<PAGE>
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1997
[LOGO]
Seeks growth of capital and reduction of risk
KEMPER QUANTITATIVE
EQUITY FUND
"... Our experience is that solid
investment ideas can offer good
returns, not just over the course
of months, but over years. ..."
[LOGO] KEMPER FUNDS
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
INDUSTRY SECTORS
10
LARGEST HOLDINGS
11
PORTFOLIO OF INVESTMENTS
13
REPORT OF
INDEPENDENT AUDITORS
14
FINANCIAL STATEMENTS
16
NOTES TO
FINANCIAL STATEMENTS
20
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1997 (UNADJUSTED FOR ANY SALES CHARGE)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Class A 19.25%
Class B 18.37%
Class C 18.45%
Lipper Growth Funds Category Average* 22.00%
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT REPRESENT FUTURE PERFORMANCE.
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 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.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/97 11/30/96
<S> <C> <C>
............................................
KEMPER QUANTITATIVE
EQUITY FUND CLASS A $13.03 $ 11.12
............................................
KEMPER QUANTITATIVE
EQUITY FUND CLASS B $12.84 $ 11.04
............................................
KEMPER QUANTITATIVE
EQUITY FUND CLASS C $12.86 $ 11.05
............................................
</TABLE>
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND
LIPPER RANKINGS*
- --------------------------------------------------------------------------------
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 #554 of #582 of #581 of
791 funds 791 funds 833 funds
.....................................................
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE FISCAL YEAR, 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 $ 0.19 $ 0.19 $ 0.19
..............................................................
</TABLE>
- --------------------------------------------------------------------------------
TERMS TO KNOW
YOUR FUND'S STYLE
STYLE
SIZE
VALUE BLEND GROWTH
X LARGE
MEDIUM
SMALL
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box is
based on a portfolio date as of November 30, 1997.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratio
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.
INDEX An unmanaged group of securities 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 Analysis dealing with measurable factors as distinguished
with 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.
<PAGE>
ECONOMIC OVERVIEW
[PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 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 COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy relatively
low interest rates and low inflation. But the new year will be different in at
least two ways, both of which can be expected to have direct bearing on
investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
3
<PAGE>
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION, CREDIT EXPANSION OR
CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC EXPANSION 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOW (12/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.81 6.22 6.58 5.65
Prime rate (2) 8.50 8.50 8.25 8.50
Inflation rate (3) 1.70 2.23 3.04 2.72
The U.S. dollar (4) 10.43 7.32 4.59 -0.57
Capital goods orders (5)* 11.61 8.58 2.23 9.56
Industrial production (5)* 5.59 3.91 4.70 2.34
Employment growth (6) 2.66 2.30 2.41 1.57
</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) AS INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
* DATA AS OF NOVEMBER 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even deflation and pricing
pressures change the U.S. economic climate. The only real antidote is growth,
and from now on growth is more likely to be found outside the United States.
Today to participate in the growth from global business you'd need to be exposed
to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
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/ MAUREEN ALLYN
MAUREEN ALLYN
CHIEF ECONOMIST, Scudder Kemper Investments, Inc.
January 9, 1998
4
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
[PHOTO]
DANIEL J. BUKOWSKI IS A SENIOR VICE PRESIDENT OF WHAT IS NOW SCUDDER KEMPER
INVESTMENTS, INC. BUKOWSKI ALSO MANAGES KEMPER QUANTITATIVE EQUITY FUND. HE HAS
MORE THAN 10 YEARS OF EXPERIENCE IN THE CAPITAL MARKETS AND 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.
Q DID THE FUND'S PERFORMANCE
FOR THE YEAR MEET
YOUR EXPECTATIONS?
A Yes, on an absolute basis
the fund's performance was excellent. Class A shares had a total return
(unadjusted for any sales charge) of 19.25 percent for the year. This was a
strong return in a remarkably robust market. However, the difference between our
return and the 26.25 percent return of the benchmark Russell 1000 Growth Index
requires some explanation.
First, the index is weighted towards the largest companies in it -- primarily
big brand-name growth companies like Procter & Gamble, Pfizer, Coca-Cola,
Gillette, Microsoft and Eli Lilly. These companies are frequently referred to as
the "Nifty Fifty" by the popular press. Few if any of these companies are
currently priced low enough relative to their earnings to fit with our "growth
at a reasonable price" approach. For example, Coca-Cola recently sold at 40
times 1997 earnings -- that's a lot to pay, and we think at that level there is
more downside risk than upside potential, even though it's a fine growth
company. So we tended not to have large positions in these types of names.
Unfortunately, the market didn't seem very concerned about value for much of
the fiscal year -- investors just continued to bid up the prices of big,
brand-name companies. There were two reasons for this. First, uncertainty about
the direction of interest rates during the first part of the year prompted
investors to favor big companies whose bottom lines tend to be less affected by
interest rate changes. Second, concern over the impact of Asia's prob-
lems during the last two months of the year prompted a "flight to safety," and
large cap, brand-name companies benefited.
Q WERE THE HIGH PRICES OF THESE
COMPANIES THE ONLY REASON YOU DIDN'T BUY MORE?
A Price is the main reason
but not the only one. We also manage the fund with tax efficiency in mind.
We didn't sell current holdings to buy big cap consumer stocks because doing so
would have dramatically boosted the fund's taxable capital gains exposure, but
only provided modest upside potential. For us, that didn't make a lot of sense.
Our experience is that solid investment ideas can offer good returns not just
over the course of months, but over years. Unless there's a compelling reason to
sell stocks, we'll hang onto them. We think that's the best way to serve our
shareholders.
Q WITH THE PASSAGE OF THE NEW
TAX ACT, SHAREHOLDERS MAY BE INTERESTED IN HOW YOU MANAGE THE FUND FOR TAX
EFFICIENCY. COULD YOU FURTHER DESCRIBE YOUR APPROACH?
A Certainly. We work to
provide tax efficiency in a couple of ways: (1) keeping turnover relatively low;
(2) when selling shares, paying attention to when they were purchased and at
what price, so we can offset gains with losses.
In this way, we hope to help shareholders keep more of their return rather
than giving a portion to Uncle Sam in the form of capital gains tax. It's a
strategy that doesn't show up in return numbers, but it can potentially
5
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
make a big difference in our shareholders' pocketbooks.
Q EARLIER, YOU MENTIONED A
COUPLE OF PERIODS OF MARKET UNCERTAINTY. COULD YOU PROVIDE A
"PLAY-BY-PLAY" OF MARKET CONDITIONS FOR THE YEAR AND HOW YOU RESPONDED TO THEM?
A The year began with two
quarters of strong growth, and with a parallel run-up in interest rates.
This increase in rates was caused by fears of a major Federal Reserve Board
("the Fed") rate action.
Interest rate increases are potentially negative for the financial services
stocks in particular, and investor apprehensiveness resulted in buying
opportunities in that sector. As a result, the financial services sector was an
outstanding performer for the fund (up an average of 50 percent for the fiscal
year). Among new positions, we had strong price appreciation in Federal National
Mortgage Association ("Fannie Mae") and in Bear Stearns, bought on concern that
1997 would be a weaker year for the brokerage industry. We added to our position
in NationsBank, a leading "super-regional" bank, for its potential in a time of
rapid nationwide consolidation.
We found further growth at reasonable prices in the second quarter of 1997 in
technology, the largest sector in our portfolio (27 percent) at November 30,
1997. The entire sector was under pressure at the end of the first quarter due
to fears of inventory overhang and intense competition. We believed these
concerns to be largely unwarranted, and we loaded up on technology stocks. With
world demand for personal computers continuing to expand rapidly, we see real
long-term growth potential for selected PC makers.
Technology stocks, along with the rest of the market, rallied strongly during
the second and third quarters of 1997, as positive data for the U.S. economy
reassured investors. Indications of sustainable growth, low inflation, and
declining interest rates created a favorable environment for stocks, a climate
which continued through October.
Believing the health care sector to be overvalued by the market, we took the
opportunity to sell some of the particularly high-flying issues such as Bristol
Myers Squibb and Medtronic. These sales slightly reduced the fund's short-term
performance in health care as measured by the market-cap weighted indexes. But
we felt the fund was better served by establishing new positions in more
value-oriented issues in the sector, which should enhance long-term fund
results. An example is American Home Products, a company possessing strong
earnings power. We believe the market had over-reacted to problems this year
with diet drugs, creating an excellent buying opportunity. Another portfolio
newcomer was Merck, which the market appeared to suspect could not sustain its
growth rate derived from revolutionary new drug discoveries. We were rewarded at
the end of the fiscal year when the stock moved vigorously upward in response to
an announcement from Merck's chairman that the earnings growth rate would be
maintained.
In October, the market's powerful rally was suddenly reversed by emerging
problems in Asia, which, as we mentioned earlier, caused a "flight to safety."
The fund was particularly hurt by our large exposure to technology, which took
the worst of the market's fear. Investors instead favored even further the big-
name, large capitalization consumer non-durable stocks. However, we believe that
tactic may in the end reverse itself as many of these companies are multi-
nationals with heavy exposure to Asia. It is our view that at these lofty
price-earnings multiples, even a "flight to safety" can be dangerous. The fate
of the so-called "Nifty Fifty" during the 1973-74 bear market is an example.
Many of those "couldn't fail" stocks lost over half their value. We prefer to
look for growth without paying exorbitant prices. The market hasn't rewarded
that approach yet, but we believe it will in the long term.
6
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
Q HOW DOES THE FUND'S OVERALL
PRICE-TO-EARNINGS RATIO STACK UP VERSUS THE MARKET?
A Kemper Quantitative
Equity Fund is trading at an average of 22 times last 12-months' earnings, with
an expected growth rate of 16 percent. This compares favorably with the S&P 500
which is at 23 times last 12-months' earnings, with an expected growth rate of
14 percent. So we're paying about the average market price for a growth rate 23
percent above the market. And because this is growth at the right price, the
portfolio is less vulnerable in possible corrections.
Q WHAT'S YOUR OUTLOOK FOR 1998?
A We believe 1998 will
continue the volatility that marked the end of 1997. But that said, it should be
a good year for growth stocks. That's based on several expectations for the
economy and interest rates. First, real rates (interest rates minus inflation)
are very high. In this situation, we expect to see the long bond stay below six
percent, which is very favorable for growth stocks. You can think of it this
way: Growth stocks are like longer duration bonds, in that most of their
earnings occur farther in the future. Value stocks are relatively like shorter
duration bonds, because they tend to offer more immediate earnings. A decline in
rates bodes better for longer duration assets.
Also favorable to growth stocks is that earnings growth is expected to slow in
1998. The reasons include concerns regarding the impact of problems in Asia;
reduced opportunities to increase industrial productivity (since many companies
have already made a lot of improvements); and diminished tax incentives as a
stimulus to industry.
Slower earnings growth tends to be good for growth stocks, as the more
economically sensitive types of stocks typically take the brunt of overall
earnings declines. If earnings slow, the market will be willing to pay a premium
for what growth it can find, making growth stocks more attractive.
7
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED NOVEMBER 30, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS A 12.37% 16.52% (since 2/15/96)
.......................................................................................
KEMPER QUANTITATIVE EQUITY FUND CLASS B 15.37 18.00 (since 2/15/96)
.......................................................................................
KEMPER QUANTITATIVE EQUITY FUND CLASS C 18.45 19.57 (since 2/15/96)
.......................................................................................
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND CLASS
A
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS A SHARES
<S> <C> <C> <C>
from 2/29/96 to 11/30/97
Kemper Quantitative
Equity Fund Russell 1000 Standard & Poor's
Class A(1) Growth Index+ 500 Stock Index++
2/29/96 $10,000 $10,000 $10,000
12/31/96 $10,894 $12,519 $11,820
11/30/97 $13,168 $15,096 $15,451
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND CLASS
B
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS B SHARES
<S> <C> <C> <C>
from 2/29/96 to 11/30/97
Kemper Quantitative
Equity Fund Russell 1000 Standard & Poor's
Class B(1) Growth Index+ 500 Stock Index++
2/29/96 $10,000 $10,000 $10,000
12/31/96 $11,465 $12,519 $11,820
11/30/97 $13,471 $15,096 $15,451
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND CLASS
C
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS C SHARES
<S> <C> <C> <C>
from 2/29/96 to 11/30/97
Kemper Quantitative
Equity Fund Russell 1000 Standard & Poor's
Class C(1) Growth Index+ 500 Stock Index++
2/29/96 $10,000 $10,000 $10,000
12/31/96 $11,475 $12,519 $11,820
11/30/97 $13,792 $15,096 $15,451
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT REFLECT FUTURE PERFORMANCE. RETURNS AND NET
ASSET VALUE FLUCTUATE. SHARES ARE REDEEMABLE AT CURRENT NET ASSET VALUE, WHICH
MAY BE MORE OR LESS THAN ORIGINAL COST.
*AVERAGE ANNUAL TOTAL RETURN MEASURES NET INVESTMENT INCOME AND CAPITAL GAIN OR
LOSS FROM PORTFOLIO INVESTMENTS, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND FOR
CLASS A SHARES ADJUSTMENT FOR THE MAXIMUM SALES CHARGE OF 5.75 PERCENT, FOR
CLASS B SHARES ADJUSTMENT FOR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE
(CDSC) AS FOLLOWS: 1 YEAR, 3 PERCENT; 5 YEAR, 1 PERCENT; SINCE INCEPTION, 0
PERCENT. FOR CLASS C SHARES THERE IS NO ADJUSTMENT FOR SALES CHARGE. THE MAXIMUM
CDSC FOR CLASS B SHARES IS 4 PERCENT. FOR CLASS C SHARES THERE IS A 1 PERCENT
CDSC ON CERTAIN REDEMPTIONS WITHIN THE FIRST YEAR OF PURCHASE. DURING THE
PERIODS NOTED, SECURITIES PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS
AT THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CDSC IN EFFECT AT THE END OF
THE PERIOD FOR CLASS B SHARES. IN COMPARING KEMPER QUANTITATIVE EQUITY FUND
CLASS A SHARES TO THE INDICES, YOU SHOULD ALSO NOTE THAT THE FUND'S
PERFORMANCE REFLECTS THE APPLICABLE SALES CHARGE, WHILE NO SUCH CHARGES ARE
REFLECTED IN THE PERFORMANCE OF THE INDICES.
+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.
++THE STANDARD & POOR'S 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK MARKET. SOURCE IS TOWERS DATA SYSTEMS.
8
<PAGE>
- --------------------------------------------------------------------------------
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
Data show the percentage of the common stocks in the portfolio that each sector
represented on November 30, 1997, and on November 30, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND ON 11/30/97 KEMPER QUANTITATIVE EQUITY FUND ON 11/30/96
<S> <C> <C>
Consumer nondurables 28.9% 31.3%
Technology 27.3% 24.2%
Health care 17.8% 13.1%
Finance 12.8% 9.3%
Capital goods 6.1% 4.9%
Utilities 3.0% 5.4%
Basic industries 1.8% 1.7%
Consumer durables 1.4% 5.0%
Transportation 0.9% 1.5%
Energy 0.0% 3.6%
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
Data show the percentage of the common stocks in the portfolio that each sector
of Kemper Quantitative Equity Fund represented on November 30, 1997, compared to
the industry sectors that make up the fund's benchmark, the Russell 1000 Growth
Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE EQUITY FUND ON 11/30/97 RUSSELL 1000 GROWTH INDEX ON 11/30/97
<S> <C> <C>
Consumer nondurables 28.9% 32.1%
Technology 27.3% 23.6%
Health care 17.8% 19.8%
Finance 12.8% 6.8%
Capital goods 6.1% 10.0%
Utilities 3.0% 1.6%
Basic industries 1.8% 2.8%
Consumer durables 1.4% 0.6%
Transportation 0.9% 0.1%
Energy 0.0% 2.6%
</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.
9
<PAGE>
- --------------------------------------------------------------------------------
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 29 percent of the fund's total net assets on November 30, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Holdings Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1. PHILIP The largest cigarette maker in the U.S. Through 4.0%
MORRIS its Miller Brewing subsidiary, it is also the
country's second-largest brewer. This company is
also a major branded food producer through its
Kraft Foods subsidiaries.
- --------------------------------------------------------------------------------
2. INTEL Engaged in the design, development, manufacture 3.8%
and sale of advanced microcomputer components such
as integrated circuits and other related products.
- --------------------------------------------------------------------------------
3. CISCO The largest, most comprehensive supplier of 3.1%
SYSTEMS routing software and related systems that direct
the flow of data between local area networks, this
company is a play on the explosive growth of the
Internet.
- --------------------------------------------------------------------------------
4. WORLDCOM Provides intrastate, interstate and international 3.0%
long distance services, along with operator,
billing and collection services.
- --------------------------------------------------------------------------------
5. UST Manufactures and sells moist snuff, wine and 3.0%
other products.
- --------------------------------------------------------------------------------
6. WALT DISNEY Develops and produces family entertainment such as 2.6%
theme parks and resorts, film, television and
consumer products.
- --------------------------------------------------------------------------------
7. MERCK A leading research-driven pharmaceutical products 2.4%
and services company. Merck discovers, develops,
manufactures and markets a broad range of
innovative products to improve human and animal
health.
- --------------------------------------------------------------------------------
8. COMPAQ Designs, develops, manufactures and markets 2.4%
COMPUTER personal computers for business and professional
users.
- --------------------------------------------------------------------------------
9. 3COM CORP. Pioneered the data networking industry. Today, 2.4%
3Com offers a broad range of global data
networking solutions that include routers, hubs,
LAN switches and adapters.
- --------------------------------------------------------------------------------
10. GENERAL A broadly diversified company with major 2.3%
ELECTRIC businesses in power generators, appliances,
lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
10
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
KEMPER QUANTITATIVE EQUITY FUND
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--1.8%
Crown Cork & Seal Co. 2,000 $ 98
Ferro Corp. 2,700 103
--------------------------------------------------------------------
201
- ---------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.1%
B.F. Goodrich Co. 2,300 102
Emerson Electric Co. 800 44
General Electric Co. 3,400 251
(a) U.S. Filter Corp. 4,600 144
(a) USA Waste Services 4,305 142
--------------------------------------------------------------------
683
- ---------------------------------------------------------------------------------------------------
COMMUNICATIONS--6.2%
(a) 3Com Corp. 7,375 267
(a) Ascend Communications, Inc. 3,200 80
(a) Cisco Systems 4,000 345
--------------------------------------------------------------------
692
- ---------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--13.7%
(a) AutoZone 4,900 147
Carnival Corp. 4,500 243
(a) Consolidated Stores Corp. 3,000 146
Home Depot 800 45
(a) MGM Grand 5,000 196
NIKE 3,350 163
Sears, Roebuck & Co. 2,100 96
(a) Tommy Hilfiger Corp. 5,000 196
Tricon Global Restaurants, Inc. 350 12
Walt Disney Co. 3,100 294
--------------------------------------------------------------------
1,538
- ---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.4%
Leggett & Platt Inc. 1,500 64
Magna International, Inc., "A" 1,500 95
--------------------------------------------------------------------
159
- ---------------------------------------------------------------------------------------------------
CONSUMER STAPLES--15.2%
American Greetings Corp. 5,400 198
Clorox Co. 1,000 78
Dillard Department Stores 1,200 44
Kimberly-Clark Corp. 1,100 57
McDonald's Corp. 2,700 131
Newell Co. 3,500 143
PepsiCo 4,000 147
Philip Morris Cos. 10,300 448
Procter & Gamble Co. 1,600 122
UST, Inc. 10,800 333
--------------------------------------------------------------------
1,701
- ---------------------------------------------------------------------------------------------------
FINANCE--12.8%
American General Corp. 2,000 108
Banc One Corp. 1,000 51
BB & T Corp. 1,500 82
Bear Stearns Cos. 3,000 125
Dean Witter Discover 2,500 136
Federal National Mortgage Association 3,600 190
First Chicago NBD Corp. 1,500 117
ITT Hartford Group 700 59
Jefferson-Pilot Corp. 1,700 130
Merrill Lynch & Co. 1,200 84
MGIC Investment Corp. 1,800 105
NationsBank 2,000 120
Republic NY Corp. 300 33
Safeco Corp. 1,100 54
Torchmark Corp. 1,000 41
--------------------------------------------------------------------
1,435
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Number
of
Common stocks shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
HEALTH CARE--17.8%
Abbott Laboratories 3,300 $ 215
ALZA Corp. 9,200 246
American Home Products Corp. 2,400 168
Astra AB, ADR 11,466 195
(a) Biogen 3,200 112
Crescendo Pharmaceuticals Corp. 350 4
(a) HealthCare COMPARE Corp. 3,700 193
Johnson & Johnson 2,000 126
Mallinckrodt Group 5,300 196
Merck & Co. 2,900 274
Novartis, ADR 1,000 80
United Healthcare Corp. 3,600 187
--------------------------------------------------------------------
1,996
- ---------------------------------------------------------------------------------------------------
PERSONAL COMPUTING--5.0%
(a) Compaq Computer Corp. 4,300 268
(a) Quantum Corp. 4,000 107
(a) Seagate Technology 4,000 91
(a) Western Digital Corp. 4,600 93
--------------------------------------------------------------------
559
- ---------------------------------------------------------------------------------------------------
TECHNOLOGY--16.1%
(a) Applied Materials, Inc. 5,000 165
(a) Atmel Corp. 5,000 112
(a) Computer Sciences Corp. 3,000 238
Diebold 2,900 134
Intel Corp. 5,500 427
Linear Technology Corp. 1,200 77
(a) Microchip Technology 1,400 49
(a) Novellus Systems 2,700 102
(a) Parametric Technology Corp. 2,200 111
Reynolds & Reynolds Co. 8,800 168
(a) Sun Microsystems 6,100 220
--------------------------------------------------------------------
1,803
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION--.9%
Canadian National Railway Co. 2,000 103
--------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
UTILITIES--3.0%
(a) WorldCom, Inc. 10,700 342
--------------------------------------------------------------------
TOTAL COMMON STOCKS--100%
(Cost: $10,100) 11,212
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Principal
amount Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENT--.2%
Yield--5.20%
Due--January 1998
(Cost: $25) $25 25
-----------------------------------------------------------------
TOTAL INVESTMENTS--100.2%
(Cost: $10,125) 11,237
-----------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(.2)% (20)
-----------------------------------------------------------------
NET ASSETS--100% $11,217
-----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $10,125,000 for federal income tax purposes
at November 30, 1997, the gross unrealized appreciation was $1,416,000, the
gross unrealized depreciation was $304,000 and the net unrealized appreciation
on investments was $1,112,000.
See accompanying Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER QUANTITATIVE EQUITY FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Quantitative Equity Fund as of
November 30, 1997, and the related statement of operations for the year then
ended and statement of changes in net assets and the financial highlights for
the year then ended and for the period from February 15, 1996 (commencement of
operations) to November 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Kemper
Quantitative Equity Fund at November 30, 1997, the results of its operations,
the changes in its net assets and the financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 20, 1998
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
ASSETS
- -------------------------------------------------
Investments, at value
(Cost: $10,125) $11,237
- -------------------------------------------------
Cash 48
- -------------------------------------------------
Receivable for:
Fund shares sold 7
- -------------------------------------------------
Dividends 7
- -------------------------------------------------
TOTAL ASSETS 11,299
- -------------------------------------------------
- -------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------
Payable for:
Fund shares redeemed 25
- -------------------------------------------------
Investments purchased 21
- -------------------------------------------------
Management fee 5
- -------------------------------------------------
Distribution services fee 2
- -------------------------------------------------
Administrative services fee 1
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 9
- -------------------------------------------------
Trustees' fees and other 19
- -------------------------------------------------
Total liabilities 82
- -------------------------------------------------
NET ASSETS $11,217
- -------------------------------------------------
- -------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------
Paid-in capital $ 9,639
- -------------------------------------------------
Undistributed net realized gain on
investments 466
- -------------------------------------------------
Net unrealized appreciation on
investments 1,112
- -------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $11,217
- -------------------------------------------------
- -------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($3,780 DIVIDED BY 290 shares
outstanding) $13.03
- -------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering
price) $13.82
- -------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($2,730 DIVIDED BY 213 shares
outstanding) $12.84
- -------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($1,280 DIVIDED BY 100 shares
outstanding) $12.86
- -------------------------------------------------
CLASS I SHARES
Net asset value and redemption price
per share
($3,427 DIVIDED BY 262 shares
outstanding) $13.08
- -------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------
NET INVESTMENT INCOME
- ------------------------------------------------
Dividends $ 81
- ------------------------------------------------
Interest 5
- ------------------------------------------------
Total investment income 86
- ------------------------------------------------
Expenses:
Management fee 46
- ------------------------------------------------
Distribution services fee 21
- ------------------------------------------------
Administrative services fee 4
- ------------------------------------------------
Custodian and transfer agent fees and
related expenses 21
- ------------------------------------------------
Reports to shareholders 17
- ------------------------------------------------
Professional fees 16
- ------------------------------------------------
Registration fees 2
- ------------------------------------------------
Trustees' fees and other 5
- ------------------------------------------------
Total expenses 132
- ------------------------------------------------
NET INVESTMENT LOSS (46)
- ------------------------------------------------
- ------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------
Net realized gain on sales of
investments 501
- ------------------------------------------------
Change in net unrealized appreciation
on investments 680
- ------------------------------------------------
Net gain on investments 1,181
- ------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,135
- ------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 15
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
<S> <C> <C>
- --------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------
Net investment loss $ (46) (11)
- --------------------------------------------------------------------
Net realized gain 501 88
- --------------------------------------------------------------------
Change in net unrealized appreciation 680 432
- --------------------------------------------------------------------
Net increase in net assets resulting
from operations 1,135 509
- --------------------------------------------------------------------
Net equalization credits -- 4
- --------------------------------------------------------------------
Distribution from net realized gain (78) --
- --------------------------------------------------------------------
Net increase from capital share
transactions 5,564 3,983
- --------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 6,621 4,496
- --------------------------------------------------------------------
- --------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------
Beginning of period 4,596 100
- --------------------------------------------------------------------
END OF PERIOD $11,217 4,596
- --------------------------------------------------------------------
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
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 commenced operations on February 15, 1996. 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
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 and therefore no
federal income tax provision is required.
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
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
WITH AFFILIATES
INVESTMENT MANAGER COMBINATION. Zurich Insurance
Company, the parent of Zurich Kemper Investments,
Inc. (ZKI), has acquired a majority interest in
Scudder, Stevens & Clark, Inc. (Scudder), another
major investment manager. At completion of this
transaction on December 31, 1997, Scudder changed
its name to Scudder Kemper Investments, Inc.
(Scudder Kemper) and the operations of ZKI were
combined with Scudder Kemper. In addition, the
names of the Fund's principal underwriter and
shareholder service agent were changed to Kemper
Distributors, Inc. (KDI) and Kemper Service Company
(KSvC), respectively.
MANAGEMENT AGREEMENT. The Fund has a management
agreement with 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
$46,000 for the year ended November 30, 1997.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with 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>
Year ended November 30, 1997 $ 2,000 18,000
</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
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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>
Year ended November 30, 1997 $ 21,000 42,000
</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>
Year ended November 30, 1997 $ 4,000 7,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
KSvC is the shareholder service agent of the Fund.
Under the agreement, KSvC received shareholder
services fees of $10,000 for the year ended
November 30, 1997.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1997, the Fund made no payments to its officers and
incurred trustees' fees of $5,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the year ended November 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $12,349
Proceeds from sales 6,900
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS
The following table summarizes the activity in
capital shares of the Fund (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 15
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
SHARES SOLD
- -------------------------------------------------------------------------------------------------
Class A 140 $1,750 162 $1,584
- -------------------------------------------------------------------------------------------------
Class B 137 1,715 103 1,004
- -------------------------------------------------------------------------------------------------
Class C 55 647 76 756
- -------------------------------------------------------------------------------------------------
Class I 450 5,443 139 1,428
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
- -------------------------------------------------------------------------------------------------
Class A 3 30 -- --
- -------------------------------------------------------------------------------------------------
Class B 2 19 -- --
- -------------------------------------------------------------------------------------------------
Class C 1 14 -- --
- -------------------------------------------------------------------------------------------------
Class I 1 15 -- --
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SHARES REDEEMED
- -------------------------------------------------------------------------------------------------
Class A (11) (147) (9) (99)
- -------------------------------------------------------------------------------------------------
Class B (27) (341) (4) (35)
- -------------------------------------------------------------------------------------------------
Class C (36) (425) -- --
- -------------------------------------------------------------------------------------------------
Class I (265) (3,156) (63) (655)
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
CONVERSION OF SHARES
- -------------------------------------------------------------------------------------------------
Class A 1 12 1 8
- -------------------------------------------------------------------------------------------------
Class B (1) (12) 1 (8)
- -------------------------------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $5,564 $3,983
- -------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------- ---------------------------
CLASS A CLASS B
--------------------------- ---------------------------
FEBRUARY 15 FEBRUARY 15
YEAR ENDED TO YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.12 9.50 11.04 9.50
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.03) -- (.08) (.04)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.13 1.62 2.07 1.58
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.10 1.62 1.99 1.54
- -----------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .19 -- .19 --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.03 11.12 12.84 11.04
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.25% 17.05 18.37 16.21
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- -----------------------------------------------------------------------------------------------------------------------
Expenses 1.45% 1.48 2.27 2.32
- -----------------------------------------------------------------------------------------------------------------------
Net investment loss (.36)% (.16) (1.18) (1.00)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------- ---------------------------
CLASS C CLASS I
--------------------------- ---------------------------
FEBRUARY 15 SEPTEMBER 9
YEAR ENDED TO YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.05 9.50 11.14 9.67
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (.11) (.04) (.01) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 2.11 1.59 2.14 1.47
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.00 1.55 2.13 1.47
- -----------------------------------------------------------------------------------------------------------------------
Less distribution from net realized gain .19 -- .19 --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.86 11.05 13.08 11.14
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.45% 16.32 19.48 15.20
- -----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(A)
- -----------------------------------------------------------------------------------------------------------------------
Expenses 2.16% 2.33 1.26 1.08
- -----------------------------------------------------------------------------------------------------------------------
Net investment loss (1.07)% (1.01) (.17) (.05)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEBRUARY 15
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
<S> <C> <C>
- --------------------------------------------------------------------
Net assets at end of period (in
thousands) $ 11,217 4,596
- --------------------------------------------------------------------
Portfolio turnover rate 84% 72
- --------------------------------------------------------------------
Average commission rates paid per share
on stock transactions $ .0597 .0555
</TABLE>
- --------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges.
(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%.
20
<PAGE>
- --------------------------------------------------------------------------------
NOTES
21
<PAGE>
- --------------------------------------------------------------------------------
NOTES
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES
23
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES&OFFICERS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
TRUSTEES
DANIEL PIERCE
Chairman and Trustee
DAVID W. BELIN
Trustee
LEWIS A. BURNHAM
Trustee
DONALD L. DUNAWAY
Trustee
ROBERT B. HOFFMAN
Trustee
DONALD R. JONES
Trustee
SHIRLEY D. PETERSON
Trustee
WILLIAM P. SOMMERS
Trustee
EDMOND D. VILLANI
Trustee
OFFICERS
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President,
Secretary and Treasurer
DANIEL J. BUKOWSKI
Vice President
JERARD R. HARTMAN
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
STEVEN H. REYNOLDS
Vice President
LINDA J. WONDRACK
Vice President
JOHN R. HEBBLE
Assistant Treasurer
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
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LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..............................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..............................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
..............................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
..............................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL
60606
www.kemper.com
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Printed on recycled paper in the U.S.A.
This report is not to be distributed
unless preceded or accompanied by a
Kemper Equity Funds/Growth Style
prospectus.
KQEF - 2 (1/98) 1041950
