------------------------------------------------------- ------------- ---------------
Total from investment operations (.04) (.05) (.05)
- ----------------------------------------------------------------------------- ------------- ---------------
Net asset value, end of period $9.46 9.45 9.45
- ----------------------------------------------------------------------------- ------------- ---------------
Total return (not annualized) (.42)% (.53) (.53)
- ----------------------------------------------------------------------------- ------------- ---------------
- ----------------------------------------------------------------------------- ------------- ---------------
Ratios to average net assets (annualized)
- ----------------------------------------------------------------------------- ------------- ---------------
Expenses 1.48% 2.42 2.42
- ----------------------------------------------------------------------------------------------- ---------------
Net investment income (loss) .14% (.80) (.80)
- ----------------------------------------------------------------------------------------------- ---------------
- ----------------------------------------------------------------------------- ------------- ---------------
Other ratios to average net assets (annualized)
- ----------------------------------------------------------------------------- ------------- ---------------
Expenses 1.79% 2.73 2.73
- ----------------------------------------------------------------------------- ------------- ---------------
Net investment loss (.17)% (1.11) (1.11)
- ----------------------------------------------------------------------------- ------------- ---------------
- ------------------------------------------------------------------------------------------------------------------
Supplemental data for all classes
- ------------------------------------------------------------------------------------------------------------------
Net assets at end of period $2,985,722
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 97%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. has agreed to temporarily waive and absorb certain
operating expenses of the fund. The other ratios to average net assets are
computed without this expense waiver or absorption.
