Annual Report To
Shareholders For The Year
Ending August 31, 1999
Kemper Research Fund
<PAGE>
Kemper Research Fund
Average Annual Total Returns*
For period ended August 31, 1999 (adjusted for the maximum sales charge)
Life of Class
-------------
Kemper Research 0.40 %(since 12/31/98)
Fund Class A Shares
Kemper Research 1.89% (since 12/31/98)
Fund Class B Shares
Kemper Research 4.89% (since 12/31/98)
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.
Performance
Kemper Research Fund has started off respectably. Since its inception on
December 31, 1998, through August 31, 1999, Kemper Research Fund earned 6.53
percent (Class A shares, unadjusted for any sales charges). During this same
period, the fund's benchmark, the Standard & Poor's 500 Index, gained 8.33
percent.
Market Overview
The stock market displayed significant volatility during the period. Since its
inception, the fund has seen the market change direction from growth to value,
and then revert to growth again. Similarly, large-company stocks led in the
first quarter, only to be markedly outstripped by small-company stocks in the
second quarter. The tides turned again during the final two months of the fund's
fiscal year: Although both large- and small-caps struggled, large-company stocks
held up better.
Despite strong consumer confidence, low inflation, low unemployment,
and steady corporate profit growth throughout the period, interest-rate upticks
and emerging-market uncertainty kept many investors on edge. And while we did
see some broadening in 1999, the market remains very narrow, given historical
norms.
Technology stocks have enjoyed center stage throughout 1999. Excitement
about the Internet has fuelled a strong rally. However, as is typical with
technology stocks, there have been downs as well as ups, including technology
corrections in February and July. Media stocks have also performed briskly.
Investment Philosophy
Kemper Research Fund invests primarily in large-cap domestic stocks. Typically,
the fund's sector weightings closely mirror those of the S&P 500 index. The fund
also includes exposure to both value-style and growth-style stocks.
<PAGE>
Fund Commentary
First quarter 1999: While the fund did fall short of the benchmark for the
eight-month period, most of the fund's underperformance occurred in the first
quarter of 1999. For the quarter, the fund gained 2.84 percent, while the index
gained 4.99 percent.
After lagging in the market in January, we picked up steam as the
quarter progressed. In February, our capital-goods and communications-services
stock exposure were notable contributors to positive performance. In March, we
continued to reap solid performance from communication-service stocks, including
Frontier Corporation, as well as from energy and financial services. But
overall, we benefited most in March from our technology exposure. America
Online, Sun Microsystems, Network Appliance and Nokia all bolstered our
performance.
Second quarter, 1999: During the second quarter, the fund's positive momentum
continued. The fund gained 7.68 percent, surpassing the S&P 500, up 7.06
percent. Strong individual stock selection played the principal role. In April,
as the market rotated toward cyclicals, several of the fund's more cyclical
holdings -- Parker Hannifin, Emerson Electric and Rockwell International -- all
contributed strong gains. Within our media holdings, AT&T - Liberty Media, also
served the fund well. These returns helped to offset less-successful technology
and financial-service stocks. In May returns were driven by on-target stock
selection in consumer staples, utilities, capital goods and basic materials,
though financial-service stocks continued to take a toll, as did
communication-services and consumer cyclicals. In June we participated in the
strong performance of the technology sector. Nokia, Network Appliances and
Applied Materials counted among our winners. AT&T - Liberty Media and Frontier
Corporation supported these technology powerhouses.
July and August 1999: In July and August we faced added challenges, as did the
broad market. In this two-month period, we declined 3.80 percent, closely in
line with the S&P 500 index, down 3.61 percent. In July, we gave back some
ground (-2.66 percent), though less than the benchmark (-3.12 percent). Our
stock selection in a variety of sectors held up well against the benchmark, with
leading performers including France-based energy giant Elf Acquitaine,
business-services provider Navigant International, and component-technology
manufacturer Micron Technologies.
Compared to April and June when individual stock selection was a
significant positive driver, many of our holdings were less favored by the
market in August. Technology stocks (Network Appliance, Qualcomm, Double Click,
and Sun Microsystems) continued to perform briskly, but the fund's progress was
hindered by insurance provider UNUM (now Unumprovident). Though a strong
performer for most of the period, AT&T - Liberty Media gave up some gains, and
communication services stocks such as Frontier Corporation also faltered.
The market was indeed challenging during the fund's first eight months
of operations. However, we have a high degree of conviction in the merits of our
research-driven investment process. We look forward to leveraging the potential
of Scudder Kemper Investment's deep research and analytical resources on behalf
of the shareholders of Kemper Research Fund.
<PAGE>
Growth of an assumed $10,000 investment in Kemper Research 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:
12/31/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Research Fund Class A* $10,000 $10,110 $10,040
Standard & Poors 500 Stock Index** $10,000 $10,861 $10,741
Consumer Price Index*** $10,000 $10,140 $10,195
Growth of an assumed $10,000 investment in Kemper Research Fund Class B from
12/31/98 through 8/31/99. Adjusted for maximum sales charge.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
12/31/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Research Fund Class B* $10,000 $10,695 $10,189
Standard & Poors 500 Stock Index** $10,000 $10,861 $10,741
Consumer Price Index*** $10,000 $10,140 $10,195
<PAGE>
Growth of an assumed $10,000 investment in Kemper Research Fund Class C from
12/31/98 through 8/31/99. Adjusted for maximum sales charge.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
12/31/1998 4/30/1999 8/31/1999
---------- --------- ---------
Kemper Research Fund Class C* $10,000 $10,695 $10,489
Standard & Poors 500 Stock Index** $10,000 $10,861 $10,741
Consumer Price Index*** $10,000 $10,140 $10,195
* Average annual total return and total return measure net investment income and
capital gain or loss from portfolio investments over the periods specified,
assuming reinvestment of all dividends and, where indicated, adjustment for the
maximum sales charge. The maximum sales charge for Class A shares is 5.75%. For
Class B shares the maximum contingent deferred sales charge (CDSC) is 4%. Class
C shares have no sales charge adjustment, but redemptions within one year of
purchase may be subject to a contingent deferred sales charge of 1%. Share
classes invest in the same underlying portfolio. Average annual total return
reflects annualized change while total return reflects aggregate change. During
the periods noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information and the Financial
Highlights at the end of this report. Returns are historical and do not
guarantee future results. Investment returns and principal values will fluctuate
so that shares, when redeemed, may be worth more or less than original cost.
** The S tandard & Poors 500 Stock Index is an unmanaged index comprised of
common stocks of larger U.S. companies with greater than average growth
orientation and represents the universe of stocks from which "earnings/growth"
money managers typically select. Source is CDA Wiesenberger.
***The Consumer Price Index is a statistical measure of change, over time, in
the prices of goods and services in major expenditure groups for all urban
consumers. It is generally considered to be a measure of inflation. Source is
CDA Wiesenberger.
<PAGE>
Kemper Research Fund
Portfolio of Investments at August 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Common stocks Number of Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
Communications-7.2%
<S> <C> <C>
Telephone/communications Bell Atlantic Corp. 720 44,100
BellSouth Corp. 255 11,539
Frontier Corp. 905 37,953
GTE Corp. 315 21,617
(a) MCI WorldCom, Inc. 1,000 75,750
SBC Communications, Inc. 810 38,880
-------------------------------------------------------------------------------
229,839
- ---------------------------------------------------------------------------------------------------------------------
Consumer discretionary-5.8%
Department & chain Dayton Hudson Corp. 470 27,260
stores-4.8% Gap, Inc. 707 27,661
Home Depot, Inc. 495 30,257
Wal-Mart Stores, Inc. 1,490 66,026
-------------------------------------------------------------------------------
151,204
Restaurants-1.0% McDonald's Corp. 770 31,859
-------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Consumer staples-7.7%
Food & beverage-5.3% Coca-Cola Co., Inc. 750 44,859
H.J. Heinz Co. 665 31,047
Nestle SA (ADR) 270 26,696
PepsiCo, Inc. 920 31,395
(a) Safeway, Inc. 705 32,827
Unilever NV(New York Shares) 1 69
-------------------------------------------------------------------------------
166,893
Packaged goods/ Colgate-Palmolive Co. 320 17,120
cosmetics-2.4% Gillette Co. 325 15,153
Procter & Gamble Co. 455 45,159
-------------------------------------------------------------------------------
77,432
- ---------------------------------------------------------------------------------------------------------------------
Durables-5.7%
Aerospace-2.5% Lockheed Martin Corp. 610 22,570
Rockwell International Corp. (New) 720 42,570
United Technologies Corp. 220 14,548
-------------------------------------------------------------------------------
79,688
Automobiles-1.2% Ford Motor Co. 725 37,791
-------------------------------------------------------------------------------
Telecommunications-2.0% Lucent Technologies, Inc. 480 30,750
Nokia AB Oy "A" (ADR) 380 31,683
-------------------------------------------------------------------------------
62,433
- ---------------------------------------------------------------------------------------------------------------------
Energy-6.8%
Oil & gas production-3.0% Conoco, Inc. "A" 1,060 28,355
Royal Dutch Petroleum Co. (New York shares) 1,085 67,134
-------------------------------------------------------------------------------
95,489
Oil companies-2.7% Exxon Corp. 330 26,029
Murphy Oil Corp. 355 18,016
Total SA (ADR) 620 40,339
-------------------------------------------------------------------------------
84,384
Oil/gas transmission-.5% Williams Cos., Inc. 380 15,675
-------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
Oilfield services/equipment-.6% Halliburton Co. 445 20,637
-------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Financial-14.1%
Banks-3.5% BANC ONE CORP 90 3,611
Bank of America Corp. 905 54,753
BankBoston Corp. 460 21,361
Chase Manhattan Corp. 395 33,057
-------------------------------------------------------------------------------
112,782
Consumer finance-3.0% American Express Credit Corp. 275 37,812
Associates First Capital Corp. 880 30,195
Citigroup, Inc. 615 27,329
-------------------------------------------------------------------------------
95,336
Insurance-5.6% AFLAC, Inc. 1,045 46,960
American International Group, Inc. 572 53,017
St. Paul Companies, Inc. 1,155 37,032
XL Capital Ltd. " A" 795 39,998
-------------------------------------------------------------------------------
177,007
Other financial companies-2.0% Federal National Mortgage Association 595 36,964
Household International, Inc. 710 26,802
-------------------------------------------------------------------------------
63,766
- ---------------------------------------------------------------------------------------------------------------------
Health-10.9%
Health industry services-.7% Cardinal Health, Inc. 365 23,269
-------------------------------------------------------------------------------
Medical supply & specialty-2.8% Baxter International, Inc. 410 27,496
Biomet, Inc. 370 13,228
Medtronic, Inc. 361 28,248
(a) VISX, Inc. 215 19,458
-------------------------------------------------------------------------------
88,430
Pharmaceuticals-7.4% Abbott Laboratories 575 24,941
American Home Products Corp. 500 20,750
Bristol-Myers Squibb Co. 625 43,984
Eli Lilly & Co. 350 26,119
Johnson & Johnson 205 20,961
Merck & Co., Inc. 195 13,102
Pfizer, Inc. 400 15,100
Schering-Plough Corp. 485 25,493
SmithKline Beecham PLC (ADR) 220 14,025
Warner-Lambert Co. 470 31,138
-------------------------------------------------------------------------------
235,613
- ---------------------------------------------------------------------------------------------------------------------
Manufacturing-10.2%
Chemicals-1.0% Solutia, Inc. 1,640 32,800
-------------------------------------------------------------------------------
Containers & paper-.6% (a) Smurfit-Stone Container Corp. 975 20,658
-------------------------------------------------------------------------------
Diversified manufacturing-2.1% Textron, Inc. 180 14,535
Tyco International Ltd. (New) 505 51,163
-------------------------------------------------------------------------------
65,698
Electrical products-1.6% Emerson Electric Co. 820 51,352
-------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
Industrial specialty-1.8% Corning, Inc. 345 22,943
(a) QUALCOMM, Inc. 180 34,594
-------------------------------------------------------------------------------
57,537
Machinery/components/
controls-1.6% Parker-Hannifin Corp. 1,155 50,531
-------------------------------------------------------------------------------
Specialty chemicals-1.5% Air Products & Chemicals, Inc. 1,390 47,260
-------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Media-6.1%
Advertising-1.5% (a) DoubleClick, Inc. 205 20,474
Omnicom Group, Inc. 355 26,758
-------------------------------------------------------------------------------
47,232
Cable television-3.6%
(a) AT&T Corp - Liberty Media Group 3,574 114,368
-------------------------------------------------------------------------------
Print media-1.0% Tribune Co. 345 32,193
-------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Service industries-3.0%
Edp services-1.7% (a) America Online, Inc. 400 36,525
(a) PSINet, Inc. 390 18,671
-------------------------------------------------------------------------------
55,196
Investment-.5% Merrill Lynch & Co., Inc. 195 14,552
-------------------------------------------------------------------------------
Miscellaneous consumer
services-.8% (a) Navigant Consulting, Inc. 565 24,789
-------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Technology-19.0%
Computer software-5.2% (a) Microsoft Corp. 1,490 137,918
(a) Oracle Systems Corp. 757 27,631
-------------------------------------------------------------------------------
165,549
Diverse electronics (a) Applied Materials, Inc. 235 16,700
product-1.6% Motorola, Inc. 360 33,210
-------------------------------------------------------------------------------
49,910
Edp peripherals-2.1% (a) EMC Corp. 320 19,200
(a) Network Appliance, Inc. 735 48,280
-------------------------------------------------------------------------------
67,480
Electronic components/
distributors-2.1% (a) Cisco Systems, Inc. 1,000 67,812
-------------------------------------------------------------------------------
Electronic data processing-4.6% Hewlett-Packard Co. 315 33,193
International Business Machines Corp. 560 69,755
(a) Sun Microsystems, Inc. 540 42,930
-------------------------------------------------------------------------------
145,878
Semiconductors-3.4% Intel Corp. 1,090 89,584
(a) Micron Technology, Inc. 260 19,386
-------------------------------------------------------------------------------
108,970
- ---------------------------------------------------------------------------------------------------------------------
Transportation-1.0%
Airlines-.2% (a) US Airways Group, Inc. 175 5,392
-------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------------
Railroads-.8% Canadian National Railway Co. 275 17,465
(a) Wisconsin Central Transportation Co. 585 9,323
-------------------------------------------------------------------------------
26,788
- ---------------------------------------------------------------------------------------------------------------------
Utilities-2.5%
Electric utilities CINergy Corp. 610 18,529
(a) Northeast Utilities 925 16,245
PacifiCorp 775 15,839
Unicom Corp. 720 27,810
-------------------------------------------------------------------------------
78,423
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100%
(Cost: $2,967,989) 3,179,895
-------------------------------------------------------------------------------
</TABLE>
Notes to Portfolio of Investments
(a) Non-income producing security.
Based on the cost of investments of $2,971,499 for federal income tax purposes
at August 31, 1999, the gross unrealized appreciation was $349,256, the gross
unrealized depreciation was $140,860 and the net unrealized appreciation on
investments was $208,396.
See accompanying Notes to Financial Statements.
<PAGE>
The Board of Trustees and Shareholders
Kemper Research Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Research Fund (one of the
portfolios constituting Kemper Funds Trust Series) as of August 31, 1999, and
the related statements of operations and changes in net assets, and the
financial highlights for the period from December 31, 1998 (commencement of
operations) to August 31, 1999. These 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
statements 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
Research 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 Research Fund
Statement of Assets and Liabilities
August 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at value
(Cost: $2,967,989) $ 3,179,895
- --------------------------------------------------------------------------------
Cash 1,484
- --------------------------------------------------------------------------------
Foreign taxes recoverable 694
- --------------------------------------------------------------------------------
Receivable for:
Investments sold 135,167
- --------------------------------------------------------------------------------
Dividends 3,226
- --------------------------------------------------------------------------------
Due from advisor 12,530
- --------------------------------------------------------------------------------
Total assets 3,332,996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for:
Investments purchased 125,886
- --------------------------------------------------------------------------------
Management fee 1,907
- --------------------------------------------------------------------------------
Distribution services fee 4,024
- --------------------------------------------------------------------------------
Transfer agent fees 430
- --------------------------------------------------------------------------------
Total liabilities 132,247
- --------------------------------------------------------------------------------
Net assets, at market value $ 3,200,749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net assets Net assets consist of:
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) (14,357)
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments 211,906
- --------------------------------------------------------------------------------
Paid-in capital 3,003,200
- --------------------------------------------------------------------------------
Net assets, at market value $ 3,200,749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The pricing of shares
- --------------------------------------------------------------------------------
Class A Shares
Net asset value and redemption price per share
($1,083,447 / 107,065 shares outstanding) $10.12
- --------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.74
- --------------------------------------------------------------------------------
Class B Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,058,651 / 105,269 shares outstanding) $10.06
- --------------------------------------------------------------------------------
Class C Shares
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($1,058,651 / 105,269 shares outstanding) $10.06
- --------------------------------------------------------------------------------
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 (net of foreign taxes withheld of $843) $ 27,902
- --------------------------------------------------------------------------------
Interest income 1,211
- --------------------------------------------------------------------------------
Total investment income 29,113
- --------------------------------------------------------------------------------
Expenses:
Management fee 14,509
- --------------------------------------------------------------------------------
Distribution services fee 10,320
- --------------------------------------------------------------------------------
Administrative services fee 5,181
- --------------------------------------------------------------------------------
Transfer agent fees 4,517
- --------------------------------------------------------------------------------
Custodian and accounting fees 8,880
- --------------------------------------------------------------------------------
Trustees' fees 8,457
- --------------------------------------------------------------------------------
Reports to shareholders 500
- --------------------------------------------------------------------------------
Auditing 6,667
- --------------------------------------------------------------------------------
Legal 1,248
- --------------------------------------------------------------------------------
Registration fees 83
- --------------------------------------------------------------------------------
Other 966
- --------------------------------------------------------------------------------
Total expenses before expense waiver 61,328
- --------------------------------------------------------------------------------
Less expenses waived and absorbed by investment manager (17,712)
- --------------------------------------------------------------------------------
Total expenses after expense waiver 43,616
- --------------------------------------------------------------------------------
Net Investment income (loss) (14,503)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
- --------------------------------------------------------------------------------
Net realized gain (loss) from investments (14,366)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on investments 211,906
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments 197,540
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 183,037
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
<PAGE>
Statement of Changes in Net Assets
For the period from December 31, 1998 (commencement of operations) to
August 31, 1999
- --------------------------------------------------------------------------------
Operations and capital share activity
- --------------------------------------------------------------------------------
Net investment income (loss) $ (14,503)
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (14,366)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) 211,906
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 183,037
- --------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 2,984,379
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets 3,167,416
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net assets
- --------------------------------------------------------------------------------
Beginning of period 33,333
- --------------------------------------------------------------------------------
End of period $ 3,200,749
- --------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
<PAGE>
Notes to financial statements
1. Description of the fund
Kemper Research 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 to 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.
Foreign currency translations. The books and records of the fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign
<PAGE>
currency exchange contracts and foreign currencies, and the difference between
the amount of net investment income accrued and the U.S. dollar amount actually
received. That portion of both realized and unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates is
not separately disclosed but is included with net realized and unrealized gains
and losses on investment securities.
Repurchase agreements. The fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal income taxes. The fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the fund paid no federal income taxes and no federal
income tax provision was required.
The fund incurred approximately $11,000 of net realized capital losses post
October 31, 1998. 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,
2000.
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 reported 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 .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 $14,509 for the period ended
August 31, 1999.
Scudder Kemper has agreed to temporarily absorb certain operating expenses of
the fund. Under this arrangement, Scudder Kemper waived and absorbed expenses of
$17,712 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
<PAGE>
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 August 31, 1999
are $10,320.
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) serves as transfer agent and shareholder service
agent of the fund. Under the agreement, KSvC earned transfer agency fees of
$4,517 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
accounting fees of $7,971 for the period ended August 31, 1999.
Officers and trustees. Certain officers or trustees of the fund are also
officers or directors of Scudder Kemper. During the period ended August 31,
1999, the fund made no payments to its officers and incurred trustees fees of
$8,457 to independent trustees.
4. Investment transactions
For the period ended August 31, 1999, investment transactions (excluding
short-term instruments) are as follows:
Purchases
$4,621,275
Proceeds from sales
1,638,929
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 105,896 $ 1,006,481
- ------------------------------ --------------------------- ---------------------
Class B 104,100 988,949
- ------------------------------ --------------------------- ---------------------
Class C 104,100 988,949
- ------------------------------ --------------------------- ---------------------
Net increase from
capital share transactions $ 2,984,379
- ------------------------------ --------------------------- ---------------------
<PAGE>
Kemper Research 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 loss (.01) (.07) (.07)
- --------------------------------------------------------- -------- ------------
Net realized and unrealized gain .63 .63 .63
- --------------------------------------------------------- -------- ------------
Total from investment operations .62 .56 .56
- --------------------------------------------------------- -------- ------------
Net asset value, end of period $10.12 10.06 10.06
- --------------------------------------------------------- -------- ------------
Total return (not annualized) 6.53% 5.89 5.89
- --------------------------------------------------------- -------- ------------
Ratios to average net assets (annualized)
- --------------------------------------------------------- -------- ------------
Expenses 1.48% 2.42 2.42
- --------------------------------------------------------- -------- ------------
Net investment income (loss) (.08)% (1.02) (1.02)
- --------------------------------------------------------- -------- ------------
- --------------------------------------------------------- -------- ------------
Other ratios to average net assets (annualized)
- --------------------------------------------------------- -------- ------------
Expenses 2.33% 3.27 3.27
- --------------------------------------------------------- -------- ------------
Net investment income (loss) (.93)% (1.87) (1.87)
- --------------------------------------------------------- -------- ------------
- ---------------------------------------------------------------------------------------
Supplemental data for all classes
- ---------------------------------------------------------------------------------------
Net assets at the end of period $ 3,200,749
- ---------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 78%
- ---------------------------------------------------------------------------------------
</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. 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
Style prospectus.
