<PAGE> 1
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED MAY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[LOGO]
Seeks growth of capital and reduction of risk
KEMPER
QUANTITATIVE EQUITY FUND
"... The changing tides of the market were often
unpredictable ... During this fast-paced time,
we steered the fund by focusing on
individual stock selection...."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
INDUSTRY SECTORS
9
LARGEST HOLDINGS
10
PORTFOLIO OF
INVESTMENTS
12
FINANCIAL STATEMENTS
14
NOTES TO
FINANCIAL STATEMENTS
19
FINANCIAL HIGHLIGHTS
20
SHAREHOLDERS' MEETING
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 11.09%
CLASS B 10.54%
CLASS C 10.60%
LIPPER GROWTH FUNDS CATEGORY AVERAGE* 11.98%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not guarantee future performance.
Returns, rankings 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 and rankings 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
5/31/98 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER QUANTITATIVE
EQUITY FUND CLASS A $13.88 $13.03
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE
EQUITY FUND CLASS B $13.60 $12.84
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE
EQUITY FUND CLASS C $13.63 $12.86
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY
FUND RANKINGS AS OF 5/31/98
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER GROWTH FUNDS CATEGORY*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1-YEAR #614 OF 872 FUNDS #643 OF 872 FUNDS #640 OF 872 FUNDS
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE SIX-MONTH PERIOD ENDED MAY 31, 1998, KEMPER QUANTITATIVE EQUITY FUND
MADE THE FOLLOWING DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM
CAPITAL GAIN $.33 $.33 $.33
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $.20 $.20 $.20
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[STYLE/SIZE DIAGRAM]
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar's Style Box
is based on a portfolio date as of May 31, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratios
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
Please note that style boxes do not represent an exact assessment of risk and
do not represent future performance. Please consult the prospectus for a
description of investment policies.
GRAY MONDAY The name used to identify Monday, October 27, 1997. On that day, the
Dow Jones Industrial average lost 554 points or 7 percent of its total value.
Gray Monday is a comparison to Black Monday, October 19, 1987, when the market
lost almost 23 percent of its total value.
VOLATILITY Characteristic of a security, commodity or market to rise or fall
sharply in price within a short period of time. A stock may be volatile because
the outlook for the company is particularly uncertain, or because of various
other reasons.
NIFTY FIFTY EFFECT Scenario in which the stock prices of the largest companies
of the S&P 500 rise at a greater rate than the overall market. In the 1960s and
1970s, the "Nifty Fifty" comprised a select group of 50 large, dominant
companies. Recently, the Nifty Fifty effect has been driven by investors seeking
the greater perceived security of stocks of the largest companies.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
Dr. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
SILVIA HOLDS BACHELOR OF ARTS AND PH.D. DEGREES IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $218 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Stable economic growth, low interest rates and sustained low inflation continued
to produce a beneficial market environment for investors in the second quarter
of 1998. Despite heightened sensitivity to earnings estimates and announcements,
the economy continued to support financial assets. We expect this favorable
climate to continue -- in spite of the sensitivity -- at least over the shorter
term.
As always, expectations have been at the heart of the actions and reactions
that move the markets. Expectations appear to be high, as demonstrated by a
record flow of new cash into mutual funds. As of April 30, 1998, a record $5
trillion in mutual fund assets surpassed total assets of the nation's banks,
according to the Investment Company Institute, a trade organization that
monitors the mutual fund industry, and the Federal Reserve Bank in Washington.
Unfortunately, high expectations often combine with high anxiety -- today's
investors are attuned to even the smallest hint of economic change. The result
is volatility. Many who believe that our long-running bull market is too good to
be true or that stock prices are too high are wondering when the market will
reverse.
While a reversal may not be on the immediate horizon, investors are wise to
watch for several signs that change is underway: rising prices, indicating
higher inflation; repercussions of the Asian economic crisis on American
business, which could appear in the form of reduced earnings; and a continued
widening of our trade deficit, a serious imbalance caused by heightened American
demand for foreign goods and services.
But at its monetary policy meeting at the end of the second quarter, the
Federal Reserve Board (the Fed) again chose to leave interest rates alone. In
the coming months, the Fed could raise interest rates if inflation accelerates
or if growth appears to be too rapid compared to the Fed's expectations.
Our positive outlook for the short term is based primarily on the current
resiliency of our marketplace. The United States appears to be firmly planted in
the middle of an economic cycle, with no evidence of detrimental pressures that
might be associated with the market's phenomenal growth. We are not seeing
widespread price increases for goods and services or a downturn in the housing
market, both of which we might expect late in an economic cycle.
Equities have continued to reward investors. The U.S. stock market, as
measured by the Standard & Poor's 500, gained nearly 18 percent in the first
half of 1998 but just 3.5 percent in the second quarter as profit concerns moved
front and center. Bonds in 1998 have also rewarded investors in terms of real
return, which is total return less the rate of inflation. The Treasury and high
yield debt markets have performed particularly well.
U.S. economic growth, as measured by the gross domestic product (GDP) growth
rate, was slightly above 5 percent for the first quarter. Our general
expectation for the year is that growth in all of 1998 will increase between 2.5
and 3 percent over last year. In other words, the economy will remain strong,
but will continue to slow down as the year progresses.
Consumer spending and corporate fixed investment have fueled the economy's
solid growth. Spending on both capital goods and high technology has been
strong. Corporate profit growth has continued to slow, which appears to be
acceptable to investors in an environment of stable interest rates. U.S.
employment growth has ranged from 2 to 2.25 percent, continuing to exceed
expectations. Consumer confidence has remained at all-time highs. The increase
in output prices, an indicator of inflation measured by the Consumer Price Index
(CPI), has stayed at 1.5 to 2 percent.
Adding to the good news, all seems to be quiet on the domestic policy front.
At the end of February, the U.S. federal budget deficit essentially vanished.
Recent efforts to reduce the deficit, combined with higher federal revenues due
to the robust economy, have left us with an expected budget surplus of $60
billion to $80 billion for fiscal 1998. To date, our Democratic president and
Republican Congress have not agreed on any significant legislation regarding tax
credits, spending cuts or health care that could threaten the newfound federal
budget surplus.
Can we expect a little more excitement from overseas? A full-scale global
recession from last year's Asian economic crisis seems unlikely at this point.
Although the crisis has impacted exporters in particular, it has yet to hurt
most U.S. businesses and investors. Quite the
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The
10-year Treasury rate and the prime rate are prevailing interest rates. The
other data report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (6/30/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <S> <C>
10-YEAR TREASURY RATE(1) 5.5 5.54 6.22 6.87
PRIME RATE(2) 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.75 1.7 2.3 2.82
THE U.S. DOLLAR(4) 9.54 9.32 7.32 8.35
CAPITAL GOODS ORDERS(5)* 10.51 14.37 8.58 2.44
INDUSTRIAL PRODUCTION(5)* 4.42 5.74 3.91 3.99
EMPLOYMENT GROWTH(6) 2.62 2.88 2.56 2.23
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of
the last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of May 31, 1998.
contrary. While the mere threat of repercussions from the Asian crisis added to
the anxiety mentioned earlier, it has also had the effect of keeping U.S.
interest rates and prices in check, making the U.S. economy all the more
attractive to investors around the world.
In the global economy, the U.S. dollar continues to appreciate in value
compared to other currencies. In fact, more capital is flowing into U.S.
markets as investors generally avoid Asia. Europe also has been benefiting from
the crisis. Canada, which is a commodity-producing exporter, has been somewhat
negatively affected as commodity prices have fallen. Political unrest in
Indonesia, nuclear tests in India and Pakistan and economic turmoil in Russia
have been keeping international investors on the edges of their seats.
Other major developments abroad include the final selection of
countries to participate in Europe's single currency next year. Many European
countries are adopting more restrictive fiscal policy and reducing inflation in
anticipation of their momentous entry into the European Economic and Monetary
Union (EMU). But after the EMU is established in 1999, tensions may indeed
mount as countries work to adapt to the new structure.
As we approach the turn of the century, one caveat remains: Don't
underestimate the potential of the Year 2000 computer code problem. It appears
that a significant number of federal government agencies will not meet the
criteria necessary to avoid the problem. Many businesses are revealing that
billions of dollars are being spent on the situation. Some experts say a global
recession is in store. Others adamantly disagree. In any event, we may indeed
see a reduction in capital spending toward the of 1998 and the first half of
next year as companies focus on fixing existing computers rather than on
purchasing new equipment. We'll keep you posted!
Thank you for your continued support. We appreciate the opportunity to
serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
July 10, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[FORTUNA PHOTO]
PHILIP FORTUNA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC. HE
JOINED THE ORGANIZATION IN 1986 AS AN INSTITUTIONAL PORTFOLIO MANAGER. HE IS
THE CO-LEAD PORTFOLIO MANAGER OF KEMPER QUANTITATIVE EQUITY FUND AND ALSO A
CO-LEAD PORTFOLIO MANAGER OF KEMPER VALUE + GROWTH FUND AND KEMPER HORIZON
FUND. FORTUNA RECEIVED A B.S. DEGREE IN ECONOMICS FROM CARNEGIE MELLON
UNIVERSITY AND AN M.B.A. FROM THE UNIVERSITY OF CHICAGO.
[KNAPP PHOTO]
WILLIAM KNAPP JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1992 AS A QUANTITATIVE
ANALYST. KNAPP IS THE CO-LEAD PORTFOLIO MANAGER OF KEMPER QUANTITATIVE EQUITY
FUND AND ALSO CO-MANAGER OF KEMPER VALUE + GROWTH FUND AND KEMPER HORIZON FUND.
HE RECEIVED HIS BACHELOR'S DEGREE AND GRADUATED MAGNA CUM LAUDE FROM DRAKE.
KNAPP EARNED A MASTER'S DEGREE AND A Ph.D. FROM THE UNIVERSITY OF
WISCONSIN-MADISON.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
BY ADHERING TO A DISCIPLINED, RESEARCH-INTENSIVE STRATEGY, CO-LEAD PORTFOLIO
MANAGERS PHILIP FORTUNA AND WILLIAM KNAPP LED KEMPER QUANTITATIVE EQUITY FUND
TO A RESPECTABLE RETURN, DESPITE AN AT-TIMES INHOSPITABLE MARKET CLIMATE.
Q LATELY, THE STOCK MARKET HAS TAKEN INVESTORS ON A ROLLER COASTER RIDE
CHARACTERIZED BY RAPID GAINS AND DECLINES. COULD YOU GIVE US AN OVERVIEW OF THE
MARKET ACTIVITY THAT HAS INFLUENCED THE SEMIANNUAL PERIOD?
A Certainly. Overall, the market posted brisk returns, but investors have
had to hold tight through a period of ups and downs. For the semiannual period
ending May 31, 1998, the S&P 500 Index gained 15.07 percent, and our benchmark,
the Russell 1000 Growth Index gained 14.70 percent. However, these gains were
earned against a backdrop of uncertainty and short-term volatility. We entered
the semiannual period in the wake of the October 27, 1997's Gray Monday market
correction. The markets dipped in November, and global governmental efforts were
underway to try to counteract the turmoil in Asian markets. Concerns abated as
we moved into 1998, with the U.S. stock market rallying briskly in February.
However, the markets then hit turbulent water again, and it became clear that
the effects of the economic crisis in Asia were continuing to unfold. Earnings
disappointments took a toll on many stocks, particularly those of technology
firms and smaller companies. Concerns that the Federal Reserve would increase
interest rates also stirred the waters throughout this period.
Generally, growth outperformed value, domestic stocks were more attractive
than international ones, and large company stocks fared better than smaller
ones. The changing tides of the market were often unpredictable, making sector-
based forecasts particularly unwise. During this fast-paced time, we steered the
fund by focusing on individual stock selection.
Q HOW DID THE FUND PERFORM DURING THIS PERIOD?
A For the semiannual period, Kemper Quantitative Equity Fund returned 11.09
percent (Class A shares, unadjusted for any sales charge), versus 11.98 percent
for the Lipper Growth Funds category. For the one-year period, the fund earned
22.67 percent (Class A shares, unadjusted for any sales charge), compared to
25.86 percent for our peer group. Given the challenges of the preceding six
months, we're satisfied with these returns on an absolute basis. That said, we
certainly don't want to trail our peer group average or the fund's benchmark
over the long haul. However, the short-term market climate has not afforded our
value-driven investment strategy as many opportunities as we would have liked it
to.
Q COULD YOU ELABORATE ON HOW YOU MANAGE THE FUND, AND ANY SPECIAL CHALLENGES
POSED BY THE MARKET DURING THE SEMIANNUAL PERIOD?
A We follow a disciplined, research-intensive approach to stock selection.
We focus on fundamental statistics such as historic earnings, growth rates, book
values and cash flow. We seek stocks that we believe are priced reasonably
relative to their
5
<PAGE> 6
PERFORMANCE UPDATE
fundamentals and growth potential. It's important to us to not get carried away
by the emotion of the market. When the rest of the market may be using clouded
judgement, we want to be able to evaluate the true merits of a stock. We believe
this is how we best serve shareholders. During the short term, the market's
vicissitudes didn't support our strategy to the degree to which we would have
liked, but we do remain confident of the long-term benefits of our approach.
In an environment of uncertainty, it wasn't surprising to see many
investors succumb to emotion. Technology and small-company stocks took the
brunt of the Asian meltdown. Many investors reacted to the turmoil in the
market by fleeing to the safe haven of larger companies, which are often
perceived to offer greater shelter. We saw this as a continuation of the Nifty
Fifty effect, wherein the largest stocks of the S&P 500 get pushed up higher
than the overall market. We avoided many of these stocks, which were trading
beyond a level we felt was sustainable or reasonable, given the companys'
underlying fundamentals. Our valuation discipline caused us to miss some
short-term gains earned by the market's current darlings, but we still believe
that while the highflying stocks may be the life of the party now, they also
could be the ones suffering a hangover when the market evaluates them more
logically.
In our most recent quarterly evaluation of the portfolio, the average
price-to-earnings ratio was 27.5, very close to that of the S&P 500 Index's
27.1. However, the earnings per share projected five-year median for the fund
was 17.6, exceeding the S&P 500's 13.7. That means we're finding stocks at a
significantly higher projected growth, but not paying proportionately more.
Q HOW DID YOU POSITION THE PORTFOLIO?
A Technology and consumer nondurable stocks make up the lion's share of the
portfolio, followed by health care. In these three areas, the fund's allocation
falls fairly close to that of the Russell 1000 Growth Index. Compared to that
benchmark, the fund has greater exposure to the financials sector, and less
exposure to basic industries and energy.
Given the macro-economic conditions, we've looked for openings to
position the fund defensively. Several of the fund's consumer nondurable
holdings lived up nicely to that sector's reputation of greater resiliency
during times of turmoil. American Greetings Corp. turned in nice returns, and
we also benefited from our position in food companies such as ConAgra. During
the semiannual period, retail and apparel stocks also contributed to overall
performance.
Within the health care sector, we eschewed many of the highest-priced
stocks, but still ended up with exposure to the sector that we feel is
appropriate and satisfying. We reaped solid gains from several of our health
care holdings, such as ALZA, McKesson, and R.P. Scherer. New health care names
also joined the portfolio's ranks. For instance, we added Stryker, a mid-cap
manufacturer of medical equipment.
Financial stocks still hold strong appeal for us, and we see signals of
good long-term vitality within the sector. We've seen that the buzz about
rising rates hasn't yet come to pass. In fact, we've seen rates go lower, and
they could continue to do so. We expect that financial stocks will continue to
benefit in this environment. While the trend towards consolidation may taper
off from its earlier fevered pitch, there are many indications that synergies
will continue to present good opportunities throughout the sector.
Technology was definitely a mixed bag. On the bright side, Compaq
Computer, a significant holding in the portfolio, was one instance where our
strategy worked well. Short-term inventory concerns had turned investors
against this stock, but we held to our guns. We took advantage of declines to
build our position, and overall, came out ahead as the emotion around the stock
cleared to reveal the company's longer-term merits.
Q WHAT DIDN'T TURN OUT AS WELL AS YOU HAD EXPECTED?
A Our energy stake put a damper on returns. We had bought oil services
stocks, such as Rowan Companies and Smith International, because we believed
that their prices had bottomed out. However, in hindsight it appears that we
were early. Due to low oil prices, oil stocks continue to fall lower, and
haven't been able to shake the bad feeling surrounding them. That said, we
haven't given up entirely on their potential for improved fortunes. Expectations
for oil stocks are low, and any good news could boost them.
We also suffered from our exposure to tobacco stocks. Based on price
weakness, we had built stakes in tobacco firms, such as UST, Inc. and Philip
Morris Cos. As we entered the semiannual period, both of these firms were among
our top ten holdings. We sold Philip Morris because we feel that the stock's
growth prospects are not in line
6
<PAGE> 7
PERFORMANCE UPDATE
with the rest of the portfolio. We continue to include UST, Inc. among our
largest holdings, and have added Universal Corp., a tobacco services company, to
the portfolio. Though the dust hasn't cleared as soon as we thought it would, we
believe that the cloud of litigation and government regulatory concerns will
pass, and that the market will support our confidence in tobacco stocks.
Q THE FUND HAS A HIGH WEIGHTING IN TECHNOLOGY STOCKS. HOW DID THIS IMPACT
PERFORMANCE?
A Some of our holdings, such as Diebold was battered by the fallout from
Asia. In some cases, we have opted to move out of those names that don't look
likely to get out of trouble soon. For instance, the sting of Diebold's
disappointing earnings compelled us to eliminate it from the portfolio toward
the end of the semiannual period. However, technology stocks often turn before
their earnings do. In the wake of the technology correction, new opportunities
are emerging. For instance, semiconductors have taken a beating, and now stocks
like National Semiconductor boast tempting prices. It's important to keep in
mind that despite the company's short-term weaknesses there will still be a
demand for its semiconductors. Part of our disciplined, quantitative strategy
means that we're looking beyond the emotion surrounding semiconductors, always
keeping an eye on longer-term opportunities.
Q DO YOU EXPECT THE CURRENT OF THE MARKET TO CONTINUE AS IT HAS?
A Certainly, it will be a challenging investment environment. We expect that
volatility will continue. There haven't been sufficient indications that the
turmoil in Asia is anywhere near to running its course. We can't escape the fact
that we're a part of a global economy, and that international events can exert a
significant impact on our markets. Yet, overall, we continue to believe in the
long-term potential of domestic equity investing. There are good indications
that inflation will be kept in check, which contributes to a healthy environment
for stocks. We should be prepared for domestic corporate earnings to slow down
throughout the rest of the year and possibly into 1999. We hope that this will
set a slower, but saner pace, and allow us to navigate the fund more nimbly.
Overall, the mid-cap arena is gaining appeal, and we're finding attractive
opportunities there. When it comes to investors' recent sentiments, mid-and
smaller company names haven't fared as well as their larger company
counterparts. In these uncertain conditions, we believe that we have the
opportunity to sow the seeds for future growth.
7
<PAGE> 8
INDUSTRY SECTORS
A SIX-MONTH COMPARISON
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF THE KEMPER QUANTITATIVE EQUITY FUND REPRESENTED ON MAY 31, 1998, AND ON
NOVEMBER 30, 1997.
[EQUITY PORTION BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND KEMPER QUANTITATIVE EQUITY FUND
ON 5/31/98 ON 11/30/97
<S> <C> <C>
CONSUMER NONDURABLES 29.9% 28.9%
TECHNOLOGY 21.3% 27.3%
HEALTH CARE 18.4% 17.8%
FINANCE 14.4% 12.8%
CAPITAL GOODS 5.8% 6.1%
ENERGY 4.1% 0.0%
UTILITIES 3.4% 3.0%
CONSUMER DURABLES 1.7% 1.4%
BASIC INDUSTRIES 1.0% 1.8%
TRANSPORTATION 0.0% 0.9%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF THE KEMPER QUANTITATIVE EQUITY FUND REPRESENTED ON MAY 31, 1998, COMPARED TO
THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 GROWTH
INDEX.
[RUSSELL 1000 GROWTH BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND RUSSELL 1000 GROWTH INDEX
ON 5/31/98 ON 5/31/98
<S> <C> <C>
CONSUMER NONDURABLES 29.9% 31.5%
TECHNOLOGY 21.3% 23.4%
HEALTH CARE 18.4% 20.9%
FINANCE 14.4% 7.2%
CAPITAL GOODS 5.8% 9.5%
ENERGY 4.1% 2.2%
UTILITIES 3.4% 1.8%
CONSUMER DURABLES 1.7% 0.6%
BASIC INDUSTRIES 1.0% 2.7%
TRANSPORTATION 0.0% 0.1%
</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.
8
<PAGE> 9
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 23.0 percent of the fund's total net assets on May 31, 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. WORLDCOM One of the largest long distance telecommunications 3.2%
companies in the U.S., offering domestic and
international voice, data and video products and
services.
- --------------------------------------------------------------------------------------------------------
2. CISCO SYSTEMS Largest, most comprehensive supplier of routing 3.1%
software and related systems that direct the flow of
data between local area networks.
- --------------------------------------------------------------------------------------------------------
3. ALZA Engaged in the development of pharmaceutical products 2.9%
using advanced drug delivery technologies to add
medical and economic value to drug therapies.
- --------------------------------------------------------------------------------------------------------
4. MERCK A leading research-driven pharmaceutical products and 2.2%
services company. Merck discovers, develops,
manufactures and markets a broad range of products to
improve human and animal health.
- --------------------------------------------------------------------------------------------------------
5. COMPAQ COMPUTER Designs, develops, manufactures and markets personal 2.2%
computers for business and professional users.
- --------------------------------------------------------------------------------------------------------
6. GENERAL ELECTRIC Operates in major businesses including power 2.1%
generators, appliances, lighting, plastics, medical
systems, aircraft engines, financial services and
broadcasting.
- --------------------------------------------------------------------------------------------------------
7. CARNIVAL Engaged in the operation of cruise lines, resort and 2.0%
casino complexes, hotels, transportation and tour
businesses.
- --------------------------------------------------------------------------------------------------------
8. UST Engaged in the manufacturing and selling of moist 1.9%
snuff, wine and other products.
- --------------------------------------------------------------------------------------------------------
9. TOMMY HILFIGER Designs, sources and markets classic American designer 1.7%
sportswear for men and boys at value prices.
- --------------------------------------------------------------------------------------------------------
10. SUN MICROSYSTEMS A provider of high performance workstations, servers, 1.7%
and networking software for the engineering,
scientific, commercial, and technical industries.
- --------------------------------------------------------------------------------------------------------
</TABLE>
*The fund's holdings are subject to change.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER QUANTITATIVE EQUITY FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1998 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
COMMON STOCKS NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--1.0%
Ecolab 5,000 $ 154
--------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
CAPITAL GOODS--5.4%
American Standard Companies 3,500 169
General Electric Co. 3,900 325
Tyco International, Ltd. 1,500 83
(a)U.S. Filter Corp. 4,600 140
(a)USA Waste Services 2,537 120
--------------------------------------------------------------------
837
- ---------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--15.8%
(a)Apollo Group, Inc. 2,250 72
(a)AutoZone 4,900 163
Carnival Corp. 4,500 305
(a)Consolidated Stores Corp. 3,000 115
Deluxe Corp. 2,000 67
Dillard Department Stores 1,700 72
(a)Jones Apparel Group 2,000 127
Lowe's Companies, Inc. 2,000 158
(a)MGM Grand 6,800 226
NIKE 4,850 223
(a)Nine West Group 9,000 254
(a)Payless ShoeSource, Inc. 2,000 140
(a)Tommy Hilfiger Corp. 4,000 269
Walt Disney Co. 2,100 238
--------------------------------------------------------------------
2,429
- ---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.6%
HON Industries, Inc. 4,500 144
Magna International, Inc., "A" 1,500 106
--------------------------------------------------------------------
250
- ---------------------------------------------------------------------------------------------------
CONSUMER STAPLES--12.4%
American Greetings Corp. 5,400 256
Avon Products 2,000 164
ConAgra, Inc. 3,000 88
General Nutrition 4,000 126
Newell Co. 3,000 145
PepsiCo 4,000 163
Procter & Gamble Co. 2,900 243
(a)Smithfield Foods, Inc. 4,000 108
Tupperware Corp. 3,000 81
Universal Corp. 6,600 248
UST, Inc. 10,800 288
--------------------------------------------------------------------
1,910
- ---------------------------------------------------------------------------------------------------
ENERGY--3.9%
Cooper Cameron Corp. 3,700 220
R & B Falcon Corp. 2,500 72
(a)Rowan Companies, Inc. 5,500 141
Smith International 3,300 162
--------------------------------------------------------------------
595
- ---------------------------------------------------------------------------------------------------
FINANCE--13.6%
Ambac Financial Group, Inc. 1,500 82
American General Corp. 2,000 134
BB & T Corp. 2,000 132
Bear Stearns Cos. 3,000 163
Community First Bankshares 6,000 146
Federal National Mortgage Association 3,600 216
Hibernia Corp. 9,000 189
ITT Hartford Group 700 77
Jefferson-Pilot Corp. 2,550 146
MGIC Investment Corp. 1,800 108
Merrill Lynch & Co. 1,200 107
Morgan Stanley, Dean Witter, Discover & Co. 2,500 195
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NationsBank 2,000 $ 151
Republic NY Corp. 300 39
Safeco Corp. 1,100 51
Torchmark Corp. 1,500 64
Travelers Group 1,500 91
--------------------------------------------------------------------
2,091
- ---------------------------------------------------------------------------------------------------
HEALTH CARE--17.4%
(a)ALZA Corp. 9,200 445
American Home Products Corp. 3,800 184
Astra AB, ADR 11,466 232
Bergen Brunswig Corp. 5,000 207
First Health Group Corp. 3,700 210
McKesson Corp. 3,000 234
Merck & Co. 2,900 339
R.P. Scherer Corp. 2,200 182
Schering-Plough Corp. 2,000 167
Stryker Corp. 6,000 245
United Healthcare Corp. 3,600 230
--------------------------------------------------------------------
2,675
- ---------------------------------------------------------------------------------------------------
TECHNOLOGY--20.1%
Analog Devices 3,000 74
(a)Applied Materials, Inc. 7,500 240
Bay Networks 4,500 125
Cadence Design Systems 4,500 159
(a)Cisco Systems 6,300 476
Compaq Computer Corp. 12,400 339
(a)Computer Sciences Corp. 2,000 104
Linear Technology Corp. 2,100 147
(a)Microchip Technology 5,400 132
National Semiconductor Corp. 7,500 122
(a)Novellus Systems 3,500 132
Parametric Technology Corp. 4,400 135
(a)Quantum Corp. 11,000 241
Reynolds & Reynolds Co. 8,800 184
(a)Sun Microsystems 6,600 264
Teradyne, Inc. 7,000 215
--------------------------------------------------------------------
3,089
- ---------------------------------------------------------------------------------------------------
UTILITIES--3.2%
(a)WorldCom, Inc. 10,700 487
--------------------------------------------------------------------
TOTAL COMMON STOCKS--94.4%
(Cost: $12,228) 14,517
--------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
MONEY MARKET PRINCIPAL
INSTRUMENTS--2.3% AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
Yield--4.74% to 5.57%
Due--June and July 1998
(Cost: $350) $350 350
------------------------------------------------------------------
TOTAL INVESTMENTS--96.7%
(Cost: $12,578) 14,867
------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--3.3% 513
------------------------------------------------------------------
NET ASSETS--100% $15,380
------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $12,578,000 for federal income tax purposes
at May 31, 1998, the gross unrealized appreciation was $2,737,000, the gross
unrealized depreciation was $448,000 and the net unrealized appreciation on
investments was $2,289,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
ASSETS
- -------------------------------------------------
Investments, at value
(Cost: $12,578) $14,867
- -------------------------------------------------
Cash 457
- -------------------------------------------------
Receivable for:
Investments sold 586
- -------------------------------------------------
Fund shares sold 25
- -------------------------------------------------
Dividends 10
- -------------------------------------------------
TOTAL ASSETS 15,945
- -------------------------------------------------
- -------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------
Payable for:
Investments purchased 535
- -------------------------------------------------
Management fee 7
- -------------------------------------------------
Distribution services fee 4
- -------------------------------------------------
Administrative services fee 1
- -------------------------------------------------
Trustees' fees and other 18
- -------------------------------------------------
Total liabilities 565
- -------------------------------------------------
NET ASSETS $15,380
- -------------------------------------------------
- -------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------
Paid-in capital $12,891
- -------------------------------------------------
Undistributed net realized gain on
investments 200
- -------------------------------------------------
Net unrealized appreciation on
investments 2,289
- -------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $15,380
- -------------------------------------------------
- -------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share ($6,250/450 shares
outstanding) $13.88
- -------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering
price) $14.73
- -------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share ($4,517/332 shares
outstanding) $13.60
- -------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share ($1,585/116 shares
outstanding) $13.63
- -------------------------------------------------
CLASS I SHARES
Net asset value and redemption price
per share
($3,028/217 shares outstanding) $13.94
- -------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (unaudited)
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------
Dividends $ 67
- ------------------------------------------------
Interest 22
- ------------------------------------------------
Total investment income 89
- ------------------------------------------------
Expenses:
Management fee 40
- ------------------------------------------------
Distribution services fee 19
- ------------------------------------------------
Administrative services fee 3
- ------------------------------------------------
Custodian and transfer agent fees and
related expenses 16
- ------------------------------------------------
Professional fees 6
- ------------------------------------------------
Reports to shareholders 20
- ------------------------------------------------
Registration fees 2
- ------------------------------------------------
Trustees' fees and other 10
- ------------------------------------------------
Total expenses 116
- ------------------------------------------------
NET INVESTMENT LOSS (27)
- ------------------------------------------------
- ------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------
Net realized gain on sales of
investments 48
- ------------------------------------------------
Net realized gain from futures
transactions 152
- ------------------------------------------------
Net realized gain 200
- ------------------------------------------------
Change in net unrealized appreciation
on investments 1,177
- ------------------------------------------------
Net gain on investments 1,377
- ------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,350
- ------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997
- ---------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (27) (46)
- ---------------------------------------------------------------------------
Net realized gain 200 501
- ---------------------------------------------------------------------------
Change in net unrealized appreciation 1,177 680
- ---------------------------------------------------------------------------
Net increase in net assets resulting
from operations 1,350 1,135
- ---------------------------------------------------------------------------
Distribution from net realized gain (466) (78)
- ---------------------------------------------------------------------------
Net increase from capital share
transactions 3,279 5,564
- ---------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 4,163 6,621
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------
Beginning of period 11,217 4,596
- ---------------------------------------------------------------------------
END OF PERIOD $ 15,380 11,217
- ---------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
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 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 are sold 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. All shares of the Fund have equal rights
with respect to voting, dividends and assets,
subject to class specific preferences.
- --------------------------------------------------------------------------------
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 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.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
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 six
months ended May 31, 1998.
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.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) 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
$40,000 for the six months ended May 31, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the distribution of Class A shares are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS ALLOWED
RETAINED BY KDI BY KDI TO FIRMS
--------------- -------------------
<S> <C> <C>
Six months ended May 31, 1998 $ 3,000 28,000
</TABLE>
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 (CDSC) from redemptions of
Class B and Class C shares. Distribution fees, CDSC
and commissions related to Class B and Class C
shares are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Six months ended May 31, 1998 $ 21,000 56,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C 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. Administrative services fees (ASF) paid
are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY
THE FUND TO KDI KDI TO FIRMS
--------------- ------------
<S> <C> <C>
Six months ended May 31, 1998 $ 3,000 10,000
</TABLE>
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 received shareholder services fees of $9,000
for the six months ended May 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended May 31,
1998, the Fund made no payments to its officers and
incurred trustees' fees of $2,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended May 31, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $7,023
Proceeds from sales 4,943
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund (in thousands):
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1998 1997
-------------- ---------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------
SHARES SOLD
- ------------------------------------------------------------------------
Class A 183 $2,494 140 $1,750
- ------------------------------------------------------------------------
Class B 128 1,708 137 1,715
- ------------------------------------------------------------------------
Class C 20 264 55 647
- ------------------------------------------------------------------------
Class I 75 1,005 450 5,443
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- ------------------------------------------------------------------------
Class A 12 154 3 30
- ------------------------------------------------------------------------
Class B 9 114 2 19
- ------------------------------------------------------------------------
Class C 4 53 1 14
- ------------------------------------------------------------------------
Class I 11 137 1 15
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
SHARES REDEEMED
- ------------------------------------------------------------------------
Class A (37) (502) (11) (147)
- ------------------------------------------------------------------------
Class B (16) (217) (27) (341)
- ------------------------------------------------------------------------
Class C (8) (101) (36) (425)
- ------------------------------------------------------------------------
Class I (131) (1,830) (265) (3,156)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
CONVERSION OF SHARES
- ------------------------------------------------------------------------
Class A 2 26 1 12
- ------------------------------------------------------------------------
Class B (2) (26) (1) (12)
- ------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE
TRANSACTIONS $3,279 $5,564
- ------------------------------------------------------------------------
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Fund has entered into exchange traded financial
futures contracts in order to take advantage of
anticipated market conditions and, as such, bears
the risk that arises from owning these contracts.
At the time the Fund enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the fund and the broker as the market value
of the futures contract fluctuates. At May 31,
1998, the market value of assets pledged by the
Fund to cover margin requirements for open futures
was $50,000. The Fund also had liquid assets in
excess of the face amount of open futures
contracts. At May 31, 1998, the following futures
contracts were owned by the Fund.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION GAIN AT
TYPE AMOUNT POSITION MONTH 5/31/98
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index $542,000 Long June '98 $3,000
--------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------ -------------------------------------------
CLASS A CLASS B
------------------------------------------ -------------------------------------------
SIX MONTHS YEAR FEBRUARY 15 SIX MONTHS YEAR FEBRUARY 15
ENDED ENDED TO ENDED ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30, MAY 31, NOVEMBER 30, NOVEMBER 30,
1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.03 11.12 9.50 12.84 11.04 9.50
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss -- (.03) -- (.02) (.08) (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.38 2.13 1.62 1.31 2.07 1.58
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.38 2.10 1.62 1.29 1.99 1.54
- ----------------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 -- .53 .19 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.88 13.03 11.12 13.60 12.84 11.04
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 11.09% 19.25 17.05 10.54 18.37 16.21
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses 1.48% 1.45 1.48 2.28 2.27 2.32
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.21)% (.36) (.16) (1.01) (1.18) (1.00)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------ -------------------------------------------
CLASS C CLASS I
------------------------------------------ -------------------------------------------
SIX MONTHS YEAR FEBRUARY 15 SIX MONTHS YEAR SEPTEMBER 9
ENDED ENDED TO ENDED ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30, MAY 31, NOVEMBER 30, NOVEMBER 30,
1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 12.86 11.05 9.50 13.08 11.14 9.67
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) (.11) (.04) .01 (.01) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 1.33 2.11 1.59 1.38 2.14 1.47
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.30 2.00 1.55 1.39 2.13 1.47
- ----------------------------------------------------------------------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 -- .53 .19 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.63 12.86 11.05 13.94 13.08 11.14
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.60% 18.45 16.32 11.13 19.48 15.20
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses 2.14% 2.16 2.33 1.12 1.26 1.08
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.87)% (1.07) (1.01) .15 (.17) (.05)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------
SIX MONTHS YEAR FEBRUARY 15
ENDED ENDED TO
MAY 31, NOVEMBER 30, NOVEMBER 30,
1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in
thousands) $ 15,380 11,217 4,596
- ------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 68% 84 72
- ------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return does not reflect the effect of any sales charges. Data for
the period ended May 31, 1998 is unaudited.
(a) The investment manager agreed to temporarily waive its management fee and
absorb certain operating expenses of the Fund for the period ended November
30, 1996. Absent this waiver, the ratios of expenses to average net assets
would have increased and the ratios of net investment income to average net
assets would have decreased for the period ended November 30, 1996 by the
following amounts: for Class A, 0.78%, for Class B, 0.83%, for Class C,
0.79% and for Class I, 1.15%.
19
<PAGE> 20
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Kemper Quantitative Equity Fund shareholders were asked to vote on
five separate issues: election of the nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of a new
investment management agreement with Scudder Kemper Investments, Inc., approval
of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure, and approval of a new rule 12b-1 distribution plan
with Kemper Distributors, Inc. for Class B shares and Class C shares. The
following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
David W. Belin 534,616 2,108
Lewis A. Burnham 534,616 2,108
Donald L. Dunaway 534,177 2,548
Robert B. Hoffman 534,075 2,650
Donald R. Jones 534,616 2,108
Shirley D. Peterson 534,177 2,548
Daniel Pierce 534,088 2,636
William P. Sommers 534,616 2,108
Edmond D. Villani 533,877 2,848
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the current fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
533,864 248 2,613
</TABLE>
3) Approval of a new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
530,721 3,175 2,829
</TABLE>
4) Approval of changes in the fund's fundamental investment policies to permit a
master/feeder fund structure.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
515,454 6,806 2,636 11,829
</TABLE>
5) To approve a new rule 12b-1 distribution plan with Kemper Distributors, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Class B 114,039 455 292
Class C 81,001 0 1,647
</TABLE>
20
<PAGE> 21
21
NOTES
<PAGE> 22
22
NOTES
<PAGE> 23
23
NOTES
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK CASADY KATHRYN L. QUIRK
Chairman and Trustee President Vice President
DAVID W. BELIN PHILIP J. COLLORA STEVEN H. REYNOLDS
Trustee Vice President and Vice President
Secretary
LEWIS A. BURNHAM LINDA J. WONDRACK
Trustee JOHN R. HEBBLE Vice President
Treasurer
DONALD L. DUNAWAY MAUREEN E. KANE
Trustee PHILIP FORTUNA Assistant Secretary
Vice President
ROBERT B. HOFFMAN CAROLINE PEARSON
Trustee JERARD K. HARTMAN Assistant Secretary
Vice President
DONALD R. JONES ELIZABETH C. WERTH
Trustee WILLIAM KNAPP Assistant Secretary
Vice President
SHIRLEY D. PETERSON
Trustee THOMAS W. LITTAUER
Vice President
WILLIAM P. SOMMERS
Trustee ANN M. MCCREARY
Vice President
EDMOND D. VILLANI
Trustee
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LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
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SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
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CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
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PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Fund/Growth Style Funds prospectus.
KQEF-3 (7/98) 1050260
