<PAGE> 1
DEAR KILICO POLICY OWNER:
- - ---------------------------------------
GENERAL ECONOMIC OVERVIEW
The momentum of the 1994 economic expansion produced some of the most positive
economic reports we've seen in years. Income, consumer spending, construction
spending and hiring all were at high levels as we closed the pages on the year.
Such growth, however, continues to concern both investors and the government as
we know from experience that rapid growth can lead to inflation. It was almost a
year ago that the Federal Reserve Board initiated its series of rate hikes
intended to cool down the economy. To date, only a few sectors, such as housing
and automobile sales, have slowed in response to the higher rates. We believe
additional rate increases are inevitable.
Several measures indicate the strength and stability of today's economy compared
to the early 1990s: consumers are not in as much debt as they were just three or
four years ago, nonfinancial corporations have a much lower level of debt
relative to their cash flow, and the federal budget deficit relative to the
gross domestic product (GDP) is lower than it was earlier in the decade.
As we begin a new year, a slowdown in housing and auto sales may be offset
somewhat by accelerated activity in other sectors of the economy. For example,
while it's true that manufacturers today do not have the same incentive they
once had to accumulate inventories, we expect inventories to continue to build.
Products are needed both in this country and overseas, where many economies are
just now emerging from recession. Nonresidential construction may also start to
pick up.
OUR ECONOMIC OUTLOOK
While we believe that higher interest rates will help economic growth decline to
closer to 3 percent, this will probably still be too much growth for the Federal
Reserve. As a consequence, we expect the Fed to continue to raise rates until
growth slows to 2.5 percent to 2.75 percent. Alan Greenspan, chairman of the
Federal Reserve, has made it quite clear that this is the level of growth the
Fed associates with moderate inflation. Long-term rates may rise but not to the
same extent as short-term rates.
Inflation will likely increase but it should range between 3.5 percent and 4.0
percent in the next six months. This is based on our belief that the Federal
Reserve's aggressiveness in raising rates stopped inflation before it could get
out of control. The Federal Reserve's commitment to fighting inflation should be
a long-term positive for financial assets.
We would now like to direct your attention to the performance of the
subaccounts, which are investment options available through your annuity
contract. Please take a moment to review the market and performance summaries
prepared by the portfolio managers.
MONEY MARKET PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ------------------------------------------------------------------
<TABLE>
<CAPTION>
ADVANTAGE III PASSPORT
-------------------- -----------------------
PERIODIC FLEXIBLE ACCOUNT I ACCOUNT II
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
12 Months Ended
12/31/94 2.62% 2.93% 2.67% 3.95%
- - -------------------------------------------------------------
</TABLE>
- - -------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENT NET YIELDS++
For Week Ended 12/31/94
CURRENT COMPOUNDED
ANNUALIZED YIELD EFFECTIVE YIELD
--------------- ---------------
<S> <C> <C>
ADVANTAGE III 4.22% 4.31%
PASSPORT 4.31% 4.41%
</TABLE>
- - ---------------------------------------------------------
The current annualized yield for Kemper Advantage III was 4.11% for the week
ended January 31, 1995; the compounded effective yield was 4.19%. For Kemper
Passport, net yields were 4.21% and 4.30%, respectively.
After six interest rate increases by the Federal Reserve Board in 1994, the
economy has yet to show significant signs of slowing. It appears the Fed will
continue to raise interest rates until the economic growth rate falls in their
target range of 2.5% to 2.75%. This rising rate environment has caused serious
volatility in the long-term fixed income and equity markets. However, the
short-term money markets have been positively impacted with higher yields.
The KINF Money Market Portfolio invests in high-quality short-term investments
which allows it to take advantage of the current interest rate environment. When
interest rates are rising, the KINF Money Market Portfolio's yield should
quickly increase due to reinvestment of its short maturity investments at
current higher rate levels.
1
<PAGE> 2
Going forward, we anticipate rates will remain in an upward trend. This will
reward patient investors with higher income. As always, we remain committed to
demanding standards of credit quality and to preserving the integrity of your
investment.
Frank Rachwalski
Portfolio Manager January 17, 1995
<TABLE>
<CAPTION>
TOTAL RETURN PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ---------------------------------------------------------
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
12 Months Ended
12/31/94 (10.66)% (10.39)% (10.61)%
</TABLE>
- - ---------------------------------------------------------
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
ADVANTAGE III PASSPORT
- - ----------------------------- ----------------------------
<S> <C> <C> <C>
1 YEAR (18.45)% 1 YEAR (18.31)%
INCEPTION TO
5 YEAR 4.70 % DATE (3.67)%
10 YEAR 9.45 %
INCEPTION TO
DATE 9.97 %
</TABLE>
- - ---------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 1/6/92 for Passport and 3/5/82 for Advantage III through 12/31/94.
The 12 months ended December 1994 were characterized by rapid economic growth,
with expansion occurring faster than the Fed's perceived optimal long-term
growth rate of 2.5% to 2.75%. In response, the Fed repeatedly tightened monetary
policy in an attempt to cool the economy down. In addition, global industrial
commodities experienced sharp inflation while oil prices moderated. U.S.
capacity utilization and employment increased, and worldwide recovery
accelerated.
Rising interest rates usually result in a poor market for both stocks and bonds
which, in fact, occurred in 1994. Bond prices started their decline in October
1993 and stock prices followed, with a lag, after the Federal Reserve raised
short-term interest rates in early February 1994. Stocks came back somewhat
after second- and third-quarter earnings met and, in some cases, exceeded
expectations. However, although we avoided Treasuries during their price
decline, the KINF Total Return Portfolio was hurt by the volatility of certain
stocks.
To help reduce volatility, increased investments were made in defensive growth
stocks, such as food, drugs, household products and beverages, as well as
engineering and construction, banks and electrical equipment. As 1994 ended, we
reduced the total equity holdings in favor of a greater investment in U.S.
Treasuries, a market expected to perform better in 1995. On the other hand, in
December we began to reduce the KINF Total Return Portfolio's holdings of
high-yield bonds as rising interest rates raised the specter of credit risk.
Finally, the KINF Total Return Portfolio closed the year with more than 10% in
cash and cash equivalents.
We expect the stock market to be especially vulnerable in the first few months
of 1995. As interest rates continue to rise, corporations can be expected to
have more difficulty meeting their earnings estimates. However, this is the
environment in which growth stocks (which are characterized by their ability to
consistently increase earnings) tend to outperform the market. Stock selection
for the KINF Total Return Portfolio in the near-term will center on defensive
growth stocks such as those in the consumer nondurable industries. Cash also is
expected to remain at a relatively high level.
J. Patrick Beimford, Jr., Robert S. Cessine, Dennis H. Ferro, Gordon K. Johns,
Gary A. Langbaum, Michael A. McNamara and Harry E. Resis, Jr.
Portfolio Management Team January 27, 1995
2
<PAGE> 3
<TABLE>
<CAPTION>
HIGH YIELD PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ------------------------------------------------------------
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
12 Months Ended
12/31/94 (3.50)% (3.21)% (3.45)%
</TABLE>
- - -----------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
ADVANTAGE III PASSPORT
- - ------------------------------ ---------------------------
<S> <C> <C> <C>
1 YEAR (11.04)% 1 YEAR (11.20)%
INCEPTION TO
5 YEAR 8.94 % DATE 6.31 %
10 YEAR 9.84 %
INCEPTION TO DATE 11.60 %
</TABLE>
- - ---------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 1/6/92 for Passport and 3/5/82 for Advantage III through 12/31/94.
In what has been a difficult year for all segments of the fixed income market,
high yield bonds outperformed intermediate Treasuries. The Salomon Brothers High
Yield Market Index* dropped 1.24%, while the Salomon Brothers Intermediate
Treasury Index** fell 5.74% for the same twelve-month period. This
outperformance is attributable to the higher level of income offered on high
yield bonds and by the perception that an improving economy decreases the credit
risk of high yield bonds. The high yield market outperformed the stock market,
which rose 1.20% during 1994, as measured by the S&P 500***.
For most of the year, about two-thirds of the portfolio's corporate bond
holdings were in cyclical companies. These are companies whose revenues are
closely tied to the economy and because the economy continued to show strength,
these holdings performed well. Recently, we began to position the KINF High
Yield Portfolio for an eventual economic slowdown. For instance, we shifted some
of the portfolio's holdings toward consumer nondurables and services, which tend
to outperform in the latter stages of economic recovery.
In 1995, we look for the high yield market to perform reasonably well, with most
of the return from income rather than price appreciation. The Fed's tightening
during 1994 should slow the economy in 1995. This poses a less favorable
scenario for high yield issuers than in recent years and limits the upside for
prices of high yield bonds. On the other hand, the Fed's actions should be
successful in restraining inflation--a positive environment for fixed-income
securities such as high yield bonds.
Michael A. McNamara
Harry E. Resis, Jr.
Co-Portfolio Managers January 25, 1995
<TABLE>
<CAPTION>
EQUITY PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ---------------------------------------------------------
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
12 Months Ended
12/31/94 (5.25)% (4.97)% (5.20)%
</TABLE>
- - ---------------------------------------------------------
- - ---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
<TABLE>
<CAPTION>
ADVANTAGE III PASSPORT
- - ----------------------------- ----------------------------
<S> <C> <C> <C>
1 YEAR (12.73)% 1 YEAR (12.93)%
INCEPTION TO
5 YEAR 9.89 % DATE (.10)%
10 YEAR 10.69 %
INCEPTION TO DATE 10.85 %
</TABLE>
- - ---------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 1/6/92 for Passport and 12/9/83 for Advantage III through 12/31/94.
Economic growth continued to outpace projections during 1994, prompting a series
of interest rate hikes by the Federal Reserve Board. These increases raised
concerns regarding earnings momentum, particularly for companies in interest
rate sensitive industries such as housing and automobile manufacturing. In
addition, investors worried that higher interest rates signaled higher
inflation. This environment resulted in a difficult year in both the stock and
bond markets.
The KINF Equity Portfolio's technology, telecommunications and healthcare stocks
enjoyed generally strong performance throughout the year. Consumer-oriented
product companies such as Proctor & Gamble and Coca-Cola experienced
accelerating growth in both the U.S. and international markets. Gains in these
sectors were offset, however, by declines in a number of more
economically-sensitive holdings. Gaming stocks declined in response to a
proposed 4% federal gaming tax and the failure of
3
<PAGE> 4
legislated gaming in Missouri. This position was reduced substantially early in
the year. Semiconductors declined late in the year after several months of
strong performance, and retail stocks stumbled as holiday sales generally failed
to meet optimistic projections.
With economic growth continuing to exceed the Federal Reserve's target range of
2.5% to 2.75%, we anticipate additional interest rate hikes during the first
half of 1995. Until economic growth slows to a more moderate rate and interest
rates stabilize, we will continue to manage the KINF Equity Portfolio
defensively while identifying opportunities in undervalued domestic stocks and
companies that stand to benefit from strong international exposure.
C. Beth Cotner
Portfolio Manager January 17, 1995
GOVERNMENT SECURITIES PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - -------------------------------------------------------------
<TABLE>
<CAPTION>
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
12 Months Ended
12/31/94 (3.99)% (3.70)% (3.94)%
</TABLE>
- - ---------------------------------------------------------
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
ADVANTAGE III PASSPORT
- - ------------------------ ------------------------
<S> <C> <C> <C>
1 YEAR (11.34)% 1 YEAR (11.82)%
5 YEAR 3.91 % INCEPTION TO
INCEPTION TO DATE (1.09)%
DATE 3.98 %
</TABLE>
- - ---------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 1/6/92 for Passport and 11/6/89 for Advantage III through 12/31/94.
A strengthening economy and the Federal Reserve Board's monetary policy
tightening of 2.50% since early February of 1994 caused both short-term and
long-term interest rates to rise dramatically during 1994. This resulted in a
very difficult year for the U.S. fixed income market. Interest rates declined
from their highs during the last quarter as market participants took solace in
the Fed's continued aggressive stance toward inflation. The Fed tightened
interest rates an additional 75 basis points in November.
The KINF Government Securities Portfolio's defensive positioning, by means of
maintaining a short average portfolio life, limited it's ability to benefit from
the decline in rates late in the year.
Our bias for interest rates is for them to continue to rise slightly further,
particularly in the short end of the Treasury yield curve. However, our outlook
for the KINF Government Securities Portfolio is positive. Mortgages should
continue to perform well in a rising rate environment. Also, our outlook is
constructive because of what has transpired this year. The KINF Government
Securities Portfolio is generating more income because we have reinvested at
higher rates than those that prevailed eight months ago. Further, the technicals
of the mortgage market remain extremely positive--continued demand against a
background of less supply.
J. Patrick Beimford, Jr.
Portfolio Manager January 24, 1995
<TABLE>
<CAPTION>
INTERNATIONAL PERCENT CHANGE IN
SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ---------------------------------------------------------
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
12 Months Ended
12/31/94 (4.82)% (4.54)% (4.78)%
</TABLE>
- - ---------------------------------------------------------
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
ADVANTAGE III PASSPORT
- - ----------------------------- ------------------------------
<S> <C> <C> <C>
1 YEAR (11.76)% 1 YEAR (11.92)%
INCEPTION TO
INCEPTION TO DATE 4.31 % DATE 4.39 %
</TABLE>
- - ---------------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 1/6/92 through 12/31/94.
This past year was a difficult one for many of the world's equity markets.
However, with the dollar's generally weak performance, foreign equity markets
provided attractive returns and good diversification for the U.S.-based
investor. Regionally, Europe--and notably Germany, Italy and the
Netherlands--provided surprisingly good returns in spite of weak bond markets.
Southeast Asia and Latin America were both stars during most of the year--it
might be more accurate to call them "shooting stars" as performance was
extremely volatile.
4
<PAGE> 5
As 1994 drew to a close, however, we made several significant changes to our
level of investment in various countries. Fortunately, our doubts about the
fiscal environment and generally accepted interest rate assumptions used in
corporate earnings forecasts caused us to reduce our Mexican holdings well
before the fallout from December's devaluation of the Mexican peso. Considering
the volatility of both markets, we have curtailed most of our investment in both
Latin America and Southeast Asia. On the other hand, we've started to increase
our investment in Japanese stocks as that country's economic expansion is
encouraging.
While different parts of the world are at different points in the economic
cycle, most economies outside the U.S. have significant expansion opportunity
ahead of them. Going forward, we expect to favor the telecommunications and
pharmaceutical industries, and specifically companies capable of benefiting from
high levels of export demand.
Dennis H. Ferro
Portfolio Manager January 24, 1995
<TABLE>
<CAPTION>
SMALL CAPITALIZATION PERCENT CHANGE IN
EQUITY SUBACCOUNT ACCUMULATION UNIT VALUE+
- - ------------------------------------------------------------
ADVANTAGE III PASSPORT
--------------------- --------
PERIODIC FLEXIBLE
-------- --------
<S> <C> <C> <C>
Inception date
5/2/94-12/31/94 3.06% 3.26% 3.09%
- - ---------------------------------------------------------
- - ---------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN PERFORMANCE++
For Periods Ended 12/31/94
ADVANTAGE III PASSPORT
- - ----------------------------- ---------------------------
<S> <C>
INCEPTION TO
INCEPTION TO DATE (5.09)% DATE (4.98)%
</TABLE>
- - ---------------------------------------------------------
Average annual total return performance reflects standardized assumptions
including deduction of surrender charges from the Contract initial offering date
of 5/2/94 through 12/31/94.
The most significant factor for investors in 1994 was the Federal Reserve
Board's succession of interest rate hikes aimed at slowing economic growth. The
impact of this action was threefold. As interest rates moved up, price/earnings
multiples--a measure of how much investors are willing to pay for a company's
earnings stream--declined. Growth companies, especially smaller firms, were hit
the hardest. Also, fixed-income investments became more attractive as current
yields moved higher. This created more competition for investor's dollars.
Finally, as short-term rates continued to rise, the longevity of the economic
recovery was called into question.
Although the KINF Small Capitalization Equity Portfolio's positions in
technology, telecommunications and healthcare generally posted strong positive
returns, other interest rate sensitive holdings such as financial and
housing-related stocks suffered significant declines. Gaming stocks suffered
price declines in response to a proposed federal gaming tax and investors became
concerned that too many facilities would outstrip demand. Later in the year,
semiconductors declined after several months of strong performance, and retail
stocks stumbled as holiday sales generally failed to meet optimistic
projections.
During the third quarter, we began to realign the KINF Small Capitalization
Equity Portfolio by eliminating small, illiquid holdings and companies with high
market capitalizations. Several of the larger positions were also scaled back.
Anticipating additional market volatility and at least one more interest rate
hike in early 1995, we plan to maintain a more defensive stance until economic
growth slows to more moderate levels and interest rates stabilize. Once the
Federal Reserve is convinced that economic growth is slowing and inflation is
under control, the market--especially small company stocks--should respond
favorably.
Karen A. Hussey
Portfolio Manager January 17, 1995
5
<PAGE> 6
We appreciate your support as a Kemper policy owner and look forward to
continuing to serve your insurance needs.
Sincerely,
/s/ J. B. Scott
John B. Scott
Chairman, President and
Chief Executive Officer
Kemper Investors Life
Insurance Company
February 10, 1995
[PHOTO]
+ The percent change in accumulation unit value is net of mortality and expense
risk charges. No adjustment has been made for the annual records maintenance
charge or surrender charges. No withdrawals are assumed.
++ On November 3, 1989, the four KILICO Separate Accounts of Kemper ADVANTAGE
III were restructured into four subaccounts of KILICO Variable Annuity
Separate Account (KVASA), which invests in corresponding portfolios of the
Kemper Investors Fund. A new Government Securities Subaccount was also
created for investing in the Government Securities Portfolio of KINF.
Because the KILICO Separate Accounts had significantly greater assets and a
longer history of operations than the KINF portfolios, this financial and
statistical information reflects the experience of the predecessor KILICO
Separate Accounts where appropriate.
In determining performance for Kemper ADVANTAGE III and Kemper PASSPORT, the
fund expenses including management fees of .50% for the Money Market
Portfolio, .55% for the Government Securities and Total Return Portfolios,
.60% for the Equity and High Yield Portfolios, .65% for the Small
Capitalization Equity Portfolio and .75% for the International Portfolio are
deducted. In addition, Kemper ADVANTAGE III assesses a daily asset charge,
which amounts to 1.30% per annum for mortality and expense risk and
administrative costs, and a prorated portion of the $36 records maintenance
charge (assessed quarterly). Kemper PASSPORT assesses a daily asset charge,
which amounts to 1.25% per annum for mortality and expense risk and
administrative costs, and a prorated portion of the annual records
maintenance charge of $30, which is assessed during the accumulation period
against each owner's account at the end of each certificate year, on
surrender of a certificate and on surrender upon annuitization.
A $1,000 payment is used to calculate average annual total return. Average
annual total return measures the change in the value of an investment in the
Subaccount. Average annual total return reflects annualized change, and
figures are net of all fees and charges including early withdrawal and
surrender charges as follows: Kemper ADVANTAGE III Money Market, Total
Return, Equity, Government Securities and High Yield Subaccounts one year
(6%) and five year (2%); Kemper ADVANTAGE III International Subaccount one
year (6%) and lifetime (6%); Kemper ADVANTAGE III Small Capitalization Equity
Subaccount lifetime (6%); Kemper PASSPORT Money Market, Total Return, Equity,
Government Securities and High Yield Subaccounts one year (6%) and five year
(4%); Kemper PASSPORT International Subaccount one year (6%) and lifetime
(5%); and Kemper PASSPORT Small Capitalization Equity Subaccount lifetime
(6%).
The Money Market Subaccount's current annualized yield is the seven-day
annualized net investment income per share as of date specified. Gains or
losses are not included. The effective yield reflects compounding of income.
There can be no assurance that the Money Market Subaccount will be able to
maintain a stable net asset value of $1.00 per share. The Subaccount is not
insured or guaranteed by the U.S. Government.
The returns are based upon historical results and are not representative of
future results. Factors affecting performance include portfolio management;
general market, economic and fiscal conditions; and operating expenses.
Investment return and principal value will fluctuate so that unit values,
when redeemed, may be worth more or less than their original cost. With
respect to the High Yield Subaccount, investment in lower-rated and non-rated
securities present greater risk of loss to principal and interest than
higher-rated securities. With respect to the International Subaccount, there
are special risk considerations associated with investing in non-U.S.
companies, including fluctuating foreign exchange rates, foreign governmental
regulations and differing degrees of liquidity that may affect portfolio
securities. With respect to the Small Capitalization Equity Subaccount,
investment in small companies presents greater risk than investment in
larger, more established companies.
Non-qualified Kemper ADVANTAGE III plans issued in 1984 and prior years
realized a corporate tax on realized gains and losses that was in effect at
that time. Under current law, this no longer applies.
* Salomon Brothers High Yield Market Index includes cash-pay and
deferred-interest bonds with remaining maturities of at least one year.
Source is Salomon Brothers Inc.
** Salomon Brothers Intermediate Treasury Bond Index is based on Treasury Bonds
with an average life of 7-10 years. Source is Salomon Brothers Inc.
*** Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market.
6
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
KEMPER INVESTORS LIFE INSURANCE COMPANY:
We have audited the accompanying combined statement of assets and liabilities
and contract owners' equity of the KILICO Variable Annuity Separate Account as
of December 31, 1994, and the related combined statement of operations for the
year then ended, and the combined statements of changes in contract owners'
equity for the years ended December 31, 1994 and 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the KILICO
Variable Annuity Separate Account as of December 31, 1994, and the combined
results of its operations for the year then ended, and the combined changes in
its contract owners' equity for the years ended December 31, 1994 and 1993, in
conformity with generally accepted accounting principles.
[SIG.]
Chicago, Illinois
February 13, 1995
7
<PAGE> 8
KILICO VARIABLE ANNUITY SEPARATE ACCOUNT
COMBINED STATEMENT OF ASSETS AND LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
Small
Money Money Total High Government Capitalization
Market Market Return Yield Equity Securities International Equity
Combined Subaccount Subaccount #2 Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------- ---------- ------------- ---------- ---------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments,
at
current
value......... $1,432,488 78,837 3,676 584,469 217,698 320,586 91,604 122,709 12,909
Dividends
and
other
receivables... 301 216 9 23 10 21 4 6 12
-------- ------- ----- ------- ------- ------- ------ ------- ------
Total
assets......... 1,432,789 79,053 3,685 584,492 217,708 320,607 91,608 122,715 12,921
-------- ------- ----- ------- ------- ------- ------ ------- ------
LIABILITIES AND
CONTRACT
OWNERS' EQUITY
Liabilities:
Mortality
and
expense
risk
and
administrative
charges...... 1,525 99 -- 627 220 337 99 131 12
Other.......... 110 4 -- -- -- -- -- -- 106
-------- ------- ----- ------- ------- ------- ------ ------- ------
Total
liabilities.. 1,635 103 -- 627 220 337 99 131 118
-------- ------- ----- ------- ------- ------- ------ ------- ------
Contract
owners'
equity........ $1,431,154 78,950 3,685 583,865 217,488 320,270 91,509 122,584 12,803
========== ======== ===== ======== ======= ======= ====== ======= ======
ANALYSIS OF
CONTRACT
OWNERS'
EQUITY
Excess of
proceeds
from
units
sold
over
payments
for
units
redeemed........ $ 971,895 17,494 3,265 394,080 103,120 243,967 79,529 117,687 12,753
Accumulated
net
investment
income
(loss)........ 378,073 61,456 420 159,772 122,056 19,327 16,110 (907) (161)
Accumulated
net
realized
gain
(loss)
on sales
of
investments... 72,532 -- -- 44,173 (4,720) 29,760 1,041 2,355 (77)
Unrealized
appreciation
(depreciation)
of
investments... 8,654 -- -- (14,160) (2,968) 27,216 (5,171) 3,449 288
-------- ------- ----- ------- ------- ------- ------ ------- ------
Contract
owners'
equity........ $1,431,154 78,950 3,685 583,865 217,488 320,270 91,509 122,584 12,803
========== ======== ===== ======== ======= ======= ====== ======= ======
</TABLE>
See accompanying notes to combined financial statements.
8
<PAGE> 9
KILICO VARIABLE ANNUITY SEPARATE ACCOUNT
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
Small
Money Money Total Government Capitalization
Market Market Return High Yield Equity Securities International Equity
Combined Subaccount Subaccount #2 Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount(a)
--------- ---------- -------------- ---------- ---------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends
and
capital
gains
distributions.. $ 105,315 3,840 153 58,451 19,146 14,860 7,695 1,170 --
Expenses:
Mortality
and
expense
risk and
administrative
charges..... 20,153 1,266 1 8,636 2,988 4,137 1,379 1,585 161
-------- ----- --- ------- ------ ------ ------ ----- ----
Net
investment
income
(loss).... 85,162 2,574 152 49,815 16,158 10,723 6,316 (415) (161)
-------- ----- --- ------- ------ ------ ------ ----- ----
Net realized
and
unrealized
gain
(loss) on
investments:
Net
realized
gain
(loss)
on sales
of
investments... 11,105 -- -- 878 3,164 5,853 (726) 2,013 (77)
Change in
unrealized
appreciation
(depreciation)
of
investments... (199,366) -- -- (121,752) (27,264) (32,435) (10,070) (8,133) 288
-------- ----- --- ------- ------ ------ ------ ----- ----
Net realized
and
unrealized
gain
(loss) on
investments..... (188,261) -- -- (120,874) (24,100) (26,582) (10,796) (6,120) 211
-------- ----- --- ------- ------ ------ ------ ----- ----
Net increase
(decrease)
in
contract
owners'
equity
resulting
from
operations...... $(103,099) 2,574 152 (71,059) (7,942) (15,859) (4,480) (6,535) 50
======== ===== === ======== ====== ======= ====== ===== ===
</TABLE>
(a) For the period from May 2, 1994 (commencement of operations) to December 31,
1994.
See accompanying notes to combined financial statements.
9
<PAGE> 10
KILICO VARIABLE ANNUITY SEPARATE ACCOUNT
COMBINED STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Money Market Money Market
Combined Subaccount Subaccount #2
---------------------------- ----------------------- ---------------------
1994 1993 1994 1993 1994 1993
---------- --------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss)....... $ 85,162 49,841 2,574 997 152 127
Net realized gain (loss) on sales
of investments................... 11,105 19,074 -- -- -- --
Change in unrealized appreciation
(depreciation) of investments.... (199,366) 72,722 -- -- -- --
---------- --------- ------- ------- ------ ------
Net increase (decrease) in
contract owners' equity
resulting from operations...... (103,099) 141,637 2,574 997 152 127
---------- --------- ------- ------- ------ ------
Account unit transactions:
Proceeds from units sold........... 254,411 266,721 19,971 12,800 6,673 4,794
Net transfers (to) from affiliate
and subaccounts.................. 3,471 48,524 16,310 (2,660) (6,297) (8,394)
Payments for units redeemed........ (152,336) (104,210) (24,064) (13,103) (68) (84)
---------- --------- ------- ------- ------ ------
Net increase (decrease) in
contract owners' equity from
account unit transactions...... 105,546 211,035 12,217 (2,963) 308 (3,684)
---------- --------- ------- ------- ------ ------
Total increase (decrease) in contract
owners' equity..................... 2,447 352,672 14,791 (1,966) 460 (3,557)
Contract owners' equity:
Beginning of period................ 1,428,707 1,076,035 64,159 66,125 3,225 6,782
---------- --------- ------- ------- ------ ------
End of period...................... $1,431,154 1,428,707 78,950 64,159 3,685 3,225
========== ========= ======= ======= ====== ======
</TABLE>
(a) For the period from May 2, 1994 (commencement of operations) to December 31,
1994.
See accompanying notes to combined financial statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
Government
Total Return High Yield Equity Securities International
Subaccount Subaccount Subaccount Subaccount Subaccount
- - -------------------- ------------------- ------------------- ------------------- ------------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
49,815 28,972 16,158 11,854 10,723 2,502 6,316 5,694 (415) (305)
878 6,051 3,164 2,654 5,853 9,420 (726) 632 2,013 317
(121,752) 23,970 (27,264) 19,150 (32,435) 18,912 (10,070) (1,182) (8,133) 11,872
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
(71,059) 58,993 (7,942) 33,658 (15,859) 30,834 (4,480) 5,144 (6,535) 11,884
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
89,169 104,977 34,261 39,600 52,913 56,537 15,214 32,889 32,734 15,124
(16,297) (5,727) (15,720) 15,978 25,150 9,542 (24,188) (4,289) 15,006 44,074
(58,032) (43,640) (24,877) (18,723) (24,735) (16,241) (12,918) (10,666) (7,412) (1,753)
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
14,840 55,610 (6,336) 36,855 53,328 49,838 (21,892) 17,934 40,328 57,445
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
(56,219) 114,603 (14,278) 70,513 37,469 80,672 (26,372) 23,078 33,793 69,329
640,084 525,481 231,766 161,253 282,801 202,129 117,881 94,803 88,791 19,462
- - -------- ------- ------- ------- ------- ------- ------- ------- ------- ------
583,865 640,084 217,488 231,766 320,270 282,801 91,509 117,881 122,584 88,791
======== ======= ======= ======= ======= ======= ======= ======= ======= ======
<CAPTION>
Small
Capitalization
Equity
Subaccount
-----------------------
1994(a) 1993
------ -----
<S> <C>
(161) --
(77) --
288 --
------ ---
50 --
------ ---
3,476 --
9,507 --
(230) --
------ ----
12,753 --
------ ---
12,803 --
-- --
------ ---
12,803 --
====== ===
</TABLE>
11
<PAGE> 12
KILICO VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION.
KILICO Variable Annuity Separate Account (the "Separate Account") is a unit
investment trust registered under the Investment Company Act of 1940, as
amended, established by Kemper Investors Life Insurance Company ("KILICO"). The
Separate Account is used to fund contracts or certificates (collectively
referred to as "contracts") for ADVANTAGE III periodic and flexible payment
variable annuity contracts and PASSPORT individual and group variable and market
value adjusted deferred annuity contracts. The Separate Account is divided into
eight Subaccounts and each Subaccount invests exclusively in a corresponding
Portfolio of the Kemper Investors Fund (the "Fund"), an open-end diversified
management investment company.
SECURITY VALUATION.
The investments are stated at current value which is based on the closing bid
price, net asset value, at December 31, 1994.
SECURITY TRANSACTIONS AND INVESTMENT INCOME.
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Dividends and capital gains distributions are recorded as
income on the ex-dividend date. Realized gains and losses from security
transactions are reported on an identified cost basis.
ACCUMULATION UNIT VALUATION.
On each day the New York Stock Exchange (the "Exchange") is open for trading,
the accumulation unit value is determined as of the earlier of 3:00 p.m.
(Chicago time) or the close of the Exchange by dividing the total value of each
Subaccount's investments and other assets, less liabilities, by the number of
accumulation units outstanding in the respective Subaccount.
FEDERAL INCOME TAXES.
The operations of the Separate Account are included in the Federal income tax
return of KILICO. Under existing Federal income tax law, investment income and
realized capital gains and losses of the Separate Account increase liabilities
under the contract and are, therefore, not taxed. Thus the Separate Account may
realize net investment income and capital gains and losses without Federal
income tax consequences.
12
<PAGE> 13
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(2) SUMMARY OF INVESTMENTS
Investments, at cost, at December 31, 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
Shares
Owned Cost
-------- ----------
<S> <C> <C>
INVESTMENTS
Kemper Investors Fund Money Market Portfolio (Money Market and
Money Market #2 Subaccounts)................................................................ 82,513 $ 82,513
Kemper Investors Fund Total Return Portfolio.................................................. 276,685 598,629
Kemper Investors Fund High Yield Portfolio.................................................... 183,754 220,666
Kemper Investors Fund Equity Portfolio........................................................ 120,300 293,370
Kemper Investors Fund Government Securities Portfolio......................................... 80,232 96,775
Kemper Investors Fund International Portfolio................................................. 98,620 119,260
Kemper Investors Fund Small Capitalization Equity Portfolio................................... 12,420 12,621
----------
TOTAL INVESTMENTS....................................................................... $1,423,834
==========
</TABLE>
The underlying investments and significant industry concentrations of the Fund's
portfolios are summarized below.
MONEY MARKET PORTFOLIO: This Portfolio invests primarily in short-term
obligations of major banks and corporations. The Money Market Subaccount
represents the ADVANTAGE III Money Market Subaccount and the PASSPORT Money
Market Subaccount #1. Money Market Subaccount #2 represents funds allocated by
the owner of a contract to the dollar cost averaging program. Under the dollar
cost averaging program, an owner may predesignate a portion of the Subaccount
value to be automatically transferred on a monthly basis to one or more of the
other Subaccounts. This option is only available to PASSPORT individual and
group variable and market value adjusted deferred annuity contracts. At December
31, 1994, no industry exceeded 20% of the Portfolio's assets.
TOTAL RETURN PORTFOLIO: This Portfolio's investments will normally consist of
fixed-income and equity securities. Fixed-income securities will include bonds
and other debt securities and preferred stocks. Equity investments normally will
consist of common stocks and securities convertible into or exchangeable for
common stocks, however, the Portfolio may also make private placement
investments (which are normally restricted securities). At December 31, 1994, no
industry exceeded 20% of the Portfolio's assets.
HIGH YIELD PORTFOLIO: This Portfolio invests in fixed-income securities, a
substantial portion of which are high yielding fixed-income securities. These
securities ordinarily will be in the lower rating categories of recognized
rating agencies or will be non-rated, and generally will involve more risk than
securities in the higher rating categories. At December 31, 1994, 21.3% of the
Portfolio's assets were invested in the manufacturing, metals and mining
industry. No other industry exceeded 20% of the Portfolio's assets.
EQUITY PORTFOLIO: This Portfolio's investments normally will consist of common
stocks and securities convertible into or exchangeable for common stocks,
however, it may also make private placement investments (which are normally
restricted securities). At December 31, 1994, no industry exceeded 20% of the
Portfolio's assets.
GOVERNMENT SECURITIES PORTFOLIO: This Portfolio invests primarily in U.S.
Government securities. The Portfolio will also invest in fixed-income securities
other than U.S. Government securities and will engage in options and financial
futures transactions. At December 31, 1994, the Portfolio had 89.6% of its
assets invested in U.S. Government obligations.
INTERNATIONAL PORTFOLIO: This Portfolio's investments will normally consist of
equity securities of non-United States issuers, however, it may also invest in
convertible and debt securities of non-United States issuers and foreign
currencies. At December 31, 1994, 32% of the Portfolio's assets were invested in
Japan. No other industry or country exceeded 20% of the Portfolio's assets.
SMALL CAPITALIZATION EQUITY PORTFOLIO: This Portfolio's investments will consist
primarily of common stocks and securities convertible into or exchangeable for
common stocks and to a limited degree in preferred stocks and debt
13
<PAGE> 14
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
securities. At least 65% of the Portfolio's total assets will be invested in
equity securities of companies having a market capitalization of $1 billion or
less at the time of initial investment. At December 31, 1994 no industry
exceeded 20% of the Portfolio's assets.
(3) TRANSACTIONS WITH AFFILIATES
KILICO assumes mortality risks associated with the annuity contracts and incurs
all expenses involved in administering the contracts. In return, KILICO assesses
that portion of each Subaccount representing assets under the ADVANTAGE III
flexible payment contracts with a daily charge for mortality and expense risk
and administrative costs which amounts to an aggregate of one percent (1.00%)
per annum. KILICO also assesses that portion of each Subaccount representing
assets under the ADVANTAGE III periodic payment contracts with a daily asset
charge for mortality and expense risk and administrative costs which amounts to
an aggregate of one and three-tenths percent (1.30%) per annum. KILICO assesses
that portion of each Subaccount representing assets under PASSPORT individual
and group variable and market value adjusted deferred annuity contracts with a
daily asset charge for mortality and expense risk and administrative costs which
amounts to an aggregate of one and one-quarter percent (1.25%) per annum. The
PASSPORT DCA Money Market Subaccount #2, available for participation in the
dollar cost averaging program, has no daily asset charge deduction.
KILICO also assesses against each ADVANTAGE III contract participating in one or
more of the Subaccounts at any time during the year a records maintenance
charge. For contracts purchased prior to June 1, 1993, the charge is $25 and is
assessed on December 31st of each calendar year. For contracts purchased June 1,
1993 and subsequent, the charge is $36 and is assessed ratably every quarter of
each calendar year, except in those states which have yet to approve these
contract changes. The charge is assessed whether or not any purchase payments
have been made during the year. KILICO also assesses against each PASSPORT
contract participating in one or more of the Subaccounts a records maintenance
charge of $30 at the end of each contract year.
For contracts issued prior to May 1, 1994, KILICO has undertaken to reimburse
each of the ADVANTAGE III Money Market, Total Return, High Yield, and Equity
Subaccounts whose direct and indirect operating expenses exceed eighty
hundredths of one percent (.80%) of average daily net assets. In determining
reimbursement of direct and indirect operating expenses, for each Subaccount,
charges for mortality and expense risks and administrative expenses, and records
maintenance charges are excluded and, for each Portfolio, charges for taxes,
extraordinary expenses, and brokerage and transaction costs are excluded. During
the year ended December 31, 1994, no such payment was made.
Proceeds payable on the redemption of units are reduced by the amount of any
applicable contingent deferred sales charge due to KILICO. During the year ended
December 31, 1994, KILICO received contingent deferred sales charges of
$1,568,200.
Kemper Financial Services, Inc., an affiliated company, is the investment
manager and principal underwriter of the Portfolios of the Fund which serve as
the underlying investments of the Separate Accounts.
(4) NET TRANSFERS (TO) FROM AFFILIATED DIVISIONS AND SUBACCOUNTS
Net transfers (to) from affiliated divisions or accounts include transfers of
all or part of the contract owner's interest to or from another Subaccount or to
the general account of KILICO.
(5) CONTRACT OWNERS' EQUITY
The contract owners' equity is affected by the investment results of each
Portfolio and contract charges. The accompanying financial statements include
only contract owners' payments pertaining to the variable portions of their
contracts and exclude any payments for the market value adjusted or fixed
portions, the latter being included
14
<PAGE> 15
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
in the general account of KILICO. Contract owners may elect to annuitize the
contract under one of several annuity options, as specified in the prospectus.
Contract owners' equity at December 31, 1994, is as follows (in thousands,
except unit value; differences are due to rounding):
<TABLE>
<CAPTION>
Number Contract
of Unit Owners'
Units Value Equity
-------- ------ ----------
<S> <C> <C> <C>
ADVANTAGE III SUBACCOUNT
MONEY MARKET
Flexible Payment, Qualified................................................... 733 $2.111 $ 1,547
Flexible Payment, Nonqualified................................................ 6,914 2.111 14,596
Periodic Payment, Qualified................................................... 15,997 2.033 32,519
Periodic Payment, Nonqualified................................................ 7,343 2.033 14,926
----------
Total....................................................................... 63,588
----------
TOTAL RETURN
Flexible Payment, Qualified................................................... 1,299 3.796 4,932
Flexible Payment, Nonqualified................................................ 6,613 3.515 23,244
Periodic Payment, Qualified................................................... 110,428 3.656 403,681
Periodic Payment, Nonqualified................................................ 24,773 3.406 84,376
----------
Total....................................................................... 516,233
----------
HIGH YIELD
Flexible Payment, Qualified................................................... 532 4.372 2,324
Flexible Payment, Nonqualified................................................ 3,621 4.186 15,157
Periodic Payment, Qualified................................................... 26,546 4.210 111,758
Periodic Payment, Nonqualified................................................ 12,416 4.101 50,918
----------
Total....................................................................... 180,157
----------
EQUITY
Flexible Payment, Qualified................................................... 238 3.345 795
Flexible Payment, Nonqualified................................................ 1,370 3.334 4,568
Periodic Payment, Qualified................................................... 58,845 3.238 190,522
Periodic Payment, Nonqualified................................................ 19,776 3.233 63,935
----------
Total....................................................................... 259,820
----------
GOVERNMENT SECURITIES
Flexible Payment, Qualified................................................... 237 1.337 317
Flexible Payment, Nonqualified................................................ 1,465 1.337 1,958
Periodic Payment, Qualified................................................... 24,332 1.317 32,039
Periodic Payment, Nonqualified................................................ 23,487 1.317 30,926
----------
Total....................................................................... 65,240
----------
INTERNATIONAL
Flexible Payment, Qualified................................................... 625 1.234 771
Flexible Payment, Nonqualified................................................ 2,450 1.234 3,024
Periodic Payment, Qualified................................................... 61,490 1.223 75,223
Periodic Payment, Nonqualified................................................ 14,546 1.223 17,795
----------
Total....................................................................... 96,813
----------
SMALL CAPITALIZATION EQUITY
Flexible Payment, Qualified................................................... 14 1.033 14
Flexible Payment, Nonqualified................................................ 227 1.033 234
Periodic Payment, Qualified................................................... 8,304 1.031 8,558
Periodic Payment, Nonqualified................................................ 1,242 1.031 1,280
----------
Total....................................................................... 10,086
----------
TOTAL ADVANTAGE III CONTRACT OWNERS' EQUITY.............................................................. $1,191,937
----------
</TABLE>
15
<PAGE> 16
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
Number Contract
of Unit Owners'
Units Value Equity
-------- ------ ----------
<S> <C> <C> <C>
PASSPORT SUBACCOUNT
MONEY MARKET #1
Qualified.................................................................... 4,014 $1.065 $ 4,275
Nonqualified................................................................. 10,409 1.065 11,087
----------
Total...................................................................... 15,362
----------
MONEY MARKET #2
Qualified.................................................................... 858 1.105 949
Nonqualified................................................................. 2,475 1.105 2,736
----------
Total...................................................................... 3,685
----------
TOTAL RETURN
Qualified.................................................................... 17,755 0.991 17,606
Nonqualified................................................................. 50,452 0.991 50,026
----------
Total...................................................................... 67,632
----------
HIGH YIELD
Qualified.................................................................... 7,119 1.308 9,311
Nonqualified................................................................. 21,426 1.308 28,020
----------
Total...................................................................... 37,331
----------
EQUITY
Qualified.................................................................... 16,003 1.093 17,491
Nonqualified................................................................. 39,305 1.093 42,959
----------
Total...................................................................... 60,450
----------
GOVERNMENT SECURITIES
Qualified.................................................................... 5,654 1.061 5,999
Nonqualified................................................................. 19,106 1.061 20,270
----------
Total...................................................................... 26,269
----------
INTERNATIONAL
Qualified.................................................................... 5,886 1.225 7,211
Nonqualified................................................................. 15,149 1.225 18,560
----------
Total...................................................................... 25,771
----------
SMALL CAPITALIZATION EQUITY
Qualified.................................................................... 881 1.031 907
Nonqualified................................................................. 1,756 1.031 1,810
----------
Total...................................................................... 2,717
----------
TOTAL PASSPORT CONTRACT OWNERS' EQUITY................................................................... 239,217
----------
TOTAL CONTRACT OWNERS' EQUITY............................................................................ $1,431,154
==========
</TABLE>
16
<PAGE> 17
KEMPER INVESTORS FUND
FINANCIAL STATEMENTS
17
<PAGE> 18
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
18
<PAGE> 19
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER INVESTORS FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Money Market, Total Return, High Yield,
Equity, Government Securities, International and Small Capitalization Equity
Portfolios, comprising the Kemper Investors Fund as of December 31, 1994, the
related statement of operations for the year then ended and the statement of
changes in net assets for each of the two years in the period then ended (except
for the Small Capitalization Equity Portfolio for which the period is May 2,
1994, commencement of operations, through December 31, 1994), and the financial
highlights for each of the fiscal periods since 1990. 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 securities owned as of
December 31, 1994, 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 each
of the Portfolios of Kemper Investors Fund at December 31, 1994, the results of
their operations and the changes in their net assets for the fiscal periods
referred to above and the financial highlights for each of the fiscal periods
since 1990, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 3, 1995
19
<PAGE> 20
KEMPER INVESTORS FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
Small
Money Total High Government Capitalization
Market Return Yield Equity Securities International Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (Cost:
$83,638,
$573,416, $240,184, $301,705,
$125,741, $114,525 and $12,741,
respectively):.................. $83,638 585,575 224,046 327,689 123,089 117,985 13,043
Cash.............................. 49 1,823 541 -- 518 990 --
Receivable for:
Investments sold................ -- 6,452 68 2,239 786 4,306 --
Portfolio shares sold........... 532 473 632 353 203 191 74
Interest and dividends.......... 223 3,270 4,863 499 546 89 3
Other........................... -- -- -- -- 73 -- --
------- ------- -------- -------- ------- ------- ------
Total assets................ 84,442 597,593 230,150 330,780 125,215 123,561 13,120
LIABILITIES AND NET ASSETS
Cash overdraft.................... -- -- -- 60 -- -- 48
Payable for:
Investments purchased........... -- 9,306 10,224 7,668 29,224 313 122
Portfolio shares redeemed....... 316 1,378 390 1,149 150 420 23
Dividends....................... 227 -- -- -- -- -- --
Management fee.................. 41 267 103 156 44 76 6
Custodian and transfer agent
fees and related expenses..... 4 35 4 26 -- 29 --
Other........................... 33 13 14 13 15 13 12
------- ------- -------- -------- ------- ------- ------
Total liabilities........... 621 10,999 10,735 9,072 29,433 851 211
------- ------- -------- -------- ------- ------- ------
Net assets........................ $83,821 586,594 219,415 321,708 95,782 122,710 12,909
======= ======= ======= ======= ====== ======= ======
ANALYSIS OF NET ASSETS
Excess of amounts received from
issuance of shares over amounts
paid on redemptions of shares on
account of capital.............. $84,316 580,149 237,402 268,926 87,744 115,945 12,638
Undistributed net realized gain
(loss) on sales of investments
and foreign currency
transactions.................... -- (26,979) (20,129) 23,797 (7,379) 1,916 (128)
Unrealized appreciation
(depreciation) of investments
and foreign currency
transactions.................... (495) 12,159 (16,138) 25,984 (2,652) 3,440 302
Undistributed net investment
income.......................... -- 21,265 18,280 3,001 18,069 1,409 97
------- ------- -------- -------- ------- ------- ------
Net assets applicable to shares
outstanding..................... $83,821 586,594 219,415 321,708 95,782 122,710 12,909
======= ======= ======= ======= ====== ======= ======
THE PRICING OF SHARES
Shares outstanding, no par
value........................... 83,821 277,690 185,205 120,721 83,892 98,620 12,419
======= ======= ======= ======= ====== ======= ======
Net asset value, offering price
and redemption price per share
(Net assets / shares
outstanding).................... $ 1.000 2.112 1.185 2.665 1.142 1.244 1.039
======= ======= ======= ======= ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 21
KEMPER INVESTORS FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
Small
Money Total High Government Capitalization
Market Return Yield Equity Securities International Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio(a)
------ ------- ------- ------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest.......................... $4,596 16,837 22,444 981 6,698 500 81
Dividends......................... -- 6,307 26 3,015 -- 1,374 7
------ ------- ------- ------- ------ ------ ----
Total investment income......... 4,596 23,144 22,470 3,996 6,698 1,874 88
Expenses:
Management fee.................... 512 3,403 1,329 1,768 583 842 26
Custodian and transfer agent fees
and related expenses............ 15 175 38 84 40 151 11
Professional fees................. 8 64 23 29 12 8 1
Trustees' fees and other.......... 12 150 58 74 37 45 13
------ ------- ------- ------- ------ ------ ----
Total expenses.................. 547 3,792 1,448 1,955 672 1,046 51
------ ------- ------- ------- ------ ------ ----
Net investment income............... 4,049 19,352 21,022 2,041 6,026 828 37
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) on sales
of investments and foreign
currency transactions........... -- (26,384) (6,998) 23,805 (6,337) 1,853 (128)
Net realized loss from futures
transactions.................... -- -- -- -- (475) -- --
------ ------- ------- ------- ------ ------ ----
Net realized gain (loss)........ -- (26,384) (6,998) 23,805 (6,812) 1,853 (128)
Net change in balance of
unrealized appreciation or
depreciation of investments and
foreign currency transactions... (495) (55,621) (19,015) (37,642) (2,415) (7,631) 302
------ ------- ------- ------- ------ ------ ----
Net gain (loss) on investments...... (495) (82,005) (26,013) (13,837) (9,227) (5,778) 174
------ ------- ------- ------- ------ ------ ----
Net increase (decrease) in net
assets resulting from
operations........................ $3,554 (62,653) (4,991) (11,796) (3,201) (4,950) 211
====== ======= ======= ======= ====== ====== ====
</TABLE>
(a) For the period from May 2, 1994 (commencement of operations) to December 31,
1994.
21
<PAGE> 22
KEMPER INVESTORS FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Money Market Total Return
Portfolio Portfolio
-------------------- ----------------------
1994 1993 1994 1993
------- ------ ------- --------
<S> <C> <C> <C> <C>
Operations:
Net investment income....................................................... $ 4,049 1,992 19,352 18,685
Net realized gain (loss).................................................... -- -- (26,384) 41,592
Net change in unrealized appreciation or depreciation....................... (495) -- (55,621) 7,456
------- ------ ------- --------
Net increase (decrease) in net assets resulting from operations........... 3,554 1,992 (62,653) 67,733
Equalization credits (charges)................................................ -- -- 721 665
Dividends to shareholders:
Distribution from net investment income..................................... (4,049) (1,992) (15,302) (12,570)
Distribution from net realized gain on investments.......................... -- -- (42,771) (24,994)
Distribution in excess of net realized gain on investments.................. -- -- (586) --
------- ------ ------- --------
Total dividends to shareholders............................................... (4,049) (1,992) (58,659) (37,564)
Net increase (decrease) from capital share transactions....................... 15,644 (7,093) 63,355 84,989
Capital contribution from investment manager.................................. 495 -- -- --
------- ------ ------- --------
Total increase (decrease) in net assets....................................... 15,644 (7,093) (57,236) 115,823
Net assets:
Beginning of year........................................................... 68,177 75,270 643,830 528,007
------- ------ ------- --------
End of year................................................................. $83,821 68,177 586,594 643,830
======= ====== ======= =======
Undistributed net investment income at end of year............................ $ -- -- 21,265 16,485
======= ====== ======= =======
</TABLE>
(a) For the period from May 2, 1994 (commencement of operations) to December 31,
1994.
See accompanying notes to financial statements.
22
<PAGE> 23
<TABLE>
<CAPTION>
Government
High Yield Equity Securities International Small Capitalization
Portfolio Portfolio Portfolio Portfolio Equity Portfolio
- - ------------------- ------------------- ------------------- ------------------ --------------------
1994 1993 1994 1993 1994 1993 1994 1993 1994(a)
- - ------- ------- ------- ------- ------- ------- ------- ------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21,022 19,481 2,041 725 6,026 5,778 828 340 37
(6,998) 4,150 23,805 14,309 (6,812) 2,126 1,853 1,266 (128)
(19,015) 13,120 (37,642) 19,480 (2,415) (997) (7,631) 10,873 302
- - ------- ------- ------- ------- ------- ------- ------- ------ ------
(4,991) 36,751 (11,796) 34,514 (3,201) 6,907 (4,950) 12,479 211
(1,390) 2,167 432 238 (2,672) 3,133 422 461 60
(19,251) (14,790) -- (1,134) (5,312) (4,989) -- (225) --
-- -- (14,929) (4,892) (2,095) (2,491) (1,170) (38) --
-- -- -- -- (561) -- -- -- --
- - ------- ------- ------- ------- ------- ------- ------- ------ ------
(19,251) (14,790) (14,929) (6,026) (7,968) (7,480) (1,170) (263) --
11,083 47,678 63,540 52,111 (12,289) 20,538 39,528 56,756 12,538
-- -- -- -- -- -- -- -- --
- - ------- ------- ------- ------- ------- ------- ------- ------ ------
(14,549) 71,806 37,247 80,837 (26,130) 23,098 33,830 69,433 12,809
233,964 162,158 284,461 203,624 121,912 98,814 88,880 19,447 100
- - ------- ------- ------- ------- ------- ------- ------- ------ ------
219,415 233,964 321,708 284,461 95,782 121,912 122,710 88,880 12,909
======= ======= ======= ======= ======= ======= ======= ====== ======
18,280 17,893 3,001 1,136 18,069 20,021 1,716 539 97
======= ======= ======= ======= ======= ======= ======= ====== ======
</TABLE>
23
<PAGE> 24
KEMPER INVESTORS FUND
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE FUND
Kemper Investors Fund (the "Fund") is an open-end, diversified management
investment company organized as a business trust under the laws of
Massachusetts. The Fund offers multiple Portfolios, currently consisting of the
Money Market, Total Return, High Yield, Equity, Government Securities,
International and Small Capitalization Equity Portfolios. The Fund has an
unlimited number of authorized shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION.
Investments are stated at value.
The securities of the Total Return, High Yield, Equity, Government Securities,
International and Small Capitalization Equity Portfolios 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. A security that
is listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for that security by the Board of
Trustees or its delegates. 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. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event prices provided by market
makers are used. Over-the-counter traded fixed income options are valued based
upon prices provided by market makers. 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 and
foreign currencies are valued at the forward and current exchange rates,
respectively, 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.
The securities of the Money Market Portfolio are stated at amortized cost, which
approximates market value. In the event that a deviation of 1/2 of 1% or more
exists between the Portfolio's $1.00 per share net asset value, calculated at
amortized cost, and the net asset value calculated by reference to market
quotations, or if there is any other deviation that the Board of Trustees
believes would result in a material dilution to shareholders or purchasers, the
Board of Trustees will promptly consider what action, if any, should be
initiated.
FOREIGN CURRENCY TRANSLATION.
The books and records of the Fund are maintained in U.S. Dollars. All assets and
liabilities initially expressed in foreign currency values are converted into
U.S. Dollars at the mean between the bid and offered quotations of such
currencies against the U.S. Dollar as last quoted by a recognized dealer. If
such quotations are not readily available, the rate of exchange is determined in
good faith by the Board of Trustees. Income and expenses and purchases and sales
of investments are translated into U.S. Dollars at the rate of exchange
prevailing on the respective dates of such transactions. The Portfolios include
that portion of the results of operations resulting from changes in foreign
exchange rates with net realized and unrealized gain or loss from investments
and foreign currency transactions, as appropriate.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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,
except that certain dividends from foreign securities are recorded as soon as
the information is available to the Fund. Interest income is recorded on the
accrual basis and includes premium and discount amortization on money market
instruments and mortgage-backed securities; it also includes original issue and
market discount amortization on long-term fixed income securities. Realized
gains and losses from investment transactions are reported on an identified cost
basis. Gains and losses on premiums from expired options are recognized on date
of expiration. Realized and unrealized gains or losses on financial futures,
options and forward foreign currency contracts are included in net realized and
unrealized (gain) loss on investments, as appropriate.
Portfolios may purchase securities with delivery or payment to occur at a later
date. At the time a Portfolio enters into a commitment to purchase a security,
the transaction is recorded and the value of the security is reflected in the
net asset value. The value of the security may vary with market fluctuations. No
interest accrues to the Portfolio until payment takes place. At the time the
Portfolio enters into this type of transaction it is required to designate cash
or other liquid assets equal to the value of the securities purchased. At
December 31, 1994, the Government Securities Portfolio had $23,475,000 of
purchase commitments outstanding (25% of net assets) with a corresponding amount
of assets designated.
EXPENSES.
Expenses arising in connection with a Portfolio are allocated to that Portfolio.
Other Fund expenses are allocated among the Portfolios in proportion to their
relative net assets.
FUND SHARE VALUATION.
Shares of each Portfolio of the Fund are offered on a continuous basis to the
separate accounts of participating insurance companies where permitted by law.
On each day the New York Stock Exchange is open for trading, each Portfolio
determines its net asset value per share (NAV) by dividing the total value of
the Portfolio's investments and other assets, less liabilities, by the number of
Portfolio shares outstanding. The NAV is determined as of the earlier of 3:00
p.m. Chicago time or the close of the Exchange for the Total Return, High Yield,
Equity, Government Securities, International and Small Capitalization Equity
Portfolios and at 11:00 a.m. and as of the earlier of 3:00 p.m. Chicago time or
the close of the Exchange for the Money Market Portfolio. Because of the need to
obtain prices as of the close of trading on various exchanges throughout the
world, the calculation of net asset value for the International Portfolio does
not take place contemporaneously with the determination of prices of the Fund's
foreign securities.
FEDERAL INCOME TAXES AND DIVIDENDS TO SHAREHOLDERS.
Each Portfolio has complied with the special provisions of the Internal Revenue
Code available to investment companies and therefore no federal income tax
provision is required. The accumulated net realized loss on sales of investments
for federal income tax purposes at December 31, 1994 amounted to approximately
$26,387,000 in the Total Return Portfolio, $20,115,000 in the High Yield
Portfolio, $6,817,000 in the Government Securities Portfolio and $128,000 in the
Small Capitalization Equity Portfolio. These losses are available to offset
future taxable gains in their respective Portfolios and, if not applied, expire
during the period 1998 through 2002.
Distributions to shareholders are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for certain
transactions such as foreign currency transactions, if applicable.
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Dividends payable to shareholders are recorded by the Total Return, High Yield,
Equity, Government Securities, International and Small Capitalization Equity
Portfolios on the ex-dividend date. Net realized capital gains, if any, reduced
by capital loss carryovers, will be distributed at least annually.
The Money Market Portfolio declares a daily dividend equal to its net investment
income for that day, payable monthly.
Shareholders will receive dividends in additional shares.
EQUALIZATION ACCOUNTING.
A portion of proceeds from sales and cost of redemptions of Fund shares in the
Total Return, High Yield, Equity, Government Securities, International and Small
Capitalization Equity Portfolios 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.
OTHER CONSIDERATIONS.
The High Yield Portfolio invests a substantial portion of its assets in high
yield bonds. These bonds ordinarily are in the lower rating categories of
recognized rating agencies or are non-rated, and thus involve more risk than
higher rated bonds.
Kemper Financial Services, Inc. (KFS), the Fund's investment manager, may serve
as a member of various bondholders' committees. These committees represent the
interests of bondholders in restructuring negotiations and court proceedings. As
a result of participation on such committees, KFS may receive material,
non-public information with respect to bonds the Fund owns. Accordingly, the
Fund may be temporarily precluded from effecting transactions in such bonds due
to various restraints imposed by federal and state securities laws involving the
possession of material, non-public information.
(3) TRANSACTIONS WITH AFFILIATES
The Fund has a management agreement and a distribution services agreement with
KFS. For management services and facilities furnished, the Fund pays a fee,
based on average daily net assets, at an annual rate of .50% for the Money
Market Portfolio, .55% for the Total Return and Government Securities
Portfolios, .60% for the High Yield and Equity Portfolios, .65% for the Small
Capitalization Equity Portfolio and .75% for the International Portfolio. For
the year ended December 31, 1994, the Fund incurred management fees of
$8,463,000. Effective February 1, 1995, KFS transferred all of its duties and
responsibilities as principal underwriter under the distribution services
agreement to Kemper Distributors, Inc., a wholly owned subsidiary of KFS.
Kemper Asset Holdings, Inc. (KAHI), a subsidiary of Kemper Corporation, the
parent company of Kemper Financial Services, Inc., entered into a put and call
agreement with the Fund, expiring March 15, 1995. The agreement provided that
the Fund had the unconditional right to require KAHI to purchase the Orange
County, California obligation held in the Money Market Portfolio at par plus
accrued interest. KAHI's obligations thereunder were guaranteed by Kemper
Corporation. On January 26, 1995, KAHI and the Fund entered into a Note Transfer
Agreement, which replaced the put and call agreement. Pursuant to the Note
Transfer Agreement, KAHI arranged for the issuance of a $3,105,700 irrevocable
letter of credit from The Bank of New York for the benefit of the Fund to
support the payment of principal and interest when due.
The Fund has a custodian and a transfer agent agreement with Investors Fiduciary
Trust Company, which was 50% owned by KFS until January 31, 1995 when KFS
completed the sale of IFTC to a third party. For the year ended December 31,
1994, the Fund incurred custodian and transfer agent fees and related expenses
of $509,000.
26
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the year ended December 31, 1994, the Fund made no direct payments to its
officers and incurred trustees' fees of $67,000 to independent trustees.
(4) INVESTMENT TRANSACTIONS
For the year ended December 31, 1994 investment transactions (excluding
temporary short-term investments) are as follows (in thousands):
<TABLE>
<CAPTION>
Small
Total High Government Capitalization
Return Yield Equity Securities International Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Purchases............................. $ 807,150 234,801 327,576 548,704 150,689 10,292
--------- --------- --------- ---------- ---------- ------
Proceeds from sales................... $ 729,590 215,709 295,948 571,357 111,589 1,612
--------- --------- --------- ---------- ---------- ------
</TABLE>
(5) CAPITAL SHARE TRANSACTIONS
The following table summarizes the activity in capital shares of the Fund (in
thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1994
-----------------------------------------------------------------------------------------------
Money Government
Market Total Return High Yield Equity Securities
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ----------------- ------------------- ----------------- -----------------
(a) Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------ --------- -------- --------- ------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares
sold... $ 218,865 55,759 $ 127,333 105,586 $ 122,106 63,325 $ 173,691 18,859 $ 17,396
Shares
issued
in
reinvestment
of
dividends... 3,923 27,538 58,659 16,697 19,251 5,689 14,929 7,004 7,968
------- ------ ------- ------- ------- ------ ------- ------ ------
222,788 83,297 185,992 122,283 141,357 69,014 188,620 25,863 25,364
Less
shares
redeemed... 207,144 54,564 122,637 111,925 130,274 45,216 125,080 38,208 37,653
Net
increase
(decrease)
from
capital
share
transactions... $ 15,644 28,733 $ 63,355 10,358 $ 11,083 23,798 $ 63,540 (12,345) $(12,289)
======= ====== ========= ======= ======== ====== ======== ====== =======
Small
Capitalization
International Equity
Portfolio Portfolio(b)
----------------- ---------------
Shares Amount Shares Amount
------ --------- ------ -------
<S> <C> <C> <C> <C>
Shares
sold... 78,847 $ 99,933 16,090 $16,218
Shares
issued
in
reinvestmen
of
dividends.. 952 1,170 -- --
------- ------ ------- ------
79,799 101,103 16,090 16,218
Less
shares
redeemed... 9,218 61,575 3,671 3,680
Net
increase
(decrease)
from
capital
share
transaction 30,581 $ 39,528 12,419 $12,538
======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1993
------------------------------------------------------------------------------------------------------------------
Money Government
Market Total Return High Yield Equity Securities International
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------------ -------------------- ------------------ ----------------- -----------------
(a) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------ --------- -------- --------- ------ --------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold... $ 122,177 65,954 $ 160,847 107,407 $ 126,476 57,098 $ 155,533 37,818 $ 39,931 61,692 $ 71,384
Shares issued
in
reinvestment
of
dividends... 1,985 15,946 37,564 12,485 14,790 2,369 6,026 6,077 7,480 248 263
--------- ------ --------- -------- --------- ------ --------- ------ -------- ------ --------
124,162 81,900 198,411 119,892 141,266 59,467 161,559 43,895 47,411 61,940 71,647
Less shares
redeemed.... 131,255 46,470 113,422 79,143 93,588 39,934 109,448 25,057 26,873 13,491 14,891
--------- ------ --------- -------- --------- ------ --------- ------ -------- ------ --------
Net increase
(decrease)
from capital
share
transactions. $ (7,093) 35,430 $ 84,989 40,749 $ 47,678 19,533 $ 52,111 18,838 $ 20,538 48,449 $ 56,756
======= ====== ======= ====== ========= ====== ======== ====== ======= ====== =======
</TABLE>
(a) For the Money Market Portfolio, dollar amounts and number of shares are the
same.
(b) For the period from May 2, 1994 (commencement of operations) to December 31,
1994.
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INTERNATIONAL PORTFOLIO BY INDUSTRY
At December 31, 1994, the International Portfolio's investments had the
following industry diversification (in thousands):
<TABLE>
<CAPTION>
Value %
--------- -----
<S> <C> <C>
Automobiles, Parts and Services............................................................... $ 8,730 7.1
Chemical, Medical Equipment and Pharmaceutical................................................ 7,410 6.0
Communications................................................................................ 13,696 11.2
Construction and Building Materials........................................................... 2,472 2.0
Consumer Products and Services................................................................ 5,164 4.2
Diversified................................................................................... 9,779 8.0
Electrical and Electronics.................................................................... 8,079 6.6
Energy sources................................................................................ 9,962 8.1
Financial Services and Real Estate............................................................ 10,250 8.3
Food and Beverages............................................................................ 3,630 2.9
Industrial Products and Services.............................................................. 11,003 9.0
Paper Products................................................................................ 1,101 0.9
Publishing.................................................................................... 1,789 1.5
Retailing..................................................................................... 4,382 3.6
Transportation................................................................................ 4,406 3.6
Utilities..................................................................................... 4,202 3.4
--------- -----
Total Common Stocks........................................................................... 106,055 86.4
Money Market Instruments...................................................................... 11,930 9.7
--------- -----
Total Investments............................................................................. 117,985 96.1
Cash and Other Assets, less Liabilities....................................................... 4,725 3.9
--------- -----
Net Assets.................................................................................... $ 122,710 100.0
======== =====
</TABLE>
28
<PAGE> 29
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................................... $1.00 1.00 1.00 1.00 1.00
Net investment income and dividends declared.......................... .04 .03 .03 .06 .08
------- ------ ------ ------ ------
Net asset value, end of year.......................................... $1.00 1.00 1.00 1.00 1.00
======= ====== ====== ====== ======
TOTAL RETURN (%)...................................................... 3.96 2.83 3.43 5.89 8.08
RATIOS TO AVERAGE NET ASSETS (%):
Expenses.............................................................. .53 .56 .57 .56 .58
Net investment income................................................. 3.95 2.79 3.38 5.80 7.78
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands).............................. $83,821 68,177 75,270 76,479 95,759
</TABLE>
NOTE TO MONEY MARKET PORTFOLIO:
The total return for 1994 includes the effect of a capital contribution from the
investment manager. Without the capital contribution, the total return would
have been 3.47%.
TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year................................... $2.586 2.473 2.658 2.071 2.021
Income from investment operations:
Net investment income.............................................. .069 .069 .061 .080 .113
Net realized and unrealized gain (loss) on investments............. (.313) .214 (.026) .677 (.013)
-------- ------- ------- ------- -------
Total from investment operations..................................... (.244) .283 .035 .757 .100
Less dividends:
Distribution from net investment income............................ .060 .050 .080 .110 .020
Distribution from net realized gain on investments................. .168 .120 .140 .060 .030
Distribution in excess of net realized gain on investments......... .002 -- -- -- --
-------- ------- ------- ------- -------
Total dividends...................................................... .230 .170 .220 .170 .050
-------- ------- ------- ------- -------
Net asset value, end of year......................................... $2.112 2.586 2.473 2.658 2.071
======== ======= ======= ======= =======
TOTAL RETURN (%)..................................................... (9.50) 12.13 1.69 37.90 5.04
RATIOS TO AVERAGE NET ASSETS (%):
Expenses............................................................. .61 .59 .60 .61 .61
Net investment income................................................ 3.13 3.19 3.41 3.46 5.94
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands)............................. $586,594 643,830 528,007 412,772 272,747
Portfolio turnover rate (%).......................................... 128 191 160 187 139
</TABLE>
29
<PAGE> 30
FINANCIAL HIGHLIGHTS--(CONTINUED)
HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
-------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................................... $1.338 1.209 1.144 .914 1.122
Income from investment operations:
Net investment income............................................... .116 .120 .125 .140 .170
Net realized and unrealized gain (loss) on investments.............. (.149) .109 .070 .300 (.338)
-------- ------- ------- ------- ------
Total from investment operations...................................... (.033) .229 .195 .440 (.168)
Less dividends from net investment income............................. .120 .100 .130 .210 .040
-------- ------- ------- ------- ------
Net asset value, end of year.......................................... $1.185 1.338 1.209 1.144 .914
======== ======= ======= ======= ======
TOTAL RETURN (%)...................................................... (2.25) 20.00 17.76 51.83 (15.45)
RATIOS TO AVERAGE NET ASSETS (%):
Expenses.............................................................. .65 .63 .64 .67 .68
Net investment income................................................. 9.49 9.54 10.44 12.95 16.27
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands).............................. $219,415 233,964 162,158 121,608 88,566
Portfolio turnover rate (%)........................................... 98 84 57 31 28
</TABLE>
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
-------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................................... $2.935 2.631 2.642 1.681 1.692
Income from investment operations:
Net investment income............................................... .018 .004 .007 .017 .032
Net realized and unrealized gain (loss) on investments.............. (.138) .370 .082 .974 (.023)
-------- ------- ------- ------- ------
Total from investment operations...................................... (.120) .374 .089 .991 .009
Less dividends:
Distribution from net investment income............................. -- .010 .005 .030 .010
Distribution from net realized gain on investments.................. .150 .060 .095 -- .010
-------- ------- ------- ------- ------
Total dividends....................................................... .150 .070 .100 .030 .020
-------- ------- ------- ------- ------
Net asset value, end of year.......................................... $2.665 2.935 2.631 2.642 1.681
======== ======= ======= ======= ======
TOTAL RETURN (%)...................................................... (4.02) 14.63 3.57 59.47 .60
RATIOS TO AVERAGE NET ASSETS (%):
Expenses.............................................................. .66 .64 .64 .67 .68
Net investment income................................................. .69 .30 .65 .83 2.23
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands).............................. $321,708 284,461 203,624 118,983 61,621
Portfolio turnover rate (%)........................................... 106 78 78 106 135
</TABLE>
30
<PAGE> 31
FINANCIAL HIGHLIGHTS--(CONTINUED)
GOVERNMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year................................... $1.267 1.277 1.287 1.175 1.091
Income from investment operations:
Net investment income.............................................. .067 .060 .064 .090 .093
Net realized and unrealized gain (loss) on investments............. (.102) .020 .006 .082 .011
------- ------- ------ ------ ------
Total from investment operations..................................... (.035) .080 .070 .172 .104
Less dividends:
Distribution from net investment income............................ .060 .060 .050 .060 .020
Distribution from net realized gain on investments................. .024 .030 .030 -- --
Distribution in excess of net realized gain on investments......... .006 -- -- -- --
------- ------- ------ ------ ------
Total dividends...................................................... .090 .090 .080 .060 .020
------- ------- ------ ------ ------
Net asset value, end of year......................................... $1.142 1.267 1.277 1.287 1.175
======= ======= ====== ====== ======
TOTAL RETURN (%)..................................................... (2.74) 6.48 5.90 15.22 9.81
RATIOS TO AVERAGE NET ASSETS (%):
Expenses............................................................. .63 .60 .61 .63 .58
Net investment income................................................ 5.69 5.05 6.08 7.42 8.48
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands)............................. $95,782 121,912 98,814 59,064 31,929
Portfolio turnover rate (%).......................................... 606 534 492 141 174
</TABLE>
NOTE TO GOVERNMENT SECURITIES PORTFOLIO:
KFS waived its management fee during a portion of 1990. Absent this waiver, the
ratio of expenses to average net assets and the ratio of net investment income
to average net assets would have been .66% and 8.40%, respectively.
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
January 6,
Year ended 1992 to
December 31, December 31,
1994 1993 1992
-------- ------ ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $1.306 .993 1.000
Income from investment operations:
Net investment income.................. .009 .010 .010
Net realized and unrealized gain (loss)
on investments....................... (.056) .313 (.017)
-------- ------ ------
Total from investment operations......... (.047) .323 (.007)
Less dividends:
Distribution from net investment
income............................... -- .009 --
Distribution from net realized gain on
investments.......................... .015 .001 --
-------- ------ ------
Total dividends.......................... .015 .010 --
-------- ------ ------
Net asset value, end of period........... $1.244 1.306 .993
======== ====== =======
TOTAL RETURN (%)......................... (3.59) 32.83 (.72)
RATIOS TO AVERAGE NET ASSETS (%):
Expenses................................. .93 .92 1.11
Net investment income.................... .74 .86 1.01
SUPPLEMENTAL DATA:
Net assets at end of period (in
thousands)............................. $122,710 88,880 19,447
Portfolio turnover rate (%).............. 107 116 129
</TABLE>
31
<PAGE> 32
FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL CAPITALIZATION EQUITY PORTFOLIO
<TABLE>
<CAPTION>
May 2, 1994
to
December 31, 1994
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................................. $1.000
Income from investment operations:
Net investment income.............................................. .008
Net realized and unrealized gain on investments.................... .031
------
Total from investment operations..................................... .039
------
Net asset value, end of period....................................... $1.039
======
TOTAL RETURN (%)..................................................... 3.95
RATIOS TO AVERAGE NET ASSETS (%):
Expenses............................................................. 1.25
Net investment income................................................ .91
SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)........................... $12,909
Portfolio turnover rate (%).......................................... 58
</TABLE>
- - ---------------
NOTE: Ratios for all Portfolios have been determined on an annualized basis.
Total return is not annualized.
32
<PAGE> 33
KEMPER INVESTORS FUND
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Value
-------
<S> <C>
CORPORATE OBLIGATIONS
CAPTIVE BUSINESS FINANCE--12.2%
American Honda Finance Corporation
6.36%, 3/06/95.............................. $ 2,967
B.A.T. Capital Corporation
5.89%, 1/05/95.............................. 1,299
Enterprise Funding Corporation
6.17%, 1/24/95.............................. 2,988
Greyhound Financial Corporation
5.58%, 1/18/95.............................. 2,992
-------
10,246
CONSUMER FINANCING AND BANKING--13.6%
Chrysler Financial Corporation
5.68%, 2/01/95.............................. 2,986
(a)Citicorp
6.50%, 3/07/95.............................. 1,000
General Electric Capital Services Inc.
6.11%, 2/27/95.............................. 1,684
General Motors Acceptance Corporation
5.08%, 1/01/95.............................. 1,000
Sears Roebuck Acceptance Corporation
5.58%, 1/25/95.............................. 2,989
Transamerica Finance Corporation
5.69%, 1/19/95.............................. 1,695
-------
11,354
CONSUMER PRODUCTS AND SERVICES--5.9%
American Home Products Corporation
6.11%, 3/08/95.............................. 2,967
PepsiCo, Inc.
4.12%, 2/03/95.............................. 1,999
-------
4,966
CORPORATE FINANCING--6.9%
ITT Financial Corporation
5.96%, 2/21/95.............................. 2,975
Xerox Credit Corporation
6.08%, 1/18/95.............................. 2,792
-------
5,767
ENERGY--3.6%
Arnold Fuel Inc.
6.13%, 1/12/95.............................. 2,994
FINANCIAL SERVICES--14.3%
(a)Bear Stearns Companies Inc.
6.23%, 1/20/95.............................. 2,000
(a)CS First Boston, Inc.
6.26%, 1/11/95.............................. 2,000
(a)Goldman, Sachs & Co.
6.13%, 1/13/95.............................. 2,998
(a)Morgan Stanley Group Inc.
6.48%, 3/15/95.............................. 3,000
<CAPTION>
Value
-------
<S> <C>
(a)Salomon Inc
6.35%, 1/03/95.............................. $ 2,000
-------
11,998
MANAGEMENT SERVICES--3.6%
PHH Corporation
6.08%, 1/17/95.............................. 2,992
(B)MUNICIPAL OBLIGATION--3.6%
(a)Orange County, California 6.00%,
7/10/95 (maturity), $3,000,000 (par)........ 2,550
Put and Call Agreement with Kemper Asset
Holdings, Inc., guaranteed by Kemper
Corporation................................. 450
-------
3,000
RECEIVABLES FINANCING--19.2%
J.V. Receivables Corporation
5.88%, 1/25/95.............................. 2,988
NNW Utility Funding, Inc.
5.93%, 1/17/95.............................. 1,995
Ranger Funding Corporation
6.28%, 2/10/95.............................. 2,979
(a)Sanwa Business Credit Corporation
6.13%, 1/06/95.............................. 3,000
Sierra Funding Corporation
6.23%, 2/09/95.............................. 2,980
Strategic Asset Funding Corporation
5.80%, 1/23/95.............................. 2,184
-------
16,126
-------
TOTAL CORPORATE OBLIGATIONS--82.9%
(average maturity: 35 days)...................... 69,443
BANK OBLIGATIONS
(a)First National Bank of Boston
6.34%, 3/24/95.............................. 2,999
PNC Bank N.A.
6.13%, 4/20/95.............................. 2,996
(a)Shawmut Bank Connecticut, N.A.
6.45%, 1/04/95.............................. 2,000
-------
TOTAL BANK OBLIGATIONS--9.5%
(average maturity: 72 days) 7,995
REPURCHASE AGREEMENT--7.4%
First National Bank of Chicago, dated
12/30/94, collateralized by U.S. Treasury
Securities 5.55%, 1/03/95................... 6,200
-------
TOTAL INVESTMENTS--99.8%
(average maturity: 36 days)...................... 83,638
CASH AND OTHER ASSETS,
LESS LIABILITIES--.2%............................ 183
-------
NET ASSETS--100%................................. $83,821
=======
</TABLE>
See accompanying notes to portfolio of investments.
33
<PAGE> 34
NOTES TO MONEY MARKET PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate securities described in Note (a). For each security, except as
described in Note (b), cost (for financial reporting and federal income tax
purposes) and carrying value are the same. Likewise, carrying value approximates
principal amount.
(a) Variable rate securities. The rates shown are the current rates at December
31, 1994. The dates shown represent the demand date or next interest rate
change date.
(b) This investment is illiquid. See Note (3) of the Notes to Financial
Statements.
See accompanying notes to financial statements.
34
<PAGE> 35
KEMPER INVESTORS FUND
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount
or Number
of Shares Value
---------- --------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
U.S. Treasury Strips, 2015........ $ 192,000 $ 37,540
U.S. Treasury Strips, 2020........ 188,000 24,989
--------
TOTAL U.S. GOVERNMENT
OBLIGATIONS--10.7%
(Cost: $60,607)................... 62,529
COMMON STOCKS
CHEMICALS--.3%
Morton International, Inc. ....... 69,300shs. 1,975
COMMUNICATIONS AND MEDIA--6.2%
(b)AirTouch Communications........... 60,000 1,747
American Telephone & Telegraph
Company......................... 193,500 9,723
DDI Corporation................... 500 4,310
(b)DSC Communications
Corporation....................... 83,300 2,988
LM Ericsson, "B".................. 32,300 1,786
Harcourt General.................. 10,000 353
(b)Gillett Holdings, Inc. ........... 33,652 707
Nokia Telecom..................... 9,733 1,433
(b)Paging Network Inc. .............. 60,000 2,040
Readers Digest Association,
Inc. ........................... 20,000 983
Singapore Press Holdings.......... 29,000 527
(b)Technology Resource, Ltd. ........ 170,700 545
(b)Tele-Communications, Inc. ........ 100,000 2,175
Telecom Corporation of
New Zealand..................... 12,800 42
(b)Telewest Communications........... 16,000 43
(b)Tellabs, Inc. .................... 44,000 2,453
U.S. West......................... 60,000 2,138
(b)Viacom International
"A" shares...................... 12,456 518
"B" shares...................... 50,377 2,047
--------
36,558
COMPUTER SOFTWARE AND
ELECTRONICS--6.7%
(b)Applied Materials, Inc. .......... 77,300 3,266
Brown Boveri...................... 1,300 1,120
Computer Associates
International, Inc. ............ 40,000 1,940
(b)Compuware Corp. .................. 70,000 2,520
First Data Corporation............ 70,800 3,354
General Motors Corporation, "E"... 50,100 1,929
<CAPTION>
Number
of Shares Value
---------- --------
<S> <C> <C>
Kyocera Corporation............... 26,000 $ 1,926
Intel Corporation................. 55,300 3,532
(b)Microsoft Corporation............. 20,000 1,222
Molex, Inc. ...................... 6,300 217
Motorola, Inc. ................... 160,000 9,260
(b)Oracle Systems Corporation........ 70,000 3,089
(b)Silicon Graphics Inc. ............ 117,300 3,622
Sybase Inc. ...................... 40,000 2,080
--------
39,077
CONSUMER PRODUCTS AND SERVICES--9.3%
Coca-Cola Company................. 180,000 9,270
ConAgra Inc. ..................... 100,000 3,125
CPC International Inc............. 164,500 8,760
(b)CUC International Inc. ........... 75,300 2,522
Danka Business Systems, ADR....... 140,200 3,032
Gillette Company.................. 60,000 4,485
Manpower Inc. .................... 80,000 2,250
Newell Co. ....................... 143,200 3,007
Philip Morris Companies, Inc. .... 117,800 6,774
Phillips N. V. ................... 57,100 1,691
Procter & Gamble Company.......... 79,200 4,910
Sara Lee Corporation.............. 200,000 5,050
--------
54,876
DRUGS AND HEALTH CARE--10.3%
Abbott Laboratories............... 99,900 3,259
Columbia/HCA Healthcare
Corporation..................... 100,400 3,665
Forest Laboratories, Inc. ........ 133,500 6,224
(b)Foundation Health Corp. .......... 55,000 1,705
(b)Genzyme Corporation............... 80,000 2,520
(b)Genzyme Tissue Repair............. 10,800 40
(b)Integrated Health Services........ 132,200 5,222
Johnson & Johnson................. 100,000 5,475
Eli Lilly & Company............... 80,000 5,250
Merck & Company Inc. ............. 110,200 4,201
(b)Mid-Atlantic Medical Services..... 36,300 830
Pfizer Inc. ...................... 90,000 6,953
Roche Holdings Genuss Chein....... 298 1,443
Schering-Plough Corporation....... 29,000 2,146
Smithkline Beecham, PLC........... 140,000 4,795
United Healthcare Corporation..... 30,000 1,354
U. S. Healthcare Inc. ............ 51,300 2,116
Warner-Lambert Company............ 40,100 3,088
--------
60,286
</TABLE>
35
<PAGE> 36
KEMPER INVESTORS FUND
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number
of Shares Value
---------- --------
<S> <C> <C>
ENERGY AND RELATED SERVICES--2.7%
British Petroleum Co., PLC........ 271,806 $ 1,809
Enron Corporation................. 152,200 4,642
Manweb, PLC....................... 40,000 544
Mobil Corporation................. 65,000 5,476
Noble Affiliates Inc.............. 100,000 2,475
Repsol, S.A. ..................... 34,000 922
--------
15,868
ENTERTAINMENT AND RESTAURANTS--3.3%
(b)Brinker International, Inc. ...... 155,200 2,813
Cracker Barrel Old Country
Store............................. 20,800 385
Walt Disney Company............... 100,000 4,612
Genting Berhad.................... 42,000 360
(b)Lonestar Steakhouse and Saloon,
Inc............................. 53,100 1,062
McDonald's Corporation............ 150,000 4,388
PolyGram N.V...................... 12,800 595
(b)President Riverboat Casinos
warrants.......................... 3,000 3
(b)Promus Companies, Inc. ........... 160,000 4,960
--------
19,178
ENVIRONMENTAL PRODUCTS--.6%
WMX Technologies, Inc............. 140,000 3,675
FINANCIAL SERVICES AND REAL
ESTATE--8.5%
Aalberts Industries............... 11,600 562
American International Group,
Inc............................. 60,000 5,880
Banc One Corporation.............. 80,000 2,030
Bankers Life Holding
Corporation..................... 99,600 1,892
Boatmen's Bancshares, Inc. ....... 120,100 3,258
Conseco Inc. ..................... 60,100 2,592
DBS Land Ltd. .................... 122,000 363
Equity Residential Properties
Trust........................... 140,000 4,200
Federal National Mortgage
Association..................... 30,000 2,186
First USA Inc. ................... 77,300 2,541
General Re Corporation............ 15,000 1,856
Health Care Property
Investments..................... 40,000 1,205
Lloyds Bank PLC................... 55,000 475
MBNA Corporation.................. 146,500 3,424
MGIC Investment Corporation....... 68,600 2,272
Meditrust......................... 112,400 3,400
NationsBank Corporation........... 80,000 3,610
Nationwide Health Properties...... 50,300 1,798
Sanyo Shinpan Finance Co. ........ 18,300 1,763
Siam City Bank.................... 602,200 768
<CAPTION>
Number
of Shares Value
---------- --------
<S> <C> <C>
Tokio Marine & Fire Insurance Co.
Ltd. ........................... 153,000 $ 1,871
Veba, A.G. ....................... 4,800 1,672
Wai Kee Holdings, with
warrants expiring 1996.......... 1,620,000 380
--------
49,998
MANUFACTURING--5.3%
Amada, Co., Ltd................... 122,000 1,529
Atlas Copco....................... 136,000 1,738
Corning Glass Company............. 160,000 4,780
General Electric Company.......... 93,600 4,774
Georgia-Pacific Corporation....... 40,000 2,860
Honda Motor Co., Ltd. ............ 90,000 1,597
(b)Interco warrants expiring 1999.... 3,872 5
Keppel Corporation Limited........ 156,000 1,327
Magna International, Inc. "A"..... 28,100 1,078
MASISA, ADR....................... 23,500 599
Matsushita Electric Industrial
Co., Ltd. ...................... 71,000 1,167
Nucor Corporation................. 55,900 3,102
Sandvik AB, "B"................... 35,040 559
Sharp Corporation................. 171,000 3,085
Tokyo Electron.................... 59,000 1,833
Universal Robina Corp. ........... 119,500 84
(b)Zebra Technologies Corporation.... 24,000 938
--------
31,055
RETAILING AND DISTRIBUTION--5.0%
Alco Standard Corporation......... 90,000 5,647
(b)Ann Taylor Stores Corp. .......... 70,000 2,406
Carrefour, S.A. .................. 2,300 953
Dayton Hudson Corporation......... 13,200 934
(b)Goldlion Holdings, warrants
expiring 1995 and 1996.......... 325,000 2
Hagemeyer N.V. ................... 7,100 579
Helig-Meyers Company.............. 41,900 1,058
Home Depot Inc. .................. 4,400 202
Keiyo Company, Ltd. .............. 91,000 1,386
(b)Kohl's Corporation................ 99,400 3,951
May Department Stores............. 60,000 2,025
Nordstrom......................... 40,000 1,680
(b)Thrifty Payless Holdings.......... 47,500 190
(b)Toys "R" Us, Inc.................. 79,600 2,428
(b)Viking Office Products............ 61,700 1,890
Wal-Mart Stores, Inc. ............ 191,600 4,072
--------
29,403
</TABLE>
36
<PAGE> 37
KEMPER INVESTORS FUND
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number
of Shares
or
Principal
Amount Value
---------- --------
<S> <C> <C>
TRANSPORTATION--1.8%
Conrail Inc....................... 110,000 $ 5,555
Road Builders Holdings............ 97,000 528
(b)TNT, Ltd., "A".................... 306,800 524
Van Ommeren....................... 38,500 1,012
(b)Wisconsin Central
Transportation Corporation...... 70,500 2,908
--------
10,527
--------
TOTAL COMMON STOCKS--60.0%
(Cost: $335,228) 352,476
PREFERRED STOCKS
Conseco Inc., convertible......... 44,200 1,801
First USA Inc..................... 73,000 2,382
K-III Communications Inc., PIK,... 15,223 1,462
RJR Nabisco, Inc.................. 400,000 2,400
--------
TOTAL PREFERRED STOCKS--1.4%
(Cost: $8,998).................... 8,045
CORPORATE OBLIGATIONS
BROADCASTING, CABLE SYSTEMS AND
PUBLISHING--4.3%
Cablevision Systems Corporation,
10.75%, 2004.................... $ 1,500 1,500
(a)Cencall Communications,
10.125%, 2004................... 1,240 428
Century Communications Corp.,
9.50%, 2000..................... 5,600 5,376
Cinemark USA, Inc.,
12.00%, 2002.................... 570 593
Comcast Corporation,
10.625%, 2012................... 1,770 1,735
Continental Cablevision, Inc.,
9.50%, 2013..................... 2,000 1,830
Paging Network Inc.,
8.875%, 2006.................... 5,910 4,684
Rogers Cantel,
11.125%, 2002................... 1,720 1,754
3Com Corporation, convertible,
10.25%, 2001.................... 2,000 2,110
Univision TV, 11.75%, 2001........ 4,000 4,160
Webcraft Technology,
9.375%, 2002.................... 930 807
--------
24,977
<CAPTION>
Principal
Amount Value
---------- --------
<S> <C> <C>
COMPUTER SOFTWARE AND
ELECTRONICS--.6%
Solectron Corporation,
convertible,
zero coupon, 2012............... $ 6,235 $ 3,577
CONSUMER PRODUCTS AND SERVICES--.6%
Color Tile Inc., 10.75%, 2001..... 1,500 1,313
Sweetheart Cup Company Inc.,
10.50%, 2003.................... 2,150 2,010
--------
3,323
DRUGS AND HEALTH CARE--.5%
Elan Corporation, PLC,
convertible, zero coupon,
2012............................ 8,000 3,240
ENERGY AND RELATED SERVICES--2.4%
Baker Hughes, convertible,
zero coupon, 2008............... 682 370
Burlington Motor Holdings Inc.,
11.50%, 2003.................... 3,200 2,944
Coastal Corporation,
11.75%, 2006.................... 2,250 2,461
Dual Drilling, 9.875%, 2004....... 3,415 3,039
Gulf Canada Resources, Ltd.,
9.25%, 2004..................... 5,590 5,157
--------
13,971
ENTERTAINMENT--1.8%
Argosy Gaming Company Inc.,
convertible, 12.00%, 2001....... 2,930 2,754
Time Warner, Inc.
(a) 11.00%, 2002 1,450 1,370
8.375%, 2033.................... 8,000 6,524
--------
10,648
ENVIRONMENTAL SERVICES--.1%
WMX Technologies, Inc.,
convertible, zero coupon,
2012............................ 820 289
FINANCIAL SERVICES, HOMEBUILDERS AND
REAL ESTATE--.4%
American Reinsurance Corporation,
10.875%, 2004................... 1,250 1,322
Del E. Webb Corp., 9.00%, 2006.... 900 684
</TABLE>
37
<PAGE> 38
KEMPER INVESTORS FUND
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount Value
---------- --------
<S> <C> <C>
Schuler Homes Inc., convertible,
6.50%, 2003..................... $ 43 $ 37
US Banknote Corporation, 10.375%,
2002............................ 550 468
--------
2,511
MANUFACTURING--4.5%
American Standard, Inc.,
10.875%, 1999................... 4,450 4,506
Carbide/Graphite Group, Inc.,
11.50%, 2003.................... 2,450 2,481
Cemex, convertible, 4.25%, 1997... 1,167 922
FFM, 5.00%, 2001.................. 2,833 2,960
Foamex L.P., 11.25%, 2002......... 4,500 4,253
(a)Gaylord Container Corporation,
12.75%, 2005.................... 3,180 2,814
Hasbro Inc., convertible,
6.00%, 1998..................... 1,710 1,810
Owens-Illinois, Inc.
11.00%, 2003.................... 3,500 3,631
9.75%, 2004..................... 2,100 1,985
Riverwood International
Corporation, 11.25%, 2002....... 650 668
TriMas Corp., convertible, 5.00%,
2003............................ 500 490
--------
26,520
RETAILING AND
DISTRIBUTION--2.2%
Home Depot, Inc., convertible,
4.50%, 1997..................... 6,173 7,400
Starbucks Corp., convertible,
4.50%, 2003..................... 430 435
Thrifty Payless
11.75%, 2003.................... 3,380 3,312
12.25%, 2004.................... 1,800 1,701
--------
12,848
<CAPTION>
Principal
Amount Value
---------- --------
<S> <C> <C>
TOTAL CORPORATE
OBLIGATIONS--17.4%
(Cost: $107,953).................. $101,904
MONEY MARKET INSTRUMENTS
Yield--5.92% to 6.19%
Due--January 1995
American Honda Finance
Corporation................... $ 6,800 6,781
Caterpillar Financial Services
Corporation................... 11,000 10,944
ConAgra, Inc. .................. 10,000 9,960
Corporate Receivables
Corporation................... 7,000 6,990
Freedom Asset Funding
Corporation................... 5,023 5,007
PHH Corporation................. 11,000 10,969
Xerox Credit Corporation........ 10,000 9,970
--------
TOTAL MONEY MARKET
INSTRUMENTS--10.3%
(Cost: $60,630).................... 60,621
TOTAL INVESTMENTS--99.8%
(Cost: $573,416)................... 585,575
CASH AND OTHER ASSETS, LESS
LIABILITIES--.2%..................... 1,019
--------
NET ASSETS--100%..................... $586,594
========
</TABLE>
38
<PAGE> 39
NOTES TO TOTAL RETURN PORTFOLIO OF INVESTMENTS
(a) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
(b) Non-income producing security.
"PIK" denotes that interest or dividends are paid in kind.
Based on the cost of investments of $573,416,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was
$36,114,000, the aggregate gross unrealized depreciation was $23,955,000 and the
net unrealized appreciation of investments was $12,159,000.
See accompanying notes to financial statements.
39
<PAGE> 40
KEMPER INVESTORS FUND
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
GOVERNMENT OBLIGATIONS--1.4%
(Cost: $3,194)
U.S. Treasury Notes,
7.375%-8.625%, 1997.............. $ 3,100 $ 3,109
CORPORATE OBLIGATIONS
BROADCASTING, CABLESYSTEMS AND
PUBLISHING--11.0%
Act III Broadcasting, Inc., 9.625%,
2003............................. 330 307
Adelphia Communications
Corporation,
12.50%, 2002..................... 2,310 2,160
Affinity Group, Inc., 11.50%,
2003............................. 1,310 1,245
(b)Bell Cablemedia PLC, 11.95,
2004............................. 1,100 594
Big Flower Press, Inc., 10.75%,
2003............................. 1,900 1,767
Cablevision Industries Corporation,
10.75%, 2002..................... 2,355 2,343
Cablevision Systems Company
9.875%, 2013..................... 775 698
9.875%, 2023..................... 270 238
Century Communications Corporation
9.50%, 2000...................... 960 922
9.75%, 2002...................... 1,320 1,267
11.875%, 2003.................... 100 104
Comcast Corporation
9.50%, 2008...................... 1,330 1,204
10.625%, 2012.................... 1,850 1,813
Continental Cablevision, Inc.
11.00%, 2007..................... 275 279
9.50%, 2013...................... 2,995 2,740
Katz Corporation, 12.75%, 2002..... 960 984
(b)Neodata Services, 12.00%, 2003..... 1,210 944
Outdoor Systems, 10.75%, 2003...... 900 810
Sinclair Broadcast Group, Inc.,
10.00%, 2003..................... 1,320 1,234
Summit Communications Group, Inc.,
10.50%, 2005..................... 1,200 1,221
Univision TV, 11.75%, 2001......... 370 385
(b)Videotron Holdings PLC,
11.12%, 2004..................... 850 442
Webcraft Technologies, Inc.,
9.375%, 2002..................... 640 555
--------
24,256
CHEMICALS--3.1%
Agriculture, Mining and Chemicals,
Inc., 10.75%, 2003............... 700 706
Arcadian Partners, L.P., 10.75%,
2005............................. 2,150 2,043
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
Atlantic Group, Inc., 11.00%,
2003............................. $ 1,135 $ 1,095
G-I Holdings Inc., zero coupon,
1998............................. 1,850 1,133
(b)Harris Chemical North America,
Inc., 10.25%, 2001............... 1,100 913
Huntsman Corporation,
10.625%, 2001.................... 260 267
Rexene Corporation, 11.75%, 2004... 590 605
--------
6,762
COMMUNICATIONS--7.3%
Amerisource, PIK, 11.25%, 2005..... 991 1,003
(b)Call-Net Enterprises, 13.25%,
2004............................. 1,730 913
(b)Celcarbide S.A., 13.50%, 2004...... 1,000 848
(b)Cellular, Inc., 11.75%, 2003....... 625 406
(b)CenCall Communications Corp.,
11.125%, 2004.................... 170 59
Comdata Network, Inc.,
12.50%, 1999..................... 1,250 1,319
(b)Dial Call Communications,
10.25%, 2005..................... 450 128
(b)EchoStar Communications
Corporation Units, 12.875%,
2004............................. 5,135 2,657
Paging Network, Inc.
11.75%, 2002..................... 1,530 1,522
8.875%, 2006..................... 830 658
(b)PanAmSat, L.P., 11.375%, 2003...... 2,275 1,411
Rogers Cantel, 11.125%, 2002....... 1,970 2,009
Rogers Communications Inc.,
10.875%, 2004.................... 300 303
USA Mobile Communications, 14.00%,
2004............................. 1,130 1,155
Viacom International, Inc.,
8.00%, 2006...................... 1,840 1,578
--------
15,969
CONSTRUCTION MATERIALS--5.5%
American Standard Inc.
10.875%, 1999.................... 2,315 2,344
11.375%, 2004.................... 500 513
9.25%, 2016...................... 260 238
(b)Building Materials, 11.75%, 2004... 2,695 1,348
FM Holdings, 13.125%, 2005......... 850 1,139
Nortek, 9.875%, 2004............... 1,100 968
Triangle Pacific Corp., 10.50%,
2003............................. 2,415 2,300
(c)(d)Walter Industries, Inc.,
14.625%, 1995.................... 825 1,539
</TABLE>
40
<PAGE> 41
KEMPER INVESTORS FUND
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
Waxman Industries Inc.
13.75%, 1999..................... $ 944 $ 868
(b) 12.75%, 2004, with warrants
expiring 2004.................... 1,644 781
--------
12,038
CONSUMER PRODUCTS AND SERVICES--8.1%
Allied Waste Industry, 10.75%,
2004............................. 430 419
Americold Corporation, 11.50%, 2005 665 608
Bally's Park Place Funding, Inc.,
9.25%, 2004...................... 2,780 2,377
Beatrice Foods Inc., 12.00%,
2001............................. 2,000 1,970
Borg-Warner Corporation,
9.125%, 2003..................... 410 351
Cinemark USA, Inc., 12.00%, 2002... 940 978
Corporate Express, 9.625%, 2004.... 2,400 2,166
(b)Dr. Pepper Bottling Holdings, Inc.,
11.625%, 2003.................... 870 605
Empress River Casino, 10.75%,
2002............................. 1,090 997
Merisel Inc., 12.50%, 2004......... 1,370 1,350
Mid-American Waste Systems Inc.,
12.25%, 2003..................... 1,270 1,283
Raci Acquisition, Corp. 9.50%,
2003............................. 630 532
Santa Fe Hotel, Inc., 11.00%,
2000, with warrants expiring
1996............................. 565 485
Trump Taj Mahal Funding, PIK,
11.35%, 1999..................... 5,445 3,628
--------
17,749
DRUGS AND HEALTH CARE--2.8%
Abbey Healthcare Group Inc., 9.50%,
2002............................. 770 689
Charter Medical Corporation,
11.25%, 2004..................... 1,500 1,504
Dade International, 13.00%, 2005... 840 842
Ornda Healthcorporation
12.25%, 2002..................... 1,505 1,610
11.375%, 2004.................... 1,560 1,601
--------
6,246
ENERGY AND RELATED SERVICES--3.5%
Dual Drilling Company, 9.875%,
2004............................. 1,000 890
Empire Gas Corporation,
convertible, 7.00%, 2004......... 1,500 1,163
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
Global Marine, 12.75%, 1999........ $ 280 $ 301
(c)Great Bay Power, PIK, 17.50%,
1992 and 1993.................... 1,553 152
Gulf Canada Resources Limited,
9.25%, 2004...................... 350 323
(b)Mesa Capital Corporation,
12.75%, 1998..................... 2,405 2,080
Rowan, 11.875%, 2001............... 470 494
TransTexas Gas Corporation, 10.50%,
2000............................. 1,980 1,891
Trident NGL, Inc., 10.25%, 2003.... 500 501
--------
7,795
FINANCIAL SERVICES, HOME BUILDING AND
REAL ESTATE--4.5%
Continental Homes Holding, 12.00%,
1999............................. 1,400 1,365
Del E. Webb Corp., 9.00%, 2006..... 300 228
Forecast Group L.P.,
11.375%, 2000.................... 250 168
(a)Great America Holdings,
11.00%, 1998..................... 675 679
K. Hovnanian Enterprises, Inc.
11.25%, 2002..................... 1,318 1,120
9.75%, 2005...................... 600 445
J.M. Peters, 12.75%, 2002, with
warrants expiring 2004........... 460 430
Kaufman and Broad Home Corporation,
9.375%, 2003..................... 1,410 1,227
NVR, Inc., 11.00%, 2003............ 1,460 1,226
Oriole Homes Corp., 12.50%, 2003... 480 432
Presley Companies,
12.50%, 2001..................... 1,400 1,246
Schuler International, 10.875%,
2004............................. 600 613
Toll Corp.
10.50%, 2002..................... 180 166
9.50%, 2003...................... 620 527
--------
9,872
MANUFACTURING, METALS AND
MINING--21.3%
Aftermarket Technology,
12.00%, 2004..................... 660 680
Allison Engine, 10.00%, 2003....... 960 984
Amstar Corporation, 11.375%,
1997............................. 2,744 2,703
BE Aerospace, 9.75%, 2003.......... 780 737
Berry Plastics Unit, 12.25%, 2004,
with warrants expiring 1998...... 880 862
</TABLE>
41
<PAGE> 42
KEMPER INVESTORS FUND
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
Bluebird Body Company,
11.75%, 2002..................... $ 1,480 $ 1,495
Carbide/Graphite Group, Inc.,
11.50%, 2003..................... 465 471
Chrysler Corp, 10.95%, 2017........ 1,430 1,556
Computervision Corporation
10.875%, 1997.................... 400 372
11.375%, 1999.................... 700 581
convertible 8.00%, 1999.......... 50 30
(b)Eagle Industries, Inc., 10.50%,
2003............................. 2,870 1,865
Essex Group, Incorporated, 10.00%,
2003............................. 900 841
Exide Corporation
10.75%, 2002..................... 580 594
(b) 12.25%, 2004..................... 1,830 1,331
Fairchild Corporation
12.00%, 2001..................... 2,690 2,260
13.00%, 2007..................... 339 288
Fairchild Industries, 12.25%,
1999............................. 1,090 1,063
Fairfield Manufacturing Company,
11.375%, 2001.................... 830 780
Federal Industries, Ltd.,
10.25%, 2000..................... 195 183
Foamex L.P.,
11.25%, 2002..................... 860 813
11.875%, 2004.................... 1,870 1,786
(b)Foamex-JPS Automotive L.P.,
13.50%, 2004..................... 940 494
Great Dane Holdings, 12.75%,
2001............................. 2,255 2,232
GS Technologies, 12.00%, 2004...... 1,000 991
Jordan Industries, 10.375%, 2003... 750 668
Earle M. Jorgensen Co.,
10.75%, 2000..................... 1,085 1,042
K & F Industries, Inc.
13.75%, 2001..................... 4,770 4,365
11.875%, 2003.................... 600 588
(a)Lehman Promissory Note (K&F),
6.125%, 1997..................... 400 366
Lear Seating, 8.25%, 2002.......... 250 221
Newflo Corporation, 13.25%, 2002... 1,050 1,040
Owens-Illinois, Inc.
9.95%, 2004...................... 3,040 2,888
9.75%, 2004...................... 2,150 2,032
PACE Industries Inc., 10.625%,
2002............................. 1,020 913
Penda Industries, Inc., 10.75%,
2004............................. 650 592
(b)Polymer Group, Inc., 12.25%,
2002............................. 820 820
Rexnord Inc., 11.875%, 1999........ 700 658
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
Sequa Corporation, 9.375%, 2003.... $ 790 $ 662
Thermadyne Industries, Inc.
10.25%, 2002..................... 1,360 1,306
10.75%, 2003..................... 1,726 1,631
Unisys Corporation
13.50%, 1997..................... 540 579
8.875%, 1997..................... 315 309
--------
46,672
PAPER AND FOREST
PRODUCTS--5.3%
Container Corporation of America,
11.25%, 2004..................... 1,490 1,523
Gaylord Container Corporation
11.50%, 2001..................... 520 538
(b) 12.75%. 2005..................... 1,585 1,403
Maxxam Group Inc.
(b) 12.25%, 2003..................... 585 336
11.25%, 2003..................... 450 423
Riverwood International
Corporation, 11.25%, 2002........ 890 914
Stone-Consolidated Corporation,
10.25%, 2000..................... 1,100 1,078
Stone Container Corporation
12.625%, 1998.................... 500 526
9.875%, 2001..................... 275 261
10.75%, 2002..................... 2,810 2,799
Sweetheart Cup Company Inc.,
10.50%, 2003..................... 900 842
S. D. Warren Co., 12.00%, 2004..... 970 999
--------
11,642
RETAILING--12.8%
Color Tile, Inc., 10.75%, 2001..... 2,470 2,161
(b)Finlay Enterprises Inc., 12.00%,
2005............................. 360 207
Finlay Fine Jewelry Corporation,
10.625%, 2003.................... 580 531
Flagstar Companies
10.75%, 2001..................... 200 187
10.875%, 2002.................... 1,500 1,401
Food 4 Less Supermarket
10.45%, 2000..................... 1,090 1,071
13.75%, 2001..................... 1,130 1,212
Grand Union Company,
12.25%, 2002..................... 4,050 1,333
(b)International Semi-Tech
Microelectronics Inc.,
11.50%, 2003..................... 3,530 1,518
</TABLE>
42
<PAGE> 43
KEMPER INVESTORS FUND
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount
or Number
of Shares Value
--------- --------
<S> <C> <C>
Kroger Company, 9.25%, 2005........ $ 690 $ 676
Orchard Supply Hardware
Corporation, 9.375%, 2002........ 1,740 1,449
P & C Food Markets, 11.50%, 2001... 910 928
Pamida Holdings, 11.75%, 2003...... 1,950 1,882
Pathmark Stores
12.625%, 2002.................... 1,000 1,004
11.625%, 2002.................... 1,655 1,597
Penn Traffic Company, 9.625%,
2005............................. 2,050 1,763
Ralphs Grocery Company,
9.00%, 2003...................... 1,430 1,387
Service Merchandise Company Inc.,
9.00%, 2004...................... 2,255 1,714
Southland Corporation, 5.00%,
2003............................. 5,269 3,557
Specialty Retailers, Inc.,
11.00%, 2003..................... 930 842
Thrifty Payless, Inc.
11.75%, 2003..................... 1,080 1,058
12.25%, 2004..................... 620 586
--------
28,064
TRANSPORTATION--1.9%
Burlington Motor Holdings Inc.,
11.50%, 2003..................... 1,350 1,242
OMI Corp., 10.25%, 2003............ 1,625 1,406
SPX Corporation, 11.75%, 2002...... 690 687
(b)Transtar Holdings, L.P.,
13.375%, 2003.................... 1,411 730
--------
4,065
--------
TOTAL CORPORATE
OBLIGATIONS--87.1%
(Cost: $205,080)................... 191,130
PREFERRED AND COMMON STOCKS
(a)Citicasters........................ 37,130 shs. 919
(c)Computervision Corporation......... 162,160 628
(c)Finlay Enterprises Inc............. 720 11
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
(c)Gaylord Container Corporation
common stock..................... 10,451 $ 95
warrants expiring 1996........... 218,579 1,585
(c)Gillett Holdings, Inc.............. 42,066 883
(c)Insilco Corp....................... 9,835 245
K-III Communications, Inc., PIK,
preferred........................ 2,077 199
(a)(c)Peebles, Inc....................... 32,859 4 52
Petrolane Gas Service.............. 24,990 331
(c)Specialty Equipment Companies,
Inc.............................. 13,000 132
(c)Thrifty Payless, Inc............... 31,540 126
(c)UGI, Inc........................... 4,249 5
--------
TOTAL PREFERRED AND COMMON
STOCKS--2.6%
(Cost: $7,711)................. 5,611
MONEY MARKET INSTRUMENTS
Yield--6.00% to 6.35%
Due--January and February 1995
American Home Products............. $ 6,500 6,486
Bridgestone/Firestone.............. 5,700 5,691
ConAgra, Inc....................... 1,500 1,494
Enserch Corporation................ 6,000 5,997
Sierra Funding Corp................ 2,552 2,534
Xerox Credit Corp.................. 2,000 1,994
--------
TOTAL MONEY MARKET
INSTRUMENTS--11.0%
(Cost: $24,199)................ 24,196
--------
TOTAL INVESTMENTS--102.1%
(Cost: $240,184)............... 224,046
LIABILITIES, LESS CASH
AND OTHER ASSETS--(2.1)%.............. (4,631)
--------
NET ASSETS--100%...................... $ 219,415
========
</TABLE>
See accompanying notes to portfolio of investments.
43
<PAGE> 44
NOTES TO HIGH YIELD PORTFOLIO OF INVESTMENTS
(a) The following securities may require registration under the Securities Act
of 1933 or an exemption therefrom in order to effect sale in the ordinary
course of business; they were valued at cost on the dates of acquisition.
These securities were valued at fair value as determined in good faith by
the Board of Trustees of the Fund. There were no market quotations available
for unrestricted securities of the same class on the dates of acquisition or
on December 31, 1994. At December 31, 1994, the value of the Portfolio's
restricted securities was $2,416,000, which represented 1.10% of net assets.
<TABLE>
<CAPTION>
Principal
Amount
Date of or Number Unit
Security Description Acquisition of Shares Cost
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Great America Holdings, 11.00%, 1998 July 1990-March 1992 $675,000 $84.15
----------------------------------------------------------------------------------------------------------------------
Lehman Promissory Note (K&F), 6.125%, 1997 July 1994 400,000 90.75
----------------------------------------------------------------------------------------------------------------------
Citicasters, common stock November 1989-December 1991 37,130shs. 50.74
----------------------------------------------------------------------------------------------------------------------
Peebles Inc., common stock July 1989-August 1994 32,859 27.49
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
(c) Non-income producing security. In the case of a bond, generally denotes that
issuer has defaulted on the payment of interest or has filed for bankruptcy.
(d) Certain circumstances exist for this non-income producing security which
cause the market value to exceed the principal amount.
"PIK" denotes that interest or dividends are paid in kind.
Based on the cost of investments of $240,184,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was
$3,099,000, the aggregate gross unrealized depreciation was $19,237,000 and the
net unrealized depreciation of investments was $16,138,000.
See accompanying notes to financial statements.
44
<PAGE> 45
KEMPER INVESTORS FUND
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
COMMON STOCKS
CHEMICALS--2.7%
Air Products and Chemicals........ 65,000 $ 2,901
Minerals Technologies............. 50,000 1,463
Monsanto Company.................. 43,000 3,032
Morton International, Inc. ....... 49,900 1,422
--------
8,818
COMMUNICATIONS AND MEDIA--4.1%
American Telephone & Telegraph
Company......................... 143,400 7,206
Capital Cities/ABC Inc. .......... 18,000 1,534
DDI Corporation................... 30 259
Harcourt General.................. 40,000 1,410
Singapore Press Holdings.......... 5,000 91
(a)Technology Resource, Ltd. ........ 34,600 110
(a)Telewest Communications........... 7,000 19
Tribune Co........................ 25,400 1,391
(a)Viacom International Inc.
"A" shares...................... 1,992 83
"B" shares...................... 15,093 613
variable common rights.......... 24,900 28
(a)Vodafone Group PLC................ 99,900 331
--------
13,075
COMPUTER SOFTWARE, ELECTRONIC DATA
PROCESSING AND SEMI-CONDUCTORS--10.1%
(a)Cisco Systems, Inc. .............. 37,800 1,328
(a)Compaq Computer Corporation....... 64,800 2,560
(a)Compuware......................... 73,000 2,628
(a)EMC Corporation................... 58,600 1,267
First Data Corporation............ 48,700 2,307
General Motors Corporation, "E"... 63,000 2,426
Hewlett Packard Company........... 35,000 3,496
Intel Corporation................. 25,000 1,597
Linear Technology Corp. .......... 50,000 2,475
(a)Microsoft Corporation............. 54,000 3,301
Motorola Inc. .................... 46,000 2,662
(a)Oracle Systems Corporation........ 35,000 1,544
(a)Silicon Graphics Inc. ............ 119,000 3,674
(a)Solectron Corporation............. 43,100 1,185
--------
32,450
CONSUMER PRODUCTS AND SERVICES--17.6%
Campbell Soup Company............. 95,000 4,192
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
Coca-Cola Co. .................... 128,000 $ 6,592
ConAgra, Inc. .................... 95,000 2,969
Corning Inc. ..................... 102,000 3,047
CPC International Inc. ........... 84,000 4,473
(a)CUC International Inc. ........... 65,800 2,204
Duracell International Inc. ...... 32,600 1,414
(a)Franklin Quest Inc. .............. 85,200 2,545
Gillette Company.................. 50,000 3,738
Manpower Inc. .................... 155,000 4,359
Philip Morris Companies Inc. ..... 85,900 4,939
Procter & Gamble Company.......... 103,000 6,386
Sara Lee Corporation.............. 120,000 3,030
Seagram Company Ltd. ............. 75,000 2,213
Service Corporation
International................... 118,000 3,275
UST, Incorporated................. 50,000 1,388
--------
56,764
ENERGY AND RELATED SERVICES--2.0%
British Petroleum Co., PLC........ 54,200 361
Enron Corp. ...................... 134,100 4,090
Manweb PLC........................ 10,000 136
Mobil Corporation................. 18,000 1,517
Repsol, S.A. ..................... 6,900 187
--------
6,291
ENTERTAINMENT AND GAMING--2.1%
Walt Disney Company............... 105,000 4,843
Genting Berhad.................... 8,000 69
PolyGram N.V. .................... 3,000 140
(a)Promus Companies, Inc............. 55,550 1,722
--------
6,774
FINANCIAL SERVICES AND REAL
ESTATE--10.9%
Aalberts Industries N.V. ......... 2,300 111
Bankers Life Holding
Corporation....................... 50,400 958
Boatmen's Bancshares Inc.......... 123,000 3,336
Conseco, Inc. .................... 47,300 2,040
DBS Land Ltd...................... 24,000 71
Equity Residential Properties
Trust............................. 45,000 1,350
First Financial Management
Corporation..................... 80,000 4,930
First USA Inc..................... 79,400 2,610
General Re Corp. ................. 34,200 4,232
Kansas City Southern
Industries...................... 48,800 1,507
(a)Lloyds Bank PLC................... 16,000 138
</TABLE>
45
<PAGE> 46
KEMPER INVESTORS FUND
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
MBNA Corporation.................. 180,900 $ 4,229
MGIC Investment Corporation....... 138,000 4,571
NationsBank Corporation........... 63,000 2,843
Road Builder Holdings............. 19,000 103
Sanyo Shinpan Finance Co.......... 3,700 356
Siam City Bank.................... 120,400 153
Tokio Marine & Fire
Insurance Co. Ltd. ............. 12,000 147
Veba, A.G. ....................... 1,000 348
Wai Kee Holdings, with warrants
expiring 1996................... 318,000 75
Western National Corporation...... 81,500 1,049
--------
35,157
MANUFACTURING--10.1%
Amada Co., Ltd. .................. 23,000 288
AMP, Inc.......................... 40,000 2,910
(a)Applied Materials, Inc. ....... 55,000 2,324
Atlas Copco....................... 25,000 319
(a)Automotive Industries Holding,
Inc., "A"....................... 33,100 670
Brown Boveri...................... 240 207
Consolidated Papers, Inc.......... 7,000 315
Emerson Electric Co. ............. 69,000 4,312
General Electric Company.......... 115,400 5,885
W. W. Grainger Inc................ 30,000 1,733
Honda Motor Co., Ltd. ............ 20,000 355
Keppel Corporation Limited........ 31,000 264
Kyocera Corporation............... 4,800 356
Loral Corporation................. 18,200 689
MASISA, ADR....................... 4,700 120
Matsushita Electric Industrial Co.
Ltd. ........................... 14,000 230
Newell Co......................... 170,000 3,570
Nucor Corporation................. 55,800 3,097
Reynolds & Reynolds............... 65,000 1,625
Sandvik AB........................ 7,060 113
Sharp Corporation................. 14,000 253
Tokyo Electron.................... 12,000 373
TriMas Corporation................ 125,000 2,500
--------
32,508
MEDICAL PRODUCTS AND SERVICES--13.5%
Abbott Laboratories............... 48,400 1,579
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
Columbia/HCA Healthcare Corp. .... 82,000 $ 2,993
(a)Cordis Corporation............. 62,600 3,787
(a)Forest Laboratories, Inc....... 67,000 3,124
(a)IDEX Laboratories.............. 33,600 1,210
(a)Integrated Health Services..... 86,200 3,405
Johnson & Johnson................. 38,900 2,130
Eli Lilly & Co.................... 50,000 3,281
Medtronic, Inc. .................. 82,000 4,561
(a)Mid-Atlantic Medical
Services........................ 61,600 1,409
Pfizer Inc........................ 21,800 1,684
Roche Holdings Genuss Chein....... 57 276
(a)R. P. Scherer Corporation...... 34,000 1,543
Schering-Plough Corporation....... 57,000 4,218
United Healthcare Corporation..... 37,000 1,670
U.S. Healthcare Inc............... 38,000 1,568
(a)Value Health Inc............... 60,350 2,248
Warner-Lambert Co. ............... 36,900 2,841
--------
43,527
NETWORKING AND TELECOMMUNICATIONS
EQUIPMENT--3.5%
(a)...............................
ADC Telecommunications, Inc. 19,600 980
Allen Group Inc. ................. 44,000 1,050
LM Ericsson "B"................... 6,500 359
Nokia Telecom..................... 1,936 285
(a)...............................
Tellabs, Inc. 80,200 4,471
(a)...............................
3Com Corporation 80,000 4,125
--------
11,270
POLLUTION CONTROL--.8%
WMX Technologies, Inc. ........... 105,000 2,756
RESTAURANTS--1.4%
(a)Brinker International, Inc..... 81,100 1,470
McDonald's Corporation............ 100,000 2,925
--------
4,395
RETAILING AND DISTRIBUTION--9.4%
Alco Standard Corporation......... 65,000 4,079
(a)Ann Taylor Stores Corp......... 46,700 1,605
Carrefour S.A..................... 650 269
(a)General Nutrition Centers...... 65,100 1,888
Hagemeyer N.V. ................... 1,400 114
</TABLE>
46
<PAGE> 47
KEMPER INVESTORS FUND
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number
of Shares
or
Principal
Amount Value
--------- --------
<S> <C> <C>
Helig-Meyers Company.............. 75,300 $ 1,901
Home Depot, Inc. ................. 136,200 6,265
Keiyo Company Ltd................. 18,000 274
May Department Stores Company..... 40,000 1,350
(a)Office Depot, Inc. ............... 59,350 1,424
(a)Starbucks Corporation............. 126,800 3,487
(a)Viking Office Products............ 54,400 1,666
Wal-Mart Stores Inc............... 271,700 5,774
--------
30,096
TRANSPORTATION--1.6%
Conrail Inc. ..................... 43,000 2,171
TNT Ltd., "A"..................... 61,400 105
Van Ommeren....................... 7,700 202
(a)Wisconsin Central Transportation
Corporation..................... 64,200 2,648
--------
5,126
--------
TOTAL COMMON STOCKS--89.8%
(Cost: $264,981)..................... 289,007
CONVERTIBLE CORPORATE OBLIGATIONS
Argosy Gaming Company, Inc.,
12.00%, 2001.................... $ 733 689
Medaphis Corp., 6.50%, 2000....... 2,000 3,325
Solectron Corporation, zero
coupon, 2012.................... 2,511 1,441
Starbucks Corporation, 4.50%,
2003............................ 667 675
--------
TOTAL CONVERTIBLE CORPORATE
OBLIGATIONS--1.9%
(Cost: $4,168).................... 6,130
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENT
Dated 12/30/94 with United
Missouri Bank, N.A., 5.10%,
1/03/95, collateralized by U.S.
Treasury Bonds (Cost: $75) ....... $ 75 $ 75
MONEY MARKET INSTRUMENTS
Yield--5.95% to 6.30%
Due--January 1995
American Home Products
Corporation..................... 2,500 2,495
Baxter International Inc.......... 6,000 5,989
Caterpillar Financial Services
Corporation..................... 5,000 4,985
ConAgra, Inc...................... 1,400 1,398
Greyhound Financial Corporation... 8,160 8,126
GTE Corporation................... 1,500 1,499
Weyerhaeuser Mortgage Company..... 8,000 7,985
--------
TOTAL MONEY MARKET
INSTRUMENTS--10.1%
(Cost: $32,481)................... 32,477
--------
TOTAL INVESTMENTS--101.8%
(Cost: $301,705).................. 327,689
LIABILITIES, LESS
OTHER ASSETS--(1.8)%................. (5,981)
--------
NET ASSETS--100%..................... $321,708
========
</TABLE>
NOTES TO EQUITY PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $301,705,000 for federal income tax purposes
at December 31,1994, the aggregate gross unrealized appreciation was
$34,770,000, the aggregate gross unrealized depreciation was $8,786,000 and the
net unrealized appreciation of investments was $25,984,000.
See accompanying notes to financial statements.
47
<PAGE> 48
KEMPER INVESTORS FUND
GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Coupon Principal
Rate Maturity Amount Value
------ --------- --------- --------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
FEDERAL HOME LOAN MORTGAGE CORPORATION--13.5%
(Cost: $13,129)
Pass-through Certificates................................................. 7.00% 2025 $11,000 $ 10,006
8.00 2022-2023 3,035 2,913
--------
12,919
FEDERAL NATIONAL MORTGAGE ASSOCIATION--12.0%
(Cost: $11,523)
Pass-through Certificates................................................. 7.50 2025 2,000 1,868
8.00 2025 8,000 7,665
8.50 2025 2,000 1,963
--------
11,496
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--53.7%
(Cost: $53,570)
Pass-through Certificates................................................. 6.50 2023 992 859
7.00 2023-2024 10,454 9,383
7.50 2022-2024 13,302 12,342
8.00 2016-2024 10,506 10,043
8.50 2016-2023 9,940 9,769
9.00 2016-2020 3,208 3,237
9.50 2013-2022 4,273 4,409
10.00 2016 1,311 1,378
--------
51,420
U.S. TREASURY SECURITIES--10.4%
(Cost: $10,027)
Notes..................................................................... 7.875 2004 9,000 9,025
Bonds..................................................................... 7.50 2024 1,000 956
--------
9,981
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS--89.6%
(Cost: $88,249)........................................................... 85,816
CORPORATE OBLIGATIONS
Commonwealth Edison Company, 8.375%, 2006................................. 500 474
Home Savings of America, 6.00%, 2000...................................... 500 441
Hydro-Quebec, 7.375%, 2003................................................ 500 465
--------
TOTAL CORPORATE OBLIGATIONS--1.4%
(Cost: $1,589)............................................................ 1,380
MONEY MARKET INSTRUMENTS
Yield--5.95% to 6.30%
Due--January 1995
Federal Home Loan Bank.................................................... 10,300 10,220
Federal Home Loan Mortgage Corporation.................................... 15,000 14,845
Federal National Mortgage Association..................................... 10,900 10,828
--------
TOTAL MONEY MARKET INSTRUMENTS--37.5%
(Cost: $35,903)........................................................... 35,893
--------
TOTAL INVESTMENTS--128.5% (Cost: $125,741).................................... 123,089
LIABILITIES, LESS CASH AND OTHER ASSETS--(28.5)%.............................. (27,307)
--------
NET ASSETS--100%.............................................................. $ 95,782
========
</TABLE>
NOTE TO GOVERNMENT SECURITIES PORTFOLIO OF INVESTMENTS
Based on the cost of investments of $125,741,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was $55,000,
the aggregate gross unrealized depreciation was $2,707,000 and the net
unrealized depreciation of investments was $2,652,000.
See accompanying notes to financial statements.
48
<PAGE> 49
KEMPER INVESTORS FUND
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
COMMON STOCKS
CONTINENTAL EUROPE
FINLAND--3.5%
Nokia Telecom....................... 29,600 $ 4,359
Telecommunications company
FRANCE--4.8%
Carrefour S.A. ..................... 6,000 2,487
Food retailer
Peugeot S. A........................ 8,000 1,097
Automobile company
(a)Renault............................. 3,650 121
Automobile company
(a)Technip............................. 16,400 749
Oil company
Total Cie Francais.................. 25,000 1,453
Oil company
--------
5,907
GERMANY--5.2%
Hoechst, A.G. ...................... 7,000 1,522
Chemicals and pharmaceuticals
manufacturer
Mannesmann, A.G..................... 7,600 2,069
Diversified manufacturing company
Veba, A.G........................... 8,000 2,787
Holding company
--------
6,378
IRELAND--1.5%
Greencore Group PLC................. 150,000 938
Food producer
(a)Waterford Wedgewood PLC............. 972,000 856
Fine china/crystal manufacturer
--------
1,794
NETHERLANDS--7.6%
Aalberts Industries N.V............. 18,360 889
Diversified holding company
Hagemeyer N.V. ..................... 20,937 1,707
Trading company
Phillips N.V........................ 90,000 2,666
Electronics company
PolyGram N.V. ...................... 55,000 2,558
Music recording company
Van Ommeren......................... 59,500 1,563
Shipping company
--------
9,383
SPAIN--1.0%
Repsol S.A.......................... 45,000 1,220
Oil and gas producer
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
SWEDEN--4.1%
Atlas Copco......................... 100,000 $ 1,278
Industrial machinery manufacturer
LM Ericsson, "B".................... 49,500 2,737
Telecommunications equipment
manufacturer
Sandvik AB.......................... 62,758 1,009
Manufacturing company
--------
5,024
SWITZERLAND--3.8%
Brown Boveri........................ 2,000 1,722
Engineering and construction
company
Rhone Poulenc Rorer, Inc............ 200 7
Chemicals and pharmaceutical
company
Roche Holdings Genuss Chein......... 600 2,904
Pharmaceuticals company
--------
4,633
--------
TOTAL CONTINENTAL EUROPE--31.5% 38,698
PACIFIC REGION
HONG KONG--1.1%
Hutchison Whampoa Ltd. ............. 136,000 550
Diversified holding company
Swire Pacific Ltd., 'A'............. 68,000 424
Property investment and
developement company
Wai Kee Holdings, with warrants
expiring 1996....................... 1,640,000 385
Construction company
--------
1,359
JAPAN--32.0%
(a)Amada, Co. Ltd. .................... 100,000 1,253
Equipment manufacturer
(a)Autobacs Seven Co., Ltd.,
warrants expiring 1996.............. 137 493
Auto supplies and equipment
retailer
Bridgestone Corp. .................. 68,000 1,063
Manufacturer of rubber related
products
DDI Corp. .......................... 240 2,069
Telecommunications company
Daifuku Co., Ltd. .................. 45,000 758
Diversified machinery
Fujitsu Limited..................... 150,000 1,518
Computer components manufacturer
Honda Motor Co. Ltd. ............... 60,000 1,064
Automobile company
</TABLE>
49
<PAGE> 50
KEMPER INVESTORS FUND
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
Japan Medical Supply................ 49,000 $ 398
Medical equipment supplier
Keiyo Company Ltd. ................. 77,000 1,173
Retailer
Kurita Water Industries............. 30,000 776
Water treatment equipment and
chemicals manufacturer
Kyocera Corporation................. 13,000 963
Electronics manufacturer
Marui Co, Ltd. ..................... 40,000 730
Department store
Matsushita Electric Industrial Co.
Ltd............................... 70,000 1,151
Consumer electronics and office
equipment manufacturer
Mitsubishi Heavy Industries......... 250,000 1,904
Industrial machinery manufacturer
Mitsui Petrochemical Industries..... 51,000 450
Chemical company
Nippon Paper Industries............. 150,000 1,101
Paper company
Nippondenso Co. Ltd................. 68,000 1,431
Automotive components manufacturer
and supplier
Nissan Motor Co. Ltd................ 165,000 1,361
Automobile manufacturer
Nisshin Steel Co., Ltd.............. 175,000 881
Steel manufacturer
(a)NKK Corp............................ 500,000 1,383
Steel manufacturer
Omron Corp. ........................ 85,000 1,568
Control components manufacturer
Sanyo Shinpan Finance Co. .......... 25,500 2,456
Consumer finance company
Schimachu........................... 30,000 1,079
Furniture manufacturer and
retailer
Seven-Eleven Japan Co., Ltd. ....... 17,000 1,365
Convenience retailer
Sharp Corporation................... 75,000 1,353
Electronics manufacturer
Shinko Electric..................... 16,600 393
Electrical equipment
Sumitomo Bank, Ltd. ................ 65,000 1,238
Banking
Sumitomo Corporation................ 105,000 1,073
Holding company
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
Suzuki Motor Co. Ltd. .............. 115,000 $ 1,349
Automobile company
Tanube Seiyaku Company Ltd.......... 103,000 875
Pharmaceuticals and medical
products manufacturer
Tokio Marine & Fire Insurance
Co. Ltd. ......................... 157,000 1,920
Insurance company
Tokyo Electron...................... 50,000 1,553
Electronics manufacturing company
(a)Toppan Printing,
warrants expiring 1995.............. 780 244
Printing company
(a)Ube Industries, Ltd. ............... 250,000 965
Diversified manufacturing company
--------
39,351
MALAYSIA--.9%
Road Builder Holdings............... 67,000 365
Construction company
(a)Technology Resources Industries .... 216,000 689
Telecommunications company --------
1,054
PHILIPPINES--.2%
(a)Universal Robina Corporation........ 290,000 205
Food manufacturer
SINGAPORE--3.4%
Development Bank.................... 51,000 525
Banking
Keppel Corporation Limited.......... 170,000 1,446
Conglomerate holding company
Singapore Press Holding............. 85,000 1,545
Publishing company
United Overseas Bank................ 60,000 634
Banking
--------
4,150
THAILAND--.5%
Siam City Bank...................... 502,000 640
Banking
--------
TOTAL PACIFIC REGION--38.1% 46,759
</TABLE>
50
<PAGE> 51
KEMPER INVESTORS FUND
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
LATIN AMERICA
BRAZIL--.6%
(a)Usiminas S.A., ADR.................. 56,050 $ 729
Iron and steel manufacturer
CHILE--1.2%
Enersis S.A., ADR................... 16,500 458
Electric utility company
MASISA, ADR......................... 9,400 240
Wood products manufacturer
(a)Provida Corporation, ADR............ 43,700 814
Financial services
--------
1,512
--------
TOTAL LATIN AMERICA--1.8%.............. 2,241
COMMONWEALTH COUNTRIES
AUSTRALIA--1.4%
CSL Ltd............................. 253,800 478
Blood plasma producer
Just Jeans Holdings Ltd............. 20,800 35
Retail company
TNT Ltd............................. 666,000 1,136
Transportation and logistics
--------
1,649
CANADA--2.2%
Magna International, "A"............ 47,300 1,814
Automobile parts company
(a)Sceptre Resources................... 87,800 556
Energy resource company
(a)Talisman Energy..................... 18,700 317
Energy resource company
--------
2,687
UNITED KINGDOM--11.4%
British Petroleum Co., PLC.......... 461,708 3,073
Petroleum mining and production
company
Eastern Group PLC................... 140,000 1,702
Electric utility company
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>
Granada Group PLC................... 85,770 $ 687
Leisure goods company
Lloyds Bank PLC..................... 185,000 1,599
Banking
Manweb PLC.......................... 150,000 2,042
Electric utility company
RTZ Corporation PLC................. 200,000 2,594
Mining company
(a)Telewest Communications............. 173,000 463
Communications utility
Vodafone Group PLC.................. 561,000 1,861
Cellular telephone services
--------
14,021
--------
TOTAL COMMONWEALTH
COUNTRIES--15.0%....................... 18,357
--------
TOTAL COMMON STOCKS--86.4%
(Cost: $102,594).................... 106,055
MONEY MARKET INSTRUMENTS
Yield--5.91% to 6.16%
Due--January 1995
B.A.T. Capital Corporation........ $ 945 944
Greyhound Financial Corporation... 5,000 4,992
NNW Utility Funding, Inc.......... 1,000 999
A.H. Robbins...................... 5,000 4,995
--------
TOTAL MONEY MARKET INSTRUMENTS--9.7%
(Cost: $11,931)..................... 11,930
--------
TOTAL INVESTMENTS--96.1%
(Cost: $114,525).................... 117,985
CASH AND OTHER ASSETS,
LESS LIABILITIES--3.9%.............. 4,725
--------
NET ASSETS--100%....................... $122,710
========
</TABLE>
NOTES TO INTERNATIONAL PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $114,525,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was
$8,320,000, the aggregate gross unrealized depreciation was $4,860,000 and the
net unrealized appreciation of investments was $3,460,000.
See accompanying notes to financial statements.
51
<PAGE> 52
KEMPER INVESTORS FUND
SMALL CAPITALIZATION EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
COMMON STOCKS
BUILDING MATERIALS
AND HOUSING--.3%
(a)Schuler Homes Inc. .............. 3,100 $ 44
CABLE TELEVISION, BROADCASTING, AND
WIRELESS COMMUNICATIONS--.8%
(a)E Z Communications, Inc. 2,000 25
(a)Infinity Broadcasting............ 2,300 72
(a)Jones Intercable, Inc. "A"....... 800 10
-------
107
CHEMICALS--3.3%
(a)FMC Corp. ....................... 5,000 289
Minerals Technologies............ 4,200 123
(a)OM Group......................... 700 17
-------
429
COMPUTER SOFTWARE AND
TECHNOLOGY--9.0%
(a)Atmel Corp. ..................... 3,500 117
(a)Alternative Resources, Inc. ..... 4,000 126
(a)Broderbund Software, Inc. ....... 3,200 150
(a)EMC Corporation.................. 2,800 61
(a)Keane, Inc. ..................... 6,000 143
(a)Microchip Technologies........... 6,000 165
(a)Parametric Technology
Corporation................... 3,600 124
(a)7th Level........................ 9,900 52
(a)Solectron Corporation............ 4,100 113
(a)Ultratech Stepper................ 3,000 114
-------
1,165
CONSUMER PRODUCTS
AND SERVICES--9.2%
(a)Coleman, Inc. 4,800 169
Danka Business Systems, ADR...... 9,000 195
(a)Franklin Quest Inc............... 7,000 209
(a)Hammons John Q Hotels, Inc....... 8,000 112
Hudson Foods, Inc. .............. 7,100 178
Meredith Corporation............. 3,400 159
(a)Norton McNaughton, Inc. ......... 400 6
(a)Safety 1st Inc................... 5,000 146
(a)Waterford Wedgewood PLC 13,000 11
-------
1,185
ENGINEERING--.9%
Aalberts Industries N.V.......... 200 10
Jacobs Engineering Group......... 5,600 104
-------
114
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
FINANCIAL SERVICES--5.4%
ADVANTA Corporation.............. 6,000 $ 151
Bankers Life Holding
Corporation...................... 9,500 180
Conseco, Inc..................... 800 34
MBNA Corporation................. 4,000 93
(a)Medaphis Corporation............. 1,500 70
(a)SPS Transaction Services......... 6,000 158
Western National Corporation..... 1,300 17
-------
703
MANUFACTURING AND
DISTRIBUTION--8.4%
Federal Signal Corporation....... 10,000 204
Greenfield Industries............ 7,400 178
Harley-Davidson, Inc............. 6,400 179
Harmon Industries................ 6,600 129
(a)Norand Corporation............... 2,000 71
Nucor Corporation................ 1,500 83
Outokumpu Oy "A"................. 700 13
TriMas Corporation............... 10,700 214
(a)Universal Robina Corp. 13,000 9
-------
1,080
MEDICAL PRODUCTS AND
EQUIPMENT--4.6%
DENTSPLY International........... 6,000 189
(a)IDEX Laboratories................ 7,400 266
(a)Pyxis Corporation................ 7,000 133
-------
588
MEDICAL SERVICES--4.0%
(a)HEALTHSOUTH Rehabilitation....... 3,300 122
Integrated Health Services....... 2,900 115
Omnicare, Inc.................... 4,700 206
(a)Renal Treatment Centers, Inc. ... 3,300 72
-------
515
RETAILING AND RESTAURANTS--8.5%
(a)Best Buy, Inc.................... 5,000 156
(a)Department 56, Inc............... 3,500 139
(a)General Nutrition Centers........ 3,600 104
Hagemeyer N.V.................... 200 16
(a)Officemax, Inc................... 5,500 146
(a)PetsMart, Inc. .................. 2,400 83
(a)Proffitt's, Inc. ................ 6,000 133
(a)Starbucks Corporation............ 3,000 82
(a)Viking Office Products........... 7,500 230
Zannier S.A...................... 200 5
-------
1,094
</TABLE>
52
<PAGE> 53
KEMPER INVESTORS FUND
SMALL CAPITALIZATION EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
TELECOMMUNICATIONS AND
EQUIPMENT--11.4%
(a)ADC Telecommunications, Inc...... 3,600 $ 180
Allen Group Inc.................. 8,300 198
(a)International CableTel........... 4,500 125
(a)LCI International................ 10,200 273
(a)Paging Network, Inc. ............ 3,600 122
Scientific Atlanta, Inc. ........ 6,000 126
(a)Tellabs, Inc..................... 4,300 240
(a)US Robotics Inc.................. 4,900 212
-------
1,476
TRANSPORTATION--2.8%
(a)ABC Rail Products 6,200 136
(a)Wisconsin Central
Transportation Corporation..... 5,300 219
-------
355
-------
TOTAL COMMON STOCKS--68.6%
(Cost: $8,552)................... 8,855
<CAPTION>
Principal
Amount Value
--------- -------
<S> <C> <C>
MONEY MARKET INSTRUMENTS
Yield--5.50% to 5.93%
Due--January and February 1995
Federal Farm Credit Banks...... $ 1,000 $ 994
Federal Home Loan Bank......... 700 699
Federal Home Loan Mortgage
Corporation.................. 2,500 2,495
-------
TOTAL MONEY MARKET
INSTRUMENTS--32.4%
(Cost: $4,189)................... 4,188
-------
TOTAL INVESTMENTS--101.0%
(Cost: $12,741).................. 13,043
LIABILITIES, LESS OTHER
ASSETS--(1.0)%...................... (134)
-------
NET ASSETS--100%.................... $12,909
=======
</TABLE>
NOTES TO SMALL CAPITALIZATION PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $12,741,000 for federal income tax purposes
at December 31, 1994, the aggregate gross unrealized appreciation was $698,000,
the aggregate gross unrealized depreciation was $396,000 and the net unrealized
appreciation was $302,000.
See accompanying notes to financial statements.
53
<PAGE> 54
ANNUAL
REPORT
KEMPER
ADVANTAGE III
& KEMPER
PASSPORT
Periodic and Flexible Payment
Variable Annuity Contracts
Modified Guaranteed and
Variable Annuity Contracts
KILICO Variable Annuity Separate Account
Kemper Investors Fund
Period ended
December 31, 1994
[KEMPER LIFE INSURANCE COMPANIES LOGO]
This publication may be distributed to the public
only if preceded or accompanied by a prospectus.
Distributed by
Investors Brokerage Services, Inc.
Kemper Investors Life Insurance Company
[KEMPER LIFE INSURANCE COMPANIES LOGO] 1 Kemper Drive
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PRINTED ON RECYCLED PAPER
L-1021 (2/95) Kemper ADVANTAGE III Individual Policy form series L-1000 230711
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