<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
SEEKS GROWTH OF CAPITAL AND REDUCTION OF RISK
KEMPER QUANTITATIVE
EQUITY FUND
"... At every turn, volatility generates opportunities for
buying and selling stocks. Research, experience and
discipline serve as excellent tools for determining
which opportunities should be seized. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
10
Industry Sectors
11
Largest Holdings
12
Portfolio Of Investments
14
Report Of Independent Auditors
15
Financial Statements
17
Notes To Financial Statements
21
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS A 6.45%
CLASS B 5.50%
CLASS C 5.65%
LIPPER GROWTH FUNDS CATEGORY AVERAGE* 14.32%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
11/30/98 11/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
KEMPER QUANTITATIVE
EQUITY FUND CLASS A $13.31 $13.03
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE
EQUITY FUND CLASS B $12.98 $12.84
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE
EQUITY FUND CLASS C $13.02 $12.86
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND
RANKINGS AS OF 11/30/98
- --------------------------------------------------------------------------------
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 #749 of #766 of #762 of
961 funds 961 funds 961 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 $0.33 $0.33 $0.33
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAIN $0.20 $0.20 $0.20
- --------------------------------------------------------------------------------
</TABLE>
RETURNS AND RANKINGS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
*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.
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MORNINGSTAR EQUITY STYLE BOX]
Source: Morningstar, Inc. Chicago, IL. (312) 696-6000. The Morningstar Style Box
is based on a software release date of 11/30/98. The Equity Style Box placement
is based on two variables: a fund's market capitalization relative to the
movements of the market and a fund's valuation, which is calculated by comparing
the stocks in the fund's portfolio with the most relevant of the three
market-cap groups.
Please note that style boxes do not represent an exact assessment of risk and do
not represent future performance. The fund's portfolio changes from day-to-day.
A longer-term view is represented by the fund's Morningstar category, which is
based on its actual investment style as measured by its underlying portfolio
holdings since inception. Please consult the prospectus for a description of
investment policies.
FUNDAMENTAL INVESTING In addition to rigorous analysis of quantitative data,
such as stock price trends and balance sheet information, fundamental investing
also includes an emphasis on less number-driven factors, such as meetings with
company management and product comparisons.
GRAY MONDAY On Monday, October 27, 1997, turmoil in Southeast Asian markets
triggered a one-day drop of 7 percent in the U.S. equity market.
QUANTITATIVE INVESTING An investment strategy that focuses on statistical
analysis and calculations of stock and economic data. Quantitative investing
often involves sophisticated computer modeling.
<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.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND 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 $245 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES, AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS.
DEAR SHAREHOLDERS,
If you're like most investors, you may be wondering if you should allow yourself
to breathe a sigh of relief as 1999 begins. After several months of generally
declining stock prices and extreme volatility, the U.S. stock market seems to
have rediscovered its resiliency. In the fourth quarter, the Standard & Poor's
500, an unmanaged index generally representative of the U.S. stock market,
bounced back into the 1200-point range, up approximately 20 percent from its
third-quarter low of 957. The blue chip Dow Jones Industrial Average enjoyed a
comparable rise. Investor confidence suddenly overtook the investor uncertainty
that had plagued the markets at summer's end. While financial volatility appears
to be continuing, the mood for investors definitely has improved.
To what can we attribute the change? Simply this -- the cumulative effect of
some good news, not the least of which was a long-awaited series of interest
rate reductions by the Federal Reserve Board. In September, the Fed reduced the
federal funds rate a modest quarter of a percentage point, however, this first
cut disappointed some investors who were expecting a more dramatic gesture. Two
weeks later, the Fed came back with an additional quarter of a percentage point
reduction. This was an unexpected cut that seemed to have a positive effect on
Wall Street. In November, a third rate cut of a quarter of a percentage point
also boosted investor confidence. Investors were further surprised by
better-than-expected corporate earnings reports early in the fourth quarter.
Finally, economic data regarding retail sales, employment and home sales
suggested continued economic growth and very little prospect of recession.
In many ways, 1998's market activity provides a study in how investor
perceptions can upstage economic realities. Certainly, the tumultuous lessons of
Russia and Southeast Asia renewed investors' awareness of risk in 1998, which
was an important wake-up call. At all times, investors must understand and
consider risk. But over the course of 1998, U.S. economic fundamentals have
essentially remained strong. In fact, inflation has remained low for the entire
year. Economic growth has been solid. Our consumer confidence remained fairly
high, although not quite as high as in 1997. The nation's budget surplus for
1998 came in at $60 billion, with another budget surplus expected for fiscal
1999.
Growth in the nation's gross domestic product (GDP), which represents the
total value of all goods and services produced within the U.S. economy, has
remained remarkably steady. GDP is expected to have grown at an annualized rate
of 3 percent for the second half of 1998 and is anticipated to hover around 2
percent to 2.5 percent for the first half of 1999. The consumer price index
(CPI) remains in a range of 1.5 percent to 2 percent.
While employment growth has slowed a bit, the slowdown in wage gains may
provide the Fed with an incentive to reduce interest rates even further. U.S.
corporate profits have generally been flat, so we may see a decrease in capital
spending. Banks appear to be only a little less willing to lend, so the threat
of a general credit crunch is minimal.
Investors may take comfort in the fact that the U.S. markets and economy have
withstood the test of 1998's tumultuous third quarter. Similarly, while certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Seven
leading industrial nations (G7) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as was expected. Indeed, Asian
turmoil has not affected U.S. trade as much as it has lowered import prices and
helped reduce global interest rates.
In Europe, the much anticipated Economic and Monetary Union (EMU) is on the
move, with a focus on more flexibility and growth potential for the region.
European equities may be the beneficiaries of increased spending, as governments
seek to foster growth and reduce unemployment.
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 (12/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 4.65 5.50 5.81 6.30
Prime rate(2) 7.75 8.50 8.50 8.25
Inflation rate(3)* 1.55 1.75 1.89 3.18
The U.S. dollar(4) -2.45 9.54 10.26 4.36
Capital goods orders(5)* 7.82 9.52 8.53 4.82
Industrial production(5)* 1.47 5.10 6.56 5.32
Employment growth(6)* 2.28 2.65 2.70 2.33
</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 November 30, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
If you're a long-term investor in today's short-term world, go ahead and
breathe that sigh of relief -- but be on your toes in 1999. It's going to be an
interesting year as the EMU emerges, the race for the next presidency heats up
and the year 2000 approaches. And, remember: Investors don't like uncertainty,
be it economic or political. More trauma in the White House, continuing disputes
with Iraq or any other hints of crisis could prompt a downward spike in our
markets in the short run. In the long run, the keys to investment performance
remain moderate growth, low inflation and limited taxation and regulation.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
The information contained in this piece has been taken from sources believed to
be reliable, but the accuracy of the information is not guaranteed. The opinions
and forecasts expressed are those of Dr. John E. Silvia as of January 4, 1999,
and may not actually come to pass. This information is subject to change. No
part of this material is intended as an investment recommendation.
4
<PAGE> 5
PERFORMANCE UPDATE
[FORTUNA PHOTO]
LEAD PORTFOLIO MANAGER PHILIP FORTUNA IS A MANAGING DIRECTOR OF SCUDDER KEMPER
INVESTMENTS, INC. HE JOINED THE ORGANIZATION IN 1986 AS AN INSTITUTIONAL
PORTFOLIO MANAGER. FORTUNA RECEIVED A BACHELOR'S DEGREE IN ECONOMICS FROM
CARNEGIE MELLON UNIVERSITY AND MASTER'S OF BUSINESS ADMINISTRATION FROM THE
UNIVERSITY OF CHICAGO.
FORTUNA IS SUPPORTED BY PORTFOLIO MANAGERS SHAHRAM TAJBAKHSH AND ROBERT
TYMOCZKO, BOTH MEMBERS OF SCUDDER KEMPER INVESTMENTS' QUANTITATIVE GROUP.
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. THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS WHEN
USED AS SALES LITERATURE.
BELOW, THE PORTFOLIO MANAGEMENT TEAM OF KEMPER QUANTITATIVE EQUITY FUND PROVIDES
AN OVERVIEW OF THE STOCK MARKET AND THE FUND'S PERFORMANCE DURING THE PAST YEAR.
THEY ALSO DISCUSS IMPORTANT INFORMATION CONCERNING THE FUND'S MERGER INTO KEMPER
BLUE CHIP FUND, SCHEDULED FOR FEBRUARY 5, 1999.
Q HOW DID THE FUND PERFORM DURING THE PAST FISCAL YEAR?
A For the one-year period ending November 30, 1998, Kemper Quantitative
Equity Fund earned 6.45 percent (Class A shares, unadjusted for any sales
charges). In a particularly challenging market environment, the fund
underperformed its benchmark and its peer group average. The Russell 1000 Growth
Index earned 28.66 percent; and the Lipper Growth category average was 14.32
percent.
We understand that the fund's performance may fall short of investor's
hopes. Shareholders can be assured that we are never happy when a fund lags its
peer group average and its benchmark by a considerable margin. But at this
juncture, we would encourage shareholders to keep a long-term perspective:
Historically, the long-term upward momentum of the stock market has included
pockets of turbulence along the way.
Q SINCE THE SEMIANNUAL REPORT IN MAY 1998, THERE HAVE BEEN SOME CHANGES TO
THE PORTFOLIO MANAGEMENT TEAM. COULD YOU INTRODUCE THE FUND'S CURRENT MANAGEMENT
TEAM?
A The core team continues to be led by Philip Fortuna, a managing director
at Scudder Kemper Investments. He's supported by Portfolio Managers Shahram
Tajbakhsh and Robert Tymoczko, both members of the firm's Quantitative Group.
Q YOU'VE NOTED THAT THE MARKETS WERE PARTICULARLY CHALLENGING. COULD YOU
RECAP SOME OF THE EVENTS THAT DROVE THE MARKETS, AND HOW INVESTORS RESPONDED?
A Certainly. We'll focus on three central themes: global uncertainty, a
flight to perceived quality, and the very narrow market climate that resulted.
Let's proceed chronologically, beginning at the start of the fiscal year in
December 1997.
As we entered the fiscal year, the markets were in the midst of euphoric
rebound. This rally had followed quickly on the heels of October 27, 1997's
"Gray Monday" market correction, when concerns about Southeast Asian economic
instability rippled through the U.S. markets, causing a one-day decline of 7
percent. Investors worried that decreased demand from Asia could hurt domestic
companies. However, stronger-than-anticipated earnings announcements and bailout
plans for the Asian nations propelled investors back to the stock market. A
euphoric climate ensued, and the fervor continued through the first quarter of
1998.
This euphoria was not rational, however, and it masked what was going on
in the market as a whole. Most importantly, the rally was not broad-based.
Investors were still very jittery about companies with any vulnerability to
Asia, and they flocked to an elite group of mega-cap, growth-oriented companies.
Investors pinned their hopes -- as
5
<PAGE> 6
PERFORMANCE UPDATE
well as an exorbitant amount of money -- on this handful of stocks, because of
the perceived stability they offered. Most stocks did not meet investors'
unrealistic criteria and were left out of this flight to perceived quality.
Small-cap and technology stocks suffered extreme pressure. So while market
benchmarks continued to rise, earnings disappointments continued to batter the
vast majority of stocks.
The Russian debt default in August sent panic throughout the global
markets, and triggered a broad-based sell-off. Although very few stocks avoided
the sell-off, financial stocks felt the brunt of investors' anxiety, because of
their perceived exposure to the Russian credit weakness. The August bear market
soon gave way to another rally; but again, the large-cap names enjoyed a
disproportionate amount of the market's favor. The prices of the large-cap
highfliers continued to skyrocket, while most other stocks continued to
flounder.
For most of the year, therefore, investors' flight to perceived quality
created a narrow market, driven by a small cluster of expensively valued growth
stocks. In this sort of environment, there were few stocks that met the criteria
of our growth-at-a-reasonable-price (GARP) discipline. However, instead of
abandoning our GARP strategy and chasing these stocks, we opted to maintain a
long-term focus, even at the cost of being sidelined for shorter-term gains.
Q NOW THAT YOU'VE SUMMARIZED SOME OF THE MARKET CONDITIONS THAT HINDERED
RELATIVE PERFORMANCE, WERE THERE FUND-SPECIFIC FACTORS THAT ALSO HINDERED GAINS?
A In hindsight, the fund would have been better served by less exposure to
technology stocks, particularly component-based companies such as semiconductor
manufacturer National Semiconductor. Other stocks that hurt the fund included
Teradyne, Applied Materials, and Linear Technology. Many of our stocks were not
able to shake the Asian flu as quickly as anticipated. We have pared back the
fund's stake in Applied Materials, and have eliminated the other three stocks
from the portfolio.
Energy-stock exposure also took a toll on the fund. Although we have since
sold them, Cooper-Cameron, Rowan Companies and Smith International impeded
gains. Most energy stocks have had an uphill climb this year: The price of crude
oil remains uncommonly low due to a variety of factors, including poor investor
sentiment, warm weather and decreased demand from Asia.
Some of the fund's apparel holdings, such as Jones Apparel and Tommy
Hilfiger, also clipped returns.
Q WHAT WORKED OUT WELL FOR THE FUND?
A The fund does include many stocks that have performed well in a variety of
industries. Telecommunications-giant MCI WorldCom, cruise operator Carnival and
health-care manufacturer Bergen-Brunswig were among stocks that earned good
returns. And while some technology stocks did hurt the fund, the portfolio also
included more successful technology companies in the personal computer (PC) and
networking subsectors. For instance, Cisco Systems, Sun Microsystems, and Compaq
Computer -- three high-quality technology firms -- all contributed gains.
Q HOW IS THE FUND CURRENTLY POSITIONED?
A In general terms, we are gravitating toward quality-oriented, large-cap,
domestic stocks. We've reduced the fund's technology position. Currently,
technology stocks make up 11.4 percent of the portfolio, down from more than
27.3 percent at the start of the fiscal year. It is our judgement that a modest
position in technology stocks is more market appropriate, and more consistent
with the fund's emphasis on reduced risk. Among other factors, the Asian
economic turmoil remains unresolved, and could continue to wreak havoc with the
less-resilient technology companies. Within the technology-stock arena, we
prefer hardware-, networking-, and PC-oriented names.
We have deployed much of the proceeds of the technology-stock sales into
financial services stocks. At the end of the fiscal year, the fund held 24.6
percent of its assets in financial services stocks, a considerable increase from
the 12.8 percent held at the start of the fiscal year. After the Russian debt
default drove down the prices of many financial services stocks, we found
attractive opportunities to establish and build positions.
The fund's allocation to health care stocks remains fairly steady at 15.5
percent. The portfolio includes quality companies such as Bergen-Brunswig, ALZA,
McKesson, and Schering-Plough Corp. We also continue to find many attractive
stocks within the consumer nondurable sector.
6
<PAGE> 7
PERFORMANCE UPDATE
Q SHORTLY AFTER THE FISCAL YEAR ENDED, THE BOARD VOTED TO REORGANIZE KEMPER
QUANTITATIVE EQUITY FUND INTO KEMPER BLUE CHIP FUND. WHAT DOES THIS MEAN FOR
SHAREHOLDERS?
A On February 5, 1999, the assets of Kemper Quantitative Equity Fund are
expected to be reorganized into Kemper Blue Chip Fund. Kemper Quantitative
Equity Fund will no longer exist after this date. Shareholders have three
options:
1. AUTOMATIC TRANSFER INTO KEMPER BLUE CHIP FUND. Unless they indicate
otherwise, shareholders will have their Kemper Quantitative Equity Fund
shares automatically exchanged for shares in Kemper Blue Chip Fund. This
would be a non-taxable event.
2. EXCHANGE INTO ANOTHER KEMPER FUND. Shareholders who do not wish to invest in
Kemper Blue Chip Fund can exchange their shares into the same class of
another Kemper fund at current net asset value. Shareholders who select the
exchange option would not have to pay a sales charge to enter the new fund.
However, the exchange would be a taxable event. Also, exchanges must be made
before market close on February 5, 1999.
3. LIQUIDATE THE ACCOUNT. Shareholders also have the option of liquidating their
account by contacting Kemper Shareholder Services or their financial
representative before market close on February 5, 1999. This would be a
taxable event.
Should shareholders have any questions about these choices, we encourage them
to contact their financial representative or Kemper's shareholder services
department.
Q WHAT ARE SOME OF THE POTENTIAL BENEFITS TO SHAREHOLDERS WHO OPT TO
TRANSFER THEIR ACCOUNTS INTO KEMPER BLUE CHIP FUND?
A Kemper Blue Chip Fund offers the benefit of economies of scale and
potentially lower expenses. Kemper Quantitative Equity currently holds $15
million in assets, compared to $610 million in Kemper Blue Chip Fund. Because
Kemper Blue Chip Fund makes larger volume trades, the fund often receives the
opportunity to make those transactions with lower associated costs. Think of the
"bulk discounts" you often see advertised in stores. In addition, certain fixed
costs are also spread among a larger pool of investors.
Kemper Blue Chip Fund seeks growth of capital and of income (Please read
the prospectus for Kemper Blue Chip Fund, which is included in your Kemper
Quantitative Equity Fund prospectus, for more information about Kemper Blue Chip
Fund.) Lead Portfolio Manager Tracy Chester, a managing director of Scudder
Kemper Investments, has more than 15 years of investment management experience.
In managing the fund, she utilizes the resources of the firm's large team of
economists, researchers, analysts and other portfolio managers.
Q AND, SHAREHOLDERS WHO ELECT TO TRANSFER THEIR ACCOUNTS INTO KEMPER BLUE
CHIP FUND WON'T HAVE TO PAY TAXES AS A RESULT OF THIS TRANSFER, RIGHT?
A Yes, that's correct. The transfer option is a non-taxable event.
Q KEMPER QUANTITATIVE EQUITY FUND SEEKS GROWTH OF CAPITAL AND THE REDUCTION
OF RISK. DOES KEMPER BLUE CHIP FUND PURSUE A DIFFERENT INVESTMENT OBJECTIVE?
A
Kemper Blue Chip Fund seeks growth of capital and of income. The fund
invests primarily in the stocks of "blue-chip" companies: large, established,
domestic companies with demonstrated histories. These types of stocks are
typically less volatile than smaller-cap stocks.
Q ARE THERE SIGNIFICANT DIFFERENCES IN THE MANAGEMENT STYLES OF KEMPER
QUANTITATIVE EQUITY FUND AND KEMPER BLUE CHIP FUND?
A Both funds follow research-intensive and disciplined stock selection
strategies. Just as we do, the portfolio management team of Kemper Blue Chip
Fund focuses on a variety of factors to find reasonably priced stocks with
strong growth prospects. Both management teams scrutinize stock price,
price-to-earnings and price-to-book ratios, earnings growth potential,
and other balance-sheet data. The two teams do use different frameworks for
organizing this data, however. The team of Kemper Quantitative Equity Fund
utilizes quantitative modeling techniques (see Terms To Know), while the
management team of Kemper Blue Chip Fund uses a fundamental investment approach
(see Terms To Know), which incorporates a rigorous analysis of quantitative
data.
Also, at Scudder Kemper Investments, we portfolio managers work in a
collaborative environment, sharing our best ideas with one another. For
instance, the Quantitative Group contributes research to fund managers across
the company.
7
<PAGE> 8
PERFORMANCE UPDATE
Q THANK YOU FOR PROVIDING US WITH AN OVERVIEW OF THE MARKETS AND THE FUND.
IN CLOSING, DO YOU BELIEVE THAT THE MARKET TURBULENCE WILL ABATE? OR, WILL
VOLATILITY CONTINUE?
A We expect stock market volatility to continue. The markets have corrected,
but these corrections have quickly given way to euphoric rallies. We are
concerned that these rebounds may be driven more by emotion and wishful thinking
than by a change in fundamental stock valuations. Also, there are many
indications that domestic growth is slowing. Global economic instability and
domestic political turmoil could continue to plague the stock market during the
next year.
That said, we still believe that domestic stocks offer compelling
opportunities for long-term investors. At every turn, volatility generates
opportunities for buying and selling stocks. Research, experience and discipline
serve as excellent tools for determining which opportunities should be seized.
We at Scudder Kemper Investments remain committed to utilizing our extensive
resources, discipline and experience to helping shareholders unlock the
potential of equity investing.
8
<PAGE> 9
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED NOVEMBER 30, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER QUANTITATIVE EQUITY FUND CLASS A 0.36% 12.81% (since 2/15/96)
- ----------------------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS B 2.50 13.41 (since 2/15/96)
- ----------------------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS C 5.65 14.39 (since 2/15/96)
- ----------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 2/15/96 to
11/30/98
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE RUSSELL 1000 GROWTH STANDARD & POOR'S 500
EQUITY FUND CLASS A1 INDEX+ INDEX++
-------------------- ------------------- ---------------------
<S> <C> <C> <C>
2/15/96 9425.00 10000.00 10000.00
9276.00 10143.00 10185.00
9683.00 10788.00 10642.00
10188.00 11177.00 10971.00
12/31/96 10883.00 11851.00 11885.00
10560.00 11914.00 12024.00
12226.00 14168.00 14334.00
13973.00 15232.00 15407.00
13171.00 15602.00 15849.00
12/31/97 14898.00 17687.00 18059.00
14750.00 18130.00 18655.00
12076.00 16260.00 16802.00
11/30/98 14003.00 18880.00 19269.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 2/15/96 to
11/30/98
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE RUSSELL 1000 GROWTH STANDARD & POOR'S 500
EQUITY FUND CLASS B1 INDEX+ INDEX++
-------------------- ------------------- ---------------------
<S> <C> <C> <C>
2/15/96 10000.00 10000.00 10000.00
9831.58 10143.00 10185.00
10231.60 10788.00 10642.00
10736.90 11177.00 10971.00
12/31/96 11452.80 11851.00 11885.00
11088.60 11914.00 12024.00
12813.50 14168.00 14334.00
14613.30 15232.00 15407.00
13763.30 15602.00 15849.00
12/31/97 15529.80 17687.00 18059.00
15339.70 18130.00 18655.00
12533.40 16260.00 16802.00
11/30/98 14212.00 18880.00 19269.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER QUANTITATIVE EQUITY FUND CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 2/15/96 to
11/30/98
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE RUSSELL 1000 GROWTH STANDARD & POOR'S 500
EQUITY FUND CLASS C1 INDEX+ INDEX++
-------------------- ------------------- ---------------------
<S> <C> <C> <C>
2/15/96 10000.00 10000.00 10000.00
9832.00 10143.00 10185.00
10242.00 10788.00 10642.00
10747.00 11177.00 10971.00
12/31/96 11463.00 11851.00 11885.00
11110.00 11914.00 12024.00
12835.00 14168.00 14334.00
14645.00 15232.00 15407.00
13784.00 15602.00 15849.00
12/31/97 15561.00 17687.00 18059.00
15383.00 18130.00 18655.00
12565.00 16260.00 16802.00
11/30/98 14555.00 18880.00 19269.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN ORIGINAL COST.
*Average annual total return and total return measure net investment income
and capital gain or loss from portfolio investments over the periods
specified, assuming reinvestment of all dividends and, where indicated,
adjustment for the maximum sales charge. The maximum sales charge for Class A
shares is 5.75%. For Class B shares the maximum contingent deferred sales
charge (CDSC) is 4%. Class C shares have no sales charge adjustment, but
redemptions within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Share classes invest in the same underlying
portfolio. Average annual total return reflects annualized change while total
return reflects aggregate change. During the periods noted, securities prices
fluctuated. For additional information, see the Prospectus and Statement of
Additional Information and the Financial Highlights at the end of this
report.
(1)PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE MAXIMUM
SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES CHARGE IN
EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. IN COMPARING KEMPER
QUANTITATIVE EQUITY FUND TO THE INDICES, YOU SHOULD ALSO NOTE THAT THE FUND'S
PERFORMANCE REFLECTS THE MAXIMUM 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. Investors cannot actually make investments in this
index.
++The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market. Source is TowersData. Investors
cannot actually make investments in this index.
9
<PAGE> 10
INDUSTRY SECTORS
A YEAR-TO-YEAR COMPARISON
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
REPRESENTED ON NOVEMBER 30, 1998, AND ON NOVEMBER 30, 1997.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE FUND ON KEMPER QUANTITATIVE FUND ON
11/30/98 11/30/97
<S> <C> <C>
FINANCE 27.70 12.80
CONSUMER NON-DURABLES 24.00 28.90
HEALTH CARE 16.10 17.80
TECHNOLOGY 11.90 27.30
UTILITIES 7.30 3.00
CAPITAL GOODS 5.20 6.10
ENERGY 3.70 _
CONSUMER DURABLES 2.20 1.40
BASIC INDUSTRIES 1.10 1.80
TRANSPORTATION - 0.90
</TABLE>
A COMPARISON WITH THE RUSSELL 1000 GROWTH INDEX*
DATA SHOWS THE PERCENTAGE OF THE COMMON STOCKS IN THE PORTFOLIO THAT EACH SECTOR
OF KEMPER QUANTITATIVE EQUITY FUND REPRESENTED ON NOVEMBER 30, 1998, COMPARED TO
THE INDUSTRY SECTORS THAT MAKE UP THE FUND'S BENCHMARK, THE RUSSELL 1000 GROWTH
INDEX.
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER QUANTITATIVE FUND ON KEMPER QUANTITATIVE FUND ON
11/30/98 11/30/97
<S> <C> <C>
FINANCE 27.70 7.10
CONSUMER NON-DURABLES 24.00 29.90
HEALTH CARE 16.10 21.90
TECHNOLOGY 11.90 26.40
UTILITIES 7.30 2.90
CAPITAL GOODS 5.20 8.90
ENERGY 3.70 0.80
CONSUMER DURABLES 2.20 0.60
BASIC INDUSTRIES 1.90 1.50
TRANSPORTATION - 0.10
</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.
10
<PAGE> 11
LARGEST HOLDINGS
THE FUND'S 10 LARGEST HOLDINGS*
Representing 34.1 percent of the fund's total net assets on November 30, 1998
<TABLE>
<CAPTION>
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Jefferson-Pilot Engaged in the writing of life, 4.2%
health and accident insurance and
annuities, and also in the
ownership and operation of radio
and television stations.
- --------------------------------------------------------------------------------------
2. MCI Worldcom One of the largest long distance 4.0%
telecommunications companies in the
world, offering domestic and
international voice, data and video
products and services.
- --------------------------------------------------------------------------------------
3. Cisco Systems The largest, most comprehensive 3.6%
supplier of 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. Texaco Engaged in the worldwide 3.6%
exploration for and production,
transportation, refining and
marketing of crude oil, natural gas
and petroleum products.
- --------------------------------------------------------------------------------------
5. Cigna A leading provider of insurance and 3.3%
related financial services
throughout the United States and
the world.
- --------------------------------------------------------------------------------------
6. Sun Microsystems A provider of high performance 3.3%
workstations, servers, and
networking software for the
engineering, scientific, commercial
and technical industries.
- --------------------------------------------------------------------------------------
7. Alza Engaged in the development of 3.2%
pharmaceutical products using
advanced drug delivery techniques
to add medical and economic value
to drug suppliers.
- --------------------------------------------------------------------------------------
8. Ameritech Global provider of 3.0%
telecommunications services,
including local and long distance
telephone, cellular, paging,
on-line, security monitoring and
cable television services.
- --------------------------------------------------------------------------------------
9. MERCK A leading research-driven 3.0%
pharmaceutical products and
services company. Merck discovers,
develops and manufactures a broad
range of products to improve human
and animal health.
- --------------------------------------------------------------------------------------
10. TORCHMARK Provider of insurance and financial 2.9%
services, including direct response
marketing for banks.
- --------------------------------------------------------------------------------------
</TABLE>
* The fund's holdings are subject to change.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER QUANTITATIVE EQUITY FUND
PORTFOLIO OF INVESTMENTS AT NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NUMBER
OF
COMMON STOCKS SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKING--2.0%
BankAmerica Corp. 1,200 $ 78
Citigroup, Inc. 2,000 100
Community First Bankshares 6,000 128
--------------------------------------------------------------------
306
- ---------------------------------------------------------------------------------------------------
BASIC INDUSTRIES--1.9%
ConAgra 4,000 126
Ecolab 5,000 155
--------------------------------------------------------------------
281
- ---------------------------------------------------------------------------------------------------
CAPITAL GOODS--5.0%
General Electric Co. 3,900 353
(a) Sunstrand Corp. 3,500 189
Tyco International, Ltd. 1,500 99
Waste Management, Inc. 2,537 109
--------------------------------------------------------------------
750
- ---------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--13.4%
(a) AutoZone 4,900 148
Carnival Corp. 9,000 310
Deluxe Corp. 2,000 69
Dillard Department Stores 5,700 196
(a) Jones Apparel Group 8,000 185
Lowes Companies 4,000 169
NIKE, Inc. 650 26
(a) Payless ShoeSource, Inc 2,000 98
Rite Aid Corp. 8,000 371
(a) Tommy Hilfiger Corp. 4,000 242
Walt Disney Co. 6,000 193
--------------------------------------------------------------------
2,007
- ---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--2.1%
HON Industries, Inc. 4,500 107
Magna International, Inc., "A" 1,500 100
Maytag Corp. 2,000 108
--------------------------------------------------------------------
315
- ---------------------------------------------------------------------------------------------------
CONSUMER STAPLES--9.7%
American Greetings Corp. 5,400 228
Avon Products 2,000 81
Dole Food Co. 2,000 63
Newell Co. 4,500 199
Procter & Gamble Co. 1,600 140
Universal Corp. 10,600 373
UST, Inc. 10,800 375
--------------------------------------------------------------------
1,459
- ---------------------------------------------------------------------------------------------------
ENERGY--3.6%
Texaco, Inc. 9,300 535
--------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
FINANCE--24.6%
Allstate Corp. 9,400 383
Ambac Financial Group, Inc. 2,500 153
American General Corp. 4,200 296
BB & T Corp. 3,000 111
Bear Stearns Cos. 3,000 126
CIGNA Corp. 6,300 490
Federal National Mortgage Association 3,600 262
ITT Hartford Group 1,400 77
Jefferson-Pilot Corp. 9,250 631
Lincoln National Corp. 3,500 293
Merrill Lynch & Co. 1,200 90
MGIC Investment Corp. 1,800 79
Morgan Stanley Dean Witter & Co. 2,500 174
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NUMBER
OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Torchmark Corp. 11,600 $ 441
Waddell & Reed Financial
Class "A" 660 16
Class "B" 2,840 66
--------------------------------------------------------------------
3,688
- ---------------------------------------------------------------------------------------------------
HEALTH CARE--15.5%
(a) ALZA Corp. 9,200 481
American Home Products Corp. 3,800 202
Astra AB, ADR 11,466 212
Bergen Brunswig Corp. 5,000 311
Cardinal Health, Inc. 3,135 215
First Health Group Corp. 1,100 18
McKesson Corp. 3,000 214
Merck & Co. 2,900 449
Schering-Plough Corp. 2,000 213
--------------------------------------------------------------------
2,315
- ---------------------------------------------------------------------------------------------------
TECHNOLOGY--11.4%
(a) Applied Materials, Inc. 1,800 70
Cadence Design Systems 4,500 127
(a) Cisco Systems 7,200 543
Compaq Computer Corp. 10,600 345
(a) Computer Sciences Corp. 2,400 137
(a) Sun Microsystems 6,600 489
--------------------------------------------------------------------
1,711
- ---------------------------------------------------------------------------------------------------
UTILITIES--7.1%
Ameritech Corp. 8,400 454
(a) MCI WorldCom, Inc. 10,200 602
--------------------------------------------------------------------
1,056
--------------------------------------------------------------------
TOTAL INVESTMENTS--96.3%
(Cost: $11,260) 14,423
--------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--3.7% 549
--------------------------------------------------------------------
NET ASSETS--100% $14,972
--------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $11,260,000 for federal income tax purposes
at November 30, 1998, the gross unrealized appreciation was $3,502,000, the
gross unrealized depreciation was $339,000 and the net unrealized appreciation
on investments was $3,163,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
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, 1998, the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the fiscal periods since 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, 1998, 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, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the fiscal
periods since 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 19, 1999
14
<PAGE> 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
ASSETS
- -------------------------------------------------
Investments, at value
(Cost: $11,260) $14,423
- -------------------------------------------------
Cash 565
- -------------------------------------------------
Receivable for:
Fund shares sold 13
- -------------------------------------------------
Dividends 19
- -------------------------------------------------
Reimbursement from Adviser 6
- -------------------------------------------------
TOTAL ASSETS 15,026
- -------------------------------------------------
- -------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------
Payable for:
Fund shares redeemed 5
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 23
- -------------------------------------------------
Trustees' fees and other 26
- -------------------------------------------------
Total liabilities 54
- -------------------------------------------------
NET ASSETS $14,972
- -------------------------------------------------
- -------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------
Paid-in capital $13,146
- -------------------------------------------------
Accumulated net realized loss on
investments (1,337)
- -------------------------------------------------
Net unrealized appreciation on
investments 3,163
- -------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $14,972
- -------------------------------------------------
- -------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------
CLASS A SHARES
Net asset value and redemption price
per share
($6,162 divided by 463 shares
outstanding) $13.31
- -------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10%
of net asset value or 5.75% of
offering price) $14.12
- -------------------------------------------------
CLASS B SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($5,154 divided by 397 shares
outstanding) $12.98
- -------------------------------------------------
CLASS C SHARES
Net asset value and redemption price
(subject to contingent deferred sales
charge) per share
($1,556 divided by 120 shares
outstanding) $13.02
- -------------------------------------------------
CLASS I SHARES
Net asset value and redemption price
per share
($2,100 divided by 157 shares
outstanding) $13.40
- -------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------
Dividends $ 137
- -------------------------------------------------
Interest 30
- -------------------------------------------------
Total investment income 167
- -------------------------------------------------
Expenses:
Management fee 82
- -------------------------------------------------
Distribution services fee 42
- -------------------------------------------------
Administrative services fee 28
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 66
- -------------------------------------------------
Professional fees 13
- -------------------------------------------------
Reports to shareholders 35
- -------------------------------------------------
Registration fees 3
- -------------------------------------------------
Trustees' fees and other 16
- -------------------------------------------------
Total expenses before expense
waiver 285
- -------------------------------------------------
Less expenses waived by investment
manager 44
- -------------------------------------------------
Total expenses after expense waiver 241
- -------------------------------------------------
NET INVESTMENT LOSS (74)
- -------------------------------------------------
- -------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
- -------------------------------------------------
Net realized loss on sales of
investments (1,490)
- -------------------------------------------------
Net realized gain from futures
transactions 153
- -------------------------------------------------
Net realized loss (1,337)
- -------------------------------------------------
Change in net unrealized appreciation
on investments 2,051
- -------------------------------------------------
Net gain on investments 714
- -------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 640
- -------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------
1998 1997
- ---------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (74) (46)
- ---------------------------------------------------------------------------------------
Net realized gain (loss) (1,337) 501
- ---------------------------------------------------------------------------------------
Change in net unrealized appreciation 2,051 680
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 640 1,135
- ---------------------------------------------------------------------------------------
Distribution from net realized gain (466) (78)
- ---------------------------------------------------------------------------------------
Net increase from capital share
transactions 3,581 5,564
- ---------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 3,755 6,621
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------
Beginning of year 11,217 4,596
- ---------------------------------------------------------------------------------------
END OF YEAR $14,972 11,217
- ---------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
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 which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq), for which there have been sales, are
valued at the most recent sale price reported. If
there are no such sales, the value is the most
recent bid quotation. Securities which are not
quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation
shall be used. Futures contracts are valued at the
most recent settlement price. All other securities
are valued at their fair market value as determined
in good faith by the Valuation Committee of the
Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis 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 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.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAXES. The fund's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
At November 30, 1998, the fund had a tax basis net
loss carryforward of approximately $1,337,000,
which may be applied against any realized net
taxable gains of each succeeding year until fully
utilized or it will expire during the period ended
2006.
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 monthly investment
management fee of 1/12 of the 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 $72,000 for the year
ended November 30, 1998 after a fee waiver by
Scudder Kemper.
In addition, Scudder Kemper has agreed to
temporarily absorb certain operating expenses of
the fund. Under this arrangement, Scudder Kemper
absorbed expenses of $34,000 for the year ended
November 30, 1998.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded in mid-December.
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>
Year ended November 30, 1998 $ 3,000 39,000
</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 separate Rule 12b-1 plans for
the Class B and Class C shares.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
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 (NET COMMISSIONS AND
OF WAIVER) AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
------------------- ----------------------
<S> <C> <C>
Year ended November 30, 1998 $ 41,000 87,000
</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
(NET OF WAIVER) ASF PAID BY
BY THE FUND TO KDI KDI TO FIRMS
------------------ ------------
<S> <C> <C>
Year ended November 30, 1998 $ 1,000 20,000
</TABLE>
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 $48,000
for the year ended November 30, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. During the year ended November 30,
1998, the fund made no payments to its officers and
incurred trustees' fees of $11,000 to independent
trustees.
PROPOSED MERGER. The Board of Trustees has approved
a reorganization of the fund with Kemper Blue Chip
Fund pursuant to which fund assets and liabilities
will be transferred to Kemper Blue Chip Fund in
exchange for Kemper Blue Chip Fund shares, which
will be distributed to fund shareholders. Fund
shareholders approved the reorganization at a
shareholder meeting held in mid-December 1998 and
the reorganization is expected to close in early
February 1999.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended November 30, 1998, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $12,260
Proceeds from sales 9,610
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
-------------- --------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 261 $3,536 140 $1,750
-----------------------------------------------------------------------
Class B 225 2,924 137 1,715
-----------------------------------------------------------------------
Class C 31 398 55 647
-----------------------------------------------------------------------
Class I 87 1,172 450 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 (104) (1,371) (11) (147)
-----------------------------------------------------------------------
Class B (46) (580) (27) (341)
-----------------------------------------------------------------------
Class C (15) (197) (36) (425)
-----------------------------------------------------------------------
Class I (203) (2,759) (265) (3,156)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
CONVERSION OF SHARES
-----------------------------------------------------------------------
Class A 4 49 1 12
-----------------------------------------------------------------------
Class B (4) (49) (1) (12)
-----------------------------------------------------------------------
NET INCREASE
FROM CAPITAL
SHARE TRANSACTIONS $3,581 $5,564
-----------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------
CLASS A
-----------------------------
YEAR ENDED FEBRUARY 15
NOVEMBER 30, TO
-------------- NOVEMBER 30,
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------
Net asset value, beginning of period $13.03 11.12 9.50
- -----------------------------------------------------------------------
Income from investment operations:
Net investment loss (.02) (.03) --
- -----------------------------------------------------------------------
Net realized and unrealized gain .83 2.13 1.62
- -----------------------------------------------------------------------
Total from investment operations .81 2.10 1.62
- -----------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 --
- -----------------------------------------------------------------------
Net asset value, end of period $13.31 13.03 11.12
- -----------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.53% 19.25 17.05
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 1.48% 1.45 1.48
- -----------------------------------------------------------------------
Net investment loss (.30)% (.36) (.16)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 1.80% 1.45 2.26
- -----------------------------------------------------------------------
Net investment loss (.62)% (.36) (.94)
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
CLASS B
-----------------------------
YEAR ENDED FEBRUARY 15
NOVEMBER 30, TO
-------------- NOVEMBER 30,
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------
Net asset value, beginning of period $12.84 11.04 9.50
- -----------------------------------------------------------------------
Income from investment operations:
Net investment loss (.06) (.08) (.04)
- -----------------------------------------------------------------------
Net realized and unrealized gain .73 2.07 1.58
- -----------------------------------------------------------------------
Total from investment operations .67 1.99 1.54
- -----------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 --
- -----------------------------------------------------------------------
Net asset value, end of period $12.98 12.84 11.04
- -----------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.50% 18.37 16.21
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 2.29% 2.27 2.32
- -----------------------------------------------------------------------
Net investment loss (1.11)% (1.18) (1.00)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 2.78% 2.27 3.15
- -----------------------------------------------------------------------
Net investment loss (1.60)% (1.18) (1.83)
- -----------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------
CLASS C
-----------------------------
YEAR ENDED FEBRUARY 15
NOVEMBER 30, TO
-------------- NOVEMBER 30,
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------
Net asset value, beginning of period $12.86 11.05 9.50
- -----------------------------------------------------------------------
Income from investment operations:
Net investment loss (.10) (.11) (.04)
- -----------------------------------------------------------------------
Net realized and unrealized gain .79 2.11 1.59
- -----------------------------------------------------------------------
Total from investment operations .69 2.00 1.55
- -----------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 --
- -----------------------------------------------------------------------
Net asset value, end of period $13.02 12.86 11.05
- -----------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.65% 18.45 16.32
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 2.17% 2.16 2.33
- -----------------------------------------------------------------------
Net investment loss (.99)% (1.07) (1.01)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 2.45% 2.16 3.12
- -----------------------------------------------------------------------
Net investment loss (1.27)% (1.07) (1.80)
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
CLASS I
-----------------------------
YEAR ENDED SEPTEMBER 9
NOVEMBER 30, TO
-------------- NOVEMBER 30,
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------
Net asset value, beginning of period $13.08 11.14 9.67
- -----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .01 (.01) --
- -----------------------------------------------------------------------
Net realized and unrealized gain .84 2.14 1.47
- -----------------------------------------------------------------------
Total from investment operations .85 2.13 1.47
- -----------------------------------------------------------------------
Less distribution from net realized
gain .53 .19 --
- -----------------------------------------------------------------------
Net asset value, end of period $13.40 13.08 11.14
- -----------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.82% 19.48 15.20
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 1.09% 1.26 1.08
- -----------------------------------------------------------------------
Net investment income (loss) .09% (.17) (.05)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
OTHER RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------
Expenses 1.16% 1.26 2.23
- -----------------------------------------------------------------------
Net investment income (loss) .02% (.17) (1.20)
- -----------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
YEAR ENDED FEBRUARY 15
NOVEMBER 30, TO
---------------- NOVEMBER 30,
1998 1997 1996
- --------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $14,972 11,217 4,596
- --------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 72% 84 72
- --------------------------------------------------------------------------------
NOTES: Total return does not reflect the effect of any sales charges. Scudder
Kemper Investments, Inc. agreed to temporarily waive a portion of its management
fee and absorb certain operating expenses of the fund for the year ended
November 30, 1998 and the period ended November 30, 1996. The Other Ratios to
Average Net Assets are computed without this expense waiver or absorption.
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
The fund paid a distribution of $.20 per share from net long-term capital gains
during the year ended November 30, 1998, of which 25% represents 20% rate gains.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
LEWIS A. BURNHAM PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
DONALD L. DUNAWAY CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
ROBERT B. HOFFMAN ELIZABETH C. WERTH
Trustee PHILIP FORTUNA Assistant Secretary
Vice President
DONALD R. JONES BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Trustee and Vice President KATHRYN L. QUIRK
Vice President
SHIRLEY D. PETERSON
Trustee CORNELIA SMALL
Vice President
WILLIAM P. SOMMERS
Trustee
- --------------------------------------------------------------------------------
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 Avenue
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
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-2 (1/27/99) 1064390
