<PAGE> 1
Kemper Quantitative Equity Fund
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED MAY 31, 1996
Seeking growth of capital and reduction of risk
"...with this fund, we're offering a portfolio based on fundamental
research and advanced quantitative technology -- seeking to reduce
personal biases that an analyst or portfolio manager might
otherwise bring into the picture."
<PAGE> 2
Table of
Contents
2
Terms to Know
3
General
Economic Overview
5
Performance Update
7
Industry Sectors
8
Individual Holdings
9
Portfolio of Investments
11
Financial Statements
13
Notes to
Financial Statements
15
Financial Highlights
AT A GLANCE
Kemper Quantitative Equity Fund Total Returns
For the three-month period ended May 31,
1996 (unadjusted for any sales charge)
[EQUITY FUNDS BAR GRAPH]
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
CLASS A 5.48%
- -------------------------------------------------------------------------------
CLASS B 5.16%
- -------------------------------------------------------------------------------
CLASS C 5.27%
- -------------------------------------------------------------------------------
LIPPER GROWTH FUNDS
CATEGORY AVERAGE* 6.97%
- -------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not represent future results. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
*Lipper Analytical Services, Inc. returns are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
5/31/96 2/15/96
- ---------------------------------------------
<S> <C> <C>
KEMPER QUANTITATIVE EQUITY
FUND CLASS A $10.01 $9.50
- ---------------------------------------------
KEMPER QUANTITATIVE EQUITY
FUND CLASS B $ 9.98 $9.50
- ---------------------------------------------
KEMPER QUANTITATIVE EQUITY
FUND CLASS C $ 9.99 $9.50
- ---------------------------------------------
</TABLE>
TERMS TO KNOW
FUNDAMENTAL RESEARCH This research includes analysis of the balance sheets and
income statements of companies used to forecast their future stock price
movements. Fundamental analysis considers past records of assets, earnings,
sales, products, management and markets in helping predict future trends in
these indicators and of a company's success or failure. By appraising a firm's
prospects, this analysis may be used to help assess whether a particular stock
or group of stocks is undervalued or overvalued at its current market price.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market average and whose growth is
expected to continue or accelerate.
INDEX An unmanaged group of stocks that is considered representative of the
stock or bond markets. An index does not take into account any fees or expenses
related to the individual securities that it tracks. However, for performance
comparisons, the index is adjusted to reflect reinvestment of dividends of the
securities in the index.
INTRINSIC VALUE Valuation determined by applying data inputs to a valuation
theory or model. The resulting value is compared to the prevailing market price.
QUANTITATIVE Analysis dealing with measurable factors as distinguished from such
qualitative considerations as the character of management or the state of
employee morale. Examples of quantitative analysis include the value of assets;
the cost of capital; the historical and projected patterns of sales, costs and
profitability and a wide range of considerations in the area of economics.
SECTOR a specific industry group.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER OF
ZURICH KEMPER INVESTMENTS, INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $78 BILLION IN ASSETS, INCLUDING $45 BILLION
IN RETAIL MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN
M.B.A. FROM HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
The first six months of 1996 have provided a few surprises. As the year began,
most of us expected sluggish economic and corporate growth -- which the Federal
Reserve Board would address by reducing short-term interest rates. Yet, what we
experienced was stronger-than-anticipated economic growth, better corporate
earnings and rising interest rates. Although such surprises unsettled the bond
market, the stock market has followed a spectacular 1995 with strength so far
this year.
Where is the economy headed now? Its direction is even less predictable as we
draw nearer to the November elections. Half of the country's leading economists
are forecasting 3 percent growth while an equal number are looking for no better
than 1 percent growth. At Kemper Funds, we suspect that the economy is growing
at a subpar rate of 2 percent. Although commodity prices may suggest otherwise,
we think inflation is holding at less than 3 percent. We see no reason to expect
the Fed to reduce rates to stimulate growth but neither is it likely to raise
rates significantly to control growth. In an environment of stable or gently
rising rates, we would expect corporate earnings to grow at a rate of about 7 to
8 percent -- that's somewhat higher than we believed likely at the start of the
year.
Our forecast calls for a generally comfortable environment for investors. But
both the economy and the general direction of the markets are due for a
reversal. In July, the U.S. economy entered its 64th month of consecutive
growth. This is the longest expansion without a single quarter of negative
output growth since George Washington was president. Today's bull market started
in October 1990, which makes it one of the longest running bull markets in
history. By virtue of its length alone, the stock market is vulnerable to a
correction.
As expected, volatility has returned to the market this year. For example: The
stock market's performance on March 8, the date that a surprisingly strong
employment report was released, betrayed some level of investor skittishness.
But while the Standard & Poor's lost 3.1 percent that day, it quickly regained
the ground and moved higher.
CONSUMERS AND JOB SECURITY
The restructuring of corporate America, which is generally credited for its
improved profitability, has been an important influence on the consumer.
Economic growth is heavily dependent upon consumer spending which, in turn, is
a function of inflation, pay raises and fear of job loss. While the first two
have not been a recent concern, fear of losing one's job has dampened consumer
confidence.
Such anxiety in the workplace was the subject of a recent study by the
Council of Economic Advisors. According to that report, more than two-thirds
of the new jobs created in the United States in 1994 and 1995 paid better than
the average job. The report found that the rate at which jobs were eliminated
has risen slightly despite strong economic growth of recent years -- however, it
reported that the length of time most workers spent unemployed has declined.
The graph below tracks Bureau of Labor Statistics data that show the
recent relationship between number of jobs created versus the number of jobs
lost.
[LINE GRAPH]
<TABLE>
<CAPTION>
Jobs Created Jobs Lost
<S> <C> <C>
12/31/91 (300,000) 40,000
12/31/92 120,000 (30,000)
12/31/93 300,000 70,000
12/31/94 180,000 70,000
12/31/95 (80,000) (40,000)
3/31/96 490,000 (10,000)
</TABLE>
SOURCE: BUREAU OF LABOR STATISTICS
3
<PAGE> 4
GENERAL ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
Economic activity is a key influence on investment performance and
shareholder decision-making. Periods of recession or boom, inflation or
deflation, credit expansion or credit crunch have a significant impact on
mutual fund performance.
The following are some significant economic guideposts and their investment
rationale that may help your investment decision-making. The 10-year Treasury
rate and the prime rate are prevailing interest rates. The other data report
year-to-year percentage changes.
<TABLE>
<CAPTION>
Now (5/31/96) 6 months ago 1 year ago 2 years ago
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 6.74 5.71 6.17 7.10
Prime rate(2) 8.25 8.63 9.00 7.25
Inflation rate(3) 2.96 2.60 3.04 2.56
The U.S. dollar(4) 8.51 -2.58 -9.31 0.51
Capital
goods orders(5) 2.93 11.03 12.98 25.11
Industrial production(6) 3.26 1.08 2.80 6.61
Employment growth(7) 2.00 1.92 2.71 3.12
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years, infla-
tion has been as high as 6%. The low, moderate inflation of the last
few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters
and the value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on corporate profits and equity performance.
(7) An influence on family income and retail sales.
Source: Economics Department, Zurich Kemper Investments, Inc.
Such ebb and flow is to be expected in investing, especially at this point in
the cycle. Attempting to "prepare" for a correction is futile, we believe. Those
whose caution caused them to excuse themselves from the market early this year,
for example, would have forgone its significant gain year to date.
Several opportunities exist today for the careful investor. First, having
settled down some from a raucous 1995, the technology sector continues to enjoy
the product and market demand that make it the dominant sector of the 1990s.
Second, equity investors willing to look overseas may find opportunities in
countries whose economies today are at a point where the U.S. economy was in
1995. Our forecast assumes that strength in foreign markets could boost those
countries' currencies, which would weaken the value of the dollar.
We expect the fixed-income markets to continue to be sensitive to interest
rate and inflation news. However, for as long as economic growth is positive and
earnings are growing, we believe the high-yield market is one market segment
that has significant potential.
Finally, we look for political activity to have less and less bearing on the
markets' performance. Although they may continue to debate tax reform,
federal budget deficit reduction and health care reform, the incumbent
legislators are running out of time to take action before the November
elections. If there is any suspense by November, it is likely to be in whether
the Republicans can retain control of Congress. Their success would make a
balanced budget and tax reform likely agenda topics for 1997.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
STEPHEN B. TIMBERS
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
ZURICH KEMPER INVESTMENTS, INC.
July 2, 1996
4
<PAGE> 5
PERFORMANCE UPDATE
[BUKOWSKI PHOTO]
DANIEL J. BUKOWSKI, SENIOR VICE PRESIDENT AND DIRECTOR OF QUANTITATIVE RESEARCH
FOR ZURICH KEMPER INVESTMENTS INC., (ZKI) MANAGES KEMPER QUANTITATIVE EQUITY
FUND. HE HAS MORE THAN 10 YEARS OF EXPERIENCE IN THE CAPITAL MARKETS. BUKOWSKI
HOLDS A BACHELOR'S DEGREE AND AN M.B.A. FROM THE UNIVERSITY OF CHICAGO.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
INTRODUCED IN FEBRUARY 1996, KEMPER QUANTITATIVE EQUITY FUND FEATURES A
DISCIPLINED INVESTMENT STYLE BASED IN PART ON DETAILED QUANTITATIVE RESEARCH.
PORTFOLIO MANAGER DAN BUKOWSKI DISCUSSES HIS APPROACH TO MANAGING THIS FUND,
FACTORS THAT HAVE INFLUENCED PERFORMANCE IN RECENT MONTHS AND HIS OUTLOOK GOING
FORWARD.
Q DAN, WHAT LED KEMPER FUNDS TO OFFER A QUANTITATIVE EQUITY FUND AT
THIS TIME?
A Fundamental research is really the cornerstone of all the Kemper equity
funds. Each portfolio manager uses data compiled by our team of
analysts as a basis for their investment decision-making. But with this fund,
we're offering a portfolio based on fundamental research and advanced
quantitative technology -- seeking to reduce the personal biases that an
analyst or portfolio manager might otherwise bring into the picture.
Q WOULD YOU BRIEFLY EXPLAIN THE PROCESS THAT LEADS TO A STOCK BEING CHOSEN
FOR THIS FUND?
A To begin, our analysts conduct extensive research on more than 300 growth
companies to determine their future prospects. For "quality control"
these stocks are then reviewed to help ensure that they are consistent with
Kemper's own forecasts and with the outlook for various industries over the
next three to five years.
Once that process is completed, we compare these companies using strict
quantitative criteria, then rank them according to their respective
"upside" potential. The result is a list of stocks that, from a purely
quantitative perspective, offer the most attractive potential returns.
Finally, we use a fairly sophisticated computer model to compare different
combinations of the high-ranking stocks in an effort to identify the
"optimal" combination of risk and return. This process allows us to balance any
overweighting in a particular stock by underweighting another stock that has a
similar risk profile, or overweighting a stock with complementary risk
characteristics.
Q AND WHAT IS THE END RESULT?
A By staying disciplined with regard to this process, we build a portfolio of
classic growth stocks that attempts to track the characteristics of our
benchmark - the Russell 1000 Growth Index. By staying in line with the index,
we seek to control risk relative to the overall market for growth stocks.
Our emphasis on valuation gives the fund a somewhat "contrarian" profile.
That is, we concentrate on stocks that are selling below their
intrinsic value. These are stocks whose prices have been driven below what
their underlying fundamentals would warrant because the market has overreacted
to something like an earnings disappointment or a delay in bringing a new
product to market.
5
<PAGE> 6
PERFORMANCE UPDATE
Q WHAT STOCKS HAVE BEEN THE BEST PERFORMERS SO FAR THIS YEAR? WHAT HAS HELD
THE FUND BACK?
A We've had some very good returns from our financial stocks -- names like
NationsBank, First USA and Federal National Mortgage Association
("Fannie Mae") -- as well as a number of our technology positions, which were
established after a broad-based sell-off. Consumer-related stocks did well,
although we haven't established as large a weighting in this area as we'd like.
That leads to one of the factors that held the fund back a bit. Consumer
non-durables -- particularly the big beverage companies like Coca Cola
and Pepsi -- performed quite well during the second quarter of this year. From
our perspective, stocks in this sector were generally too expensive; we
anticipated adding to selected issues on temporary pull-backs. Unfortunately,
they've kept rallying and we haven't yet seen any compelling opportunities. So,
additional exposure to some of these stocks would have certainly boosted our
returns. More exposure to the basic industry stocks would have helped, too.
Nevertheless, we've achieved some good returns by staying true to our
discipline.
Q WHAT KIND OF TRADING ACTIVITY HAS OCCURRED DURING THESE FIRST FEW MONTHS?
A Since we started with a relatively small asset base, the biggest challenge
has been to develop a well-diversified portfolio that resembles the
general make-up of the index. We began with about 20 stocks in February,
primarily large household names like Procter & Gamble, General Electric, Walt
Disney, NationsBank and Enron. During the following months, we added some drug
and health care stocks, a few wireless communications companies and a couple of
tobacco stocks that have been pretty undervalued relative to their
fundamentals.
Now, having risen to $2.5 million in assets and a portfolio of about 60
stocks as of May 31, we're at a point where the portfolio is fairly
well diversified among industries and companies. On the sell side, there hasn't
been much activity yet, except for a handful of stocks like Federated
Department Stores, which met our established price targets a bit faster than we
anticipated.
Q WHAT KIND OF STOCKS DO YOU ANTICIPATE ADDING IN THE COMING MONTHS?
A It's hard to foresee where the opportunities will present themselves. I'd
suspect we'll add some more consumer non-durables and possibly more in
the area of finance and health care delivery.
Q WILL THE TREND TOWARD HIGHER INTEREST RATES OR CONCERNS ABOUT INFLATION
INFLUENCE YOUR CHOICES?
A No. That goes back to the discipline I talked about earlier. Our stock
selection won't be influenced by conjecture about macroeconomic factors
like inflation or interest rates. We'll work solely from the data accumulated
in our research process.
Q WHAT IS YOUR GENERAL OUTLOOK FOR THE MARKET AND FOR KEMPER QUANTITATIVE
EQUITY FUND DURING THE REST OF 1996?
A Generally positive. The current economic environment -- particularly the
slowdown in corporate earnings growth -- should favor growth stocks going
forward. We believe the fund is well positioned for competitive returns
through the rest of the year.
6
<PAGE> 7
INDUSTRY SECTORS
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
[RUSSELL COMPARISON BAR GRAPH]
DATA SHOW THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF THE KEMPER QUANTITATIVE EQUITY FUND REPRESENTED ON MAY 31, 1996, COMPARED TO
THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 GROWTH
INDEX.
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE RUSSELL 1000 GROWTH
EQUITY FUND ON 5/31/96 INDEX ON 5/31/96
<S> <C> <C>
CONSUMER NONDURABLES 27.1% 31.8%
TECHNOLOGY 26.3% 16.6%
HEALTH CARE 17.5% 15.1%
FINANCE 13.4% 8.5%
CAPITAL GOODS 7.6% 10.7%
UTILITIES 3.8% 7.2%
CONSUMER DURABLES 2.1% 1.1%
BASIC INDUSTRIES 1.9% 5.0%
ENERGY 0.3% 3.2%
TRANSPORTATION 0.0% 0.8%
</TABLE>
* 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.
7
<PAGE> 8
INDIVIDUAL HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
REPRESENTING 27.9% OF THE FUND'S TOTAL NET ASSETS ON MAY 31, 1996
- --------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------
1. Philip The largest cigarette maker in the U.S. Through its 4.0%
Morris Miller Brewing subsidiary, it is also the country's
Companies second-largest brewer. This company is also a major
branded food producer through its Kraft and General
Foods subsidiaries.
2. Federal Often referred to as "Fannie Mae", this is a private 3.1%
National corporation federally chartered to provide financial
Mortgage products and services that increase the availability and
Association affordability of housing to low, moderate and
middle-income Americans.
3. Procter & Manufactures and distributes a wide variety of household 2.8%
Gamble Co. products consisting of laundry and cleaning products,
diapers, personal care products and food products.
4. UST, Inc. Manufactures and sells moist snuff, wine and other 2.8%
products.
5. Abbott Engaged in the discovery, development, manufacture and 2.8%
Laboratories sale of a broad and diversified line of health care
products and services.
6. Walt Disney Engaged in family entertainment such as theme parks, 2.7%
Company resorts, films, television and consumer products.
7. General Operates in major businesses including power generators, 2.6%
Electric appliances, lighting, plastics, medical systems,
Co. aircraft engines, financial services and broadcasting.
8. Intel Corp. Designs, develops, manufactures and sells advanced 2.4%
micro-computer components such as integrated circuits
and other related products.
9. Carnival A company with subsidiaries engaged in the operation of 2.4%
Corp. cruise lines, Carnival Corp. also operates a resort and
casino complex as well as hotel, transportation and tour
businesses.
10. Merck & A leading research-driven pharmaceutical products and 2.3%
Co., Inc. services company. Merck discovers, develops,
manufactures and markets a broad range of innovative
products to improve human and animal health.
*The fund's composition and holdings are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
KEMPER QUANTITATIVE EQUITY FUND
Portfolio of Investments at May 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
BASIC INDUSTRIES--1.9% (a)FMC Corp. 700 $ 47,000
- -----------------------------------------------------------------------------------------------------------
CAPITAL GOODS--7.6% Emerson Electric Co. 600 51,000
General Electric Co. 800 66,000
Xerox Corporation 300 47,000
York International Corp. 500 26,000
--------------------------------------------------------------------------
190,000
- -----------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--12.1% (a)Bay Networks 1,300 38,000
(a)Cisco Systems 800 44,000
(a)Compaq Computer Corp. 1,000 49,000
(a)EMC Corp. 2,000 44,000
(a)International Business Machines Corp. 400 43,000
(a)Seagate Technology 700 41,000
(a)3Com Corporation 900 44,000
--------------------------------------------------------------------------
303,000
- -----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--5.0% Manpower, Inc. 900 35,000
Mattel, Inc. 2,000 55,000
Newell Co. 1,200 36,000
--------------------------------------------------------------------------
126,000
- -----------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.1% Leggett & Platt Incorporated 400 11,000
Singer Company N.V. 2,000 41,000
--------------------------------------------------------------------------
52,000
- -----------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--22.1% American Greetings Corp. 1,500 41,000
Carnival Corp. 2,000 60,000
(a)Cox Communications Inc. 2,000 45,000
Walt Disney Company 1,100 67,000
(a)Franklin Quest Co. 1,200 26,000
Philip Morris Companies 1,000 99,000
Procter & Gamble Co. 800 70,000
(a)Tele-Communications, Inc. 2,000 38,000
UST, Inc. 2,100 69,000
Wendy's International 2,100 38,000
553,000
- -----------------------------------------------------------------------------------------------------------
ENERGY--.3% Enron Corp. 200 8,000
- -----------------------------------------------------------------------------------------------------------
FINANCE--13.4% American General Corp. 500 18,000
American International Group, Inc. 200 19,000
Federal National Mortgage Association 2,500 77,000
First Union Corp. 300 18,000
First USA 800 46,000
ITT Hartford Group 200 10,000
MBIA Inc. 100 8,000
MGIC Investment Corp. 400 24,000
Merrill Lynch & Co. 300 19,000
NationsBank 600 49,000
Providian Corp. 400 17,000
Travelers Group 750 31,000
--------------------------------------------------------------------------
336,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE--17.5% Abbott Laboratories 1,600 $ 69,000
(a)Foundation Health Corp. 1,400 56,000
Glaxo Wellcome, ADR 1,400 37,000
Johnson & Johnson 400 39,000
Mallinckrodt Group 1,100 41,000
Merck & Co., Inc. 900 58,000
(a)Mid Atlantic Medical Services, Inc. 2,200 42,000
(a)Sandoz Ltd. 900 47,000
United Healthcare Corp. 900 49,000
----------------------------------------------------------------------------
438,000
- -------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS--14.2% (a)Applied Materials, Inc. 1,100 41,000
(a)Atmel Corporation 600 21,000
Intel Corp. 800 60,000
(a)LSI Logic Corp. 800 25,000
Linear Technology Corp. 1,400 48,000
(a)Maxim Integrated Products 1,200 41,000
(a)Microchip Technology 1,600 41,000
(a)Novellus Systems 900 44,000
Texas Instruments 600 34,000
----------------------------------------------------------------------------
355,000
- -------------------------------------------------------------------------------------------------------------
UTILITIES--3.7% AT&T 700 44,000
(a)Paging Network, Inc. 2,200 50,000
----------------------------------------------------------------------------
94,000
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--99.9%
(Cost: $2,459,000) 2,502,000
----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.1% 1,000
----------------------------------------------------------------------------
NET ASSETS--100% $2,503,000
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $2,459,000 for federal income tax purposes
at May 31, 1996, the gross unrealized appreciation was $92,000, the gross
unrealized depreciation was $49,000 and the net unrealized appreciation on
investments was $43,000.
See accompanying Notes to Financial Statements.
10
<PAGE> 11
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $2,459,000) $2,502,000
Cash 11,000
Receivable for:
Investments sold 14,000
Dividends 3,000
TOTAL ASSETS 2,530,000
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 23,000
Management fee 1,000
Distribution services fee 1,000
Custodian and transfer agent fees and related expenses 1,000
Other 1,000
Total liabilities 27,000
NET ASSETS $2,503,000
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $2,446,000
Undistributed net realized gain on investments 11,000
Net unrealized appreciation on investments 43,000
Undistributed net investment income 3,000
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $2,503,000
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net asset value and redemption price per share
($955,600 / 95,500 shares outstanding) $10.01
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.62
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($835,600 / 83,700 shares outstanding) $9.98
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
($712,100 / 71,300 shares outstanding) $9.99
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
For the period from February 15, 1996
(commencement of operations) to May 31, 1996
STATEMENT OF OPERATIONS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
NET INVESTMENT INCOME
- ----------------------------------------------------------------------
Dividends $ 4,000
Interest 1,000
Total investment income 5,000
Expenses:
Management fee 2,000
Distribution services fee 1,000
Custodian and transfer agent fees and related expenses 1,000
Professional fees 1,000
Total expenses 5,000
NET INVESTMENT INCOME --
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ----------------------------------------------------------------------
Net realized gain on sales of investments 11,000
Change in net unrealized appreciation on investments 43,000
Net gain on investments 54,000
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $54,000
- ----------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------
Net investment income $ --
Net realized gain 11,000
Change in net unrealized appreciation 43,000
Net increase in net assets resulting from operations 54,000
Net equalization credits 3,000
Net increase from capital share transactions 2,346,000
TOTAL INCREASE IN NET ASSETS 2,403,000
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------
Beginning of period 100,000
END OF PERIOD (including undistributed
net investment income of $3,000) $2,503,000
- ----------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND
Kemper Quantitative Equity Fund is an open-end management
investment company organized as a business trust under the
laws of Massachusetts. The Fund currently offers four
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, for shares sold on or
after April 1, 1996, a contingent deferred sales charge
payable upon certain redemptions within one year of
purchase. Class C shares do not convert into another class.
Class I shares (none sold through May 31, 1996) are offered
to a limited group of investors, are not subject to initial
or contingent deferred sales charges and have lower ongoing
expenses than other classes. Differences in class expenses
will result in the payment of different per share income
dividends by class. Each share represents an identical
interest in the investments of the Fund and has the same
rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES
INVESTMENT VALUATION. Investments are stated at value.
Portfolio securities that are traded on a domestic
securities exchange or securities listed on the NASDAQ
National Market are valued at the last sale price on the
exchange or market where primarily traded or listed or, if
there is no recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding
closing values of such securities on their respective
exchanges where primarily traded. Securities not so traded
or listed are valued at the last current bid quotation if
market quotations are available. Fixed income securities are
valued by using market quotations, or independent pricing
services that use prices provided by market makers or
estimates of market values obtained from yield data relating
to instruments or securities with similar characteristics.
Equity options are valued at the last sale price unless the
bid price is higher or the asked price is lower, in which
event such bid or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or exchange on
which they are traded. Forward foreign currency contracts
are valued at the forward rates prevailing on the day of
valuation. Other securities and assets are valued at fair
value as determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment
transactions are accounted for on the trade date (date the
order to buy or sell is executed). Dividend income is
recorded on the ex-dividend date, and interest income is
recorded on the accrual basis and includes discount
amortization on money market instruments. 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
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
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 earlier of
3:00 p.m. Chicago time or 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 has complied with
the special provisions of the Internal Revenue Code
available to investment companies during the period
ended May 31, 1996.
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.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment
income so that income per share available for
distribution is not affected by sales or
redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS MANAGEMENT AGREEMENT. The Fund has a management
WITH AFFILIATES agreement with Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) and pays a management fee at an annual rate
of .58% of the first $250 million of average daily
net assets declining to .42% of average daily net
assets in excess of $12.5 billion. The Fund
incurred a management fee of $2,000 for the period
ended May 31, 1996.
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 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 and
commissions paid in connection with the sale of
Class B and Class C shares are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND
DISTRIBUTION FEES
PAID BY KDI
DISTRIBUTION FEES ----------------------------
RECEIVED BY KDI TO ALL FIRMS TO AFFILIATES
------------------- ------------ -------------
<S> <C> <C> <C>
Period ended
May 31, 1996 $ 1,000 1,000 --
</TABLE>
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. 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.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company is the shareholder service
agent of the Fund.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
During the period ended May 31, 1996, the Fund made
no payments to its officers or trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT For the period ended May 31, 1996, investment
TRANSACTIONS transactions (excluding short-term instruments) are
as follows:
Purchases $2,561,000
Proceeds from sales 113,000
- --------------------------------------------------------------------------------
5 CAPITAL SHARE The following table summarizes the activity in
TRANSACTIONS capital shares of the Fund:
<TABLE>
<CAPTION>
FEBRUARY 15, 1996 TO
MAY 31, 1996
-----------------------
SHARES AMOUNT
--------------------------------------------------------------------------
SHARES SOLD
--------------------------------------------------------------------------
<S> <C> <C>
Class A 94,000 $ 915,000
Class B 82,000 802,000
Class C 67,000 666,000
--------------------------------------------------------------------------
SHARES REDEEMED
--------------------------------------------------------------------------
Class A (2,000) (20,000)
Class B (2,000) (17,000)
--------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $2,346,000
==========================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
For the period from February 15, 1996
(commencement of operations) to May 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.50 9.50 9.50
Income from investment operations:
Net investment income -- -- --
Net realized and unrealized gain .51 .48 .49
Total from investment operations .51 .48 .49
Net asset value, end of period $10.01 9.98 9.99
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.37% 5.05 5.16
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------
Expenses 1.49% 2.45 2.42
Net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period $2,503,000
Portfolio turnover rate (annualized) 32%
- ----------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions for the period ended May 31, 1996 was $.0592.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges.
15
<PAGE> 16
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS DANIEL J. BUKOWSKI
President and Trustee Vice President
DAVID W. BELIN
Trustee
JOHN E. NEAL
LEWIS A. BURNHAM Vice President
Trustee
DONALD L. DUNAWAY JOHN E. PETERS
Trustee Vice President
ROBERT B. HOFFMAN STEVEN H. REYNOLDS
Trustee Vice President
DONALD R. JONES PHILIP J. COLLORA
Trustee Vice President
and Secretary
DOMINIQUE P. MORAX
Trustee JEROME L. DUFFY
Treasurer
SHIRLEY D. PETERSON
Trustee ELIZABETH C. WERTH
Assistant Secretary
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
1-800-621-1048
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 S. LaSalle Street Chicago, IL 60603
http://www.kemper.com
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This report is not to be distributed
unless preceded or accompanied by a
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KQEF - 3 (7/96)
[KEMPER LOGO]
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Printed in the U.S.A.
