KEMPER INVESTORS FUND, 485BPOS, 1995-04-27

KEMPER INVESTORS FUND
485BPOS, 1995-04-27

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1995

1933 ACT REGISTRATION NO. 33-11802
1940 ACT REGISTRATION NO. 811-5002
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------

FORM N-1A

<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 14 /X/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF
1940 / /
Amendment No. 15 /X/
(Check appropriate box or boxes)
</TABLE>

------------------

KEMPER INVESTORS FUND
(Exact name of Registrant as Specified in Charter)

120 South LaSalle Street, Chicago, Illinois
(Address of Principal Executive Office)

60603
(Zip Code)

Registrant's Telephone Number, including Area Code: (312) 781-1121

Philip J. Collora, Vice President and Secretary

KEMPER INVESTORS FUND
120 South LaSalle Street
Chicago, Illinois 60603
(Name and Address of Agent for Service)

With a copy to:

Charles F. Custer

Vedder, Price, Kaufman & Kammholz

222 North LaSalle Street

Chicago, Illinois 60601

The Registrant has registered an indefinite number of shares of the Fund
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 Notice for the Registrant's most recent
fiscal year was filed on or about February 27, 1995.

It is proposed that this filing will become effective (check appropriate
box)

/ /immediately upon filing pursuant to paragraph (b)

/X/on May 1, 1995 pursuant to paragraph (b)

/ /60 days after filing pursuant to paragraph (a)(1)

/ /on (date) pursuant to paragraph (a)(1).

/ /75 days after filing pursuant to paragraph (a)(2)

/ /on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

/ /this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

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<PAGE> 2

KEMPER INVESTORS FUND

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS

<TABLE>
<CAPTION>
ITEM NUMBER LOCATION
OF FORM N-1A IN PROSPECTUS
- --------------------------------------------------- ----------------------------------------
<S> <C>
1. Cover Page............................... Cover Page
2. Synopsis................................. Summary
3. Condensed Financial Information.......... Financial Highlights
4. General Description of Registrant........ Summary; Capital Structure and General
Information; Investment Objectives,
Policies and Risk Factors; Investment
Techniques
5. Management of the Fund................... Summary; Investment Manager; Distributor
5A. Management's Discussion of Fund
Performance............................ Capital Structure and General
Information
6. Capital Stock and Other Securities....... Summary; Capital Structure and General
Information; Dividends and Taxes
7. Purchase of Securities Being Offered..... Summary; Purchase and Redemption; Net
Asset Value; Distributor
8. Redemption or Repurchase................. Purchase and Redemption
9. Pending Legal Proceedings................ Inapplicable
</TABLE>

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary.................................. 2
Financial Highlights..................... 3
Investment Objectives, Policies and Risk
Factors................................ 7
Investment Techniques.................... 16
Net Asset Value.......................... 20
Purchase and Redemption.................. 21
Dividends and Taxes...................... 22
Capital Structure and General
Information............................ 22
Investment Manager....................... 23
Distributor.............................. 25
Appendix................................. 26
</TABLE>

This prospectus contains information about the Fund that you should know before
investing and should be retained for future reference. A Statement of Additional
Information dated May 1, 1995, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available upon request
without charge from the Fund at the address or telephone number shown above.

AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

KEMPER
INVESTORS
FUND

PROSPECTUS MAY 1, 1995

KEMPER INVESTORS FUND
120 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
1-800-621-1048

Kemper Investors Fund (the "Fund") offers a choice of seven investment
portfolios to investors applying for certain variable life insurance and
variable annuity contracts offered by Participating Insurance Companies.

The seven investment portfolios are:

MONEY MARKET PORTFOLIO
TOTAL RETURN PORTFOLIO
HIGH YIELD PORTFOLIO
EQUITY PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
INTERNATIONAL PORTFOLIO
SMALL CAPITALIZATION EQUITY PORTFOLIO

Shares of the Portfolios are available exclusively as pooled funding vehicles
for the variable life insurance and variable annuity contracts of Participating
Insurance Companies.
<PAGE> 4

SUMMARY

FUND INVESTMENT CONCEPT. Kemper Investors Fund (the "Fund") is an open-end
management investment company established on March 24, 1987 as a Massachusetts
business trust. The Fund is a series fund consisting of seven portfolios
("Portfolios"): Money Market, Total Return, High Yield, Equity, Government
Securities, International and Small Capitalization Equity ("Small Cap").
Additional Portfolios may be created from time to time. The Fund is the funding
vehicle for variable life insurance contracts ("VLI contracts") and variable
annuity contracts ("VA contracts") offered by the separate accounts of certain
life insurance companies ("Participating Insurance Companies"). The Fund
currently does not foresee any disadvantages to the holders of VLI contracts and
VA contracts arising from the fact that the interests of the holders of such
contracts may differ. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts that may arise and to
determine what action, if any, should be taken. The VLI contracts and VA
contracts are described in the separate prospectuses issued by the Participating
Insurance Companies. The Fund assumes no responsibility for such prospectuses.

Individual VLI contract holders and VA contract holders are not the
"shareholders" of the Fund. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders or investors (the "Shareholders"),
although such companies may pass through voting rights to their VLI and VA
contract holders.

INVESTMENT OBJECTIVES. The Money Market Portfolio seeks maximum current income
to the extent consistent with stability of principal from a portfolio of high
quality money market instruments. The Total Return Portfolio seeks a high total
return, a combination of income and capital appreciation, by investing in a
combination of debt securities and common stocks. The High Yield Portfolio seeks
to provide a high level of current income by investing in fixed-income
securities. The Equity Portfolio seeks maximum appreciation of capital through
diversification of investment securities having potential for capital
appreciation. The Government Securities Portfolio seeks high current return
consistent with preservation of capital from a portfolio composed primarily of
U.S. Government securities. The International Portfolio seeks total return, a
combination of capital growth and income, principally through an internationally
diversified portfolio of equity securities. The Small Cap Portfolio seeks
maximum appreciation of investors' capital. All portfolios except the Money
Market Portfolio may engage in options and financial futures transactions. The
Total Return, High Yield, Equity and Small Cap Portfolios each may invest a
portion of its assets in foreign securities and engage in related foreign
currency transactions. The International Portfolio will invest a substantial
portion of its assets in foreign securities and engage in related foreign
currency transactions. Foreign securities may include investments in developing
countries. The High Yield Portfolio will, and the Total Return and Government
Securities Portfolios may, invest in high yield (high risk) bonds. All of the
Portfolios are diversified. See "Investment Objectives, Policies and Risk
Factors."

RISK FACTORS. There is no assurance that the investment objective of any
Portfolio will be achieved and investment in each Portfolio includes risks that
vary in kind and degree depending upon the investment policies of the Portfolio.
The returns and net asset value of a Portfolio will fluctuate (except that the
Money Market Portfolio seeks to maintain a net asset value of $1.00 per share).
Investors should note that investments in high yield securities by certain
portfolios (principally the Total Return and High Yield Portfolios) entail
relatively greater risk of loss of income and principal than investments in
higher rated securities; and market prices of high yield securities may
fluctuate more than market prices of higher rated securities. The government
guarantee of the U.S. Government securities in which the Government Securities
Portfolio may invest does not guarantee the market value of the shares of the
Portfolio. Normally the value of investments in U.S. Government securities
varies inversely with changes in interest rates. Foreign investments by certain
Portfolios (principally the International Portfolio) involve risk and
opportunity considerations not typically associated with investing in U.S.
companies. The return of such a Portfolio can be adversely affected by changes
in currency exchange rates. Investment by the Small Cap Portfolio primarily in
smaller companies involves greater risk than investment in larger, more
established companies. There are special risks associated with options,
financial futures and foreign currency transactions and there is no assurance
that use of those investment techniques will be successful. Some of the
Portfolios may experience high portfolio turnover which would involve
correspondingly greater brokerage commissions or other transaction costs. See
"Investment Objectives, Policies and Risk Factors."

PURCHASES AND REDEMPTIONS. The separate accounts of the Participating Insurance
Companies place orders to purchase and redeem shares of each Portfolio based on,
among other things, the amount of premium payments to be invested and surrender
and transfer requests to be effected on that date pursuant to VLI and VA
contracts. See "Purchase and Redemption."

INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS" or "investment
manager") serves as investment manager for each of the Portfolios at an
effective annual rate, payable monthly, of .50%, .55%, .60%, .60%, .55%, .75%
and .65% of average daily net assets of the Money Market, Total Return, High
Yield, Equity, Government Securities, International and Small Cap Portfolios,
respectively. See "Investment Manager."

GENERAL INFORMATION AND CAPITAL. Since the Fund offers multiple Portfolios, it
is known as a "series company." Shares of each Portfolio have equal
non-cumulative voting rights and equal rights with respect to dividends, assets
and liquidation of such Portfolio. Each Portfolio has its own objective,
policies and restrictions. The Fund is not required to hold annual shareholder
meetings, but will hold special shareholder meetings as required or deemed
desirable. See "Capital Structure and General Information."

2
<PAGE> 5

FINANCIAL HIGHLIGHTS

The tables below show financial information for each Portfolio expressed in
terms of one share outstanding throughout the period. The information for the
Money Market, Total Return, High Yield and Equity Portfolios for fiscal periods
prior to 1990 reflects the operations of certain Separate Accounts as discussed
under "Capital Structure and General Information." The information in the tables
for the years ended December 31, 1990 through 1994 is covered by the report of
the Fund's independent auditors. The report is contained in the Fund's
Registration Statement and is available from the Fund. The financial statements
contained in the Fund's 1994 Annual Report to Shareholders are incorporated
herein by reference and may be obtained by writing or calling the Fund.

MONEY MARKET PORTFOLIO

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 1989 1988 1987 1986 1985
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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 1.707 1.605 1.661 1.496 1.214
- ---------------------------------------------------------------------------------------------------------------------------------
Income from
investment
operations:
Net investment
income .069 .069 .061 .080 .113 .102 .086 .075 .060 .057
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments (.313) .214 (.026) .677 (.013) .298 .102 (.056) .165 .282
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment
operations (.244) .283 .035 .757 .100 .400 .188 .019 .225 .339
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions
from net
investment
income .060 .050 .080 .110 .020 .086 .086 .075 .060 .057
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
from net
realized gain
on investments .168 .120 .140 .060 .030 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions in
excess of net
realized gain
on investments .002 -- -- -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .230 .170 .220 .170 .050 .086 .086 .075 .060 .057
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $2.112 2.586 2.473 2.658 2.071 2.021 1.707 1.605 1.661 1.496
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (9.50) 12.13 1.69 37.90 5.04 24.16 11.98 .62 15.13 28.42
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS (%):
Expenses .61 .59 .60 .61 .61 .58 .61 .58 .60 .66
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment
income 3.13 3.19 3.41 3.46 5.94 5.43 5.19 4.04 3.59 4.23
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end
of year (in
thousands) $ 586,594 643,830 528,007 412,772 272,747 262,652 206,262 214,203 146,324 103,249
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate (%) 128 191 160 187 139 102 152 129 136 117
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

3
<PAGE> 6

HIGH YIELD PORTFOLIO

<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of year $1.338 1.209 1.144 .914 1.122 1.258 1.225 1.290 1.226 1.143
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .116 .120 .125 .140 .170 .151 .152 .139 .142 .150
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investments (.149) .109 .070 .300 (.338) (.163) .033 (.065) .064 .083
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations (.033) .229 .195 .440 (.168) (.012) .185 .074 .206 .233
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends from net
investment income .120 .100 .130 .210 .040 .124 .152 .139 .142 .150
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
year $1.185 1.338 1.209 1.144 .914 1.122 1.258 1.225 1.290 1.226
=================================================================================================================================
TOTAL RETURN (%) (2.25) 20.00 17.76 51.83 (15.45) (1.22) 15.66 5.82 17.63 21.58
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS (%):
Expenses .65 .63 .64 .67 .68 .63 .66 .62 .66 .69
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 9.49 9.54 10.44 12.95 16.27 12.50 11.98 10.81 11.06 12.56
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of year
(in thousands) $ 219,415 233,964 162,158 121,608 88,566 150,674 138,461 95,502 143,605 71,282
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(%) 98 84 57 31 28 81 52 122 158 130
=================================================================================================================================
</TABLE>

EQUITY PORTFOLIO

<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <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 1.348 1.374 1.377 1.283 1.058
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .018 .004 .007 .017 .032 .039 .032 .030 .024 .036
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.138) .370 .082 .974 (.023) .338 (.026) (.003) .094 .225
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations (.120) .374 .089 .991 .009 .377 .006 .027 .118 .261
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net
investment income -- .010 .005 .030 .010 .033 .032 .030 .024 .036
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain on
investments .150 .060 .095 -- .010 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .150 .070 .100 .030 .020 .033 .032 .030 .024 .036
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $2.665 2.935 2.631 2.642 1.681 1.692 1.348 1.374 1.377 1.283
=================================================================================================================================
TOTAL RETURN (%) (4.02) 14.63 3.57 59.47 0.60 27.87 .40 1.67 9.10 25.08
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
(%):
Expenses .66 .64 .64 .67 .68 .70 .71 .64 .70 .72
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .69 .30 .65 .83 2.23 2.49 2.34 1.85 1.82 3.11
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of year (in
thousands) $ 321,708 284,461 203,624 118,983 61,621 51,961 45,833 46,474 30,228 45,913
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 106 78 78 106 135 93 301 165 262 95
=================================================================================================================================
</TABLE>

4
<PAGE> 7

GOVERNMENT SECURITIES PORTFOLIO

<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990(a) 1989(a) 1988 1987(c)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <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 1.053 1.020 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .067 .060 .064 .090 .093 .092 .089 --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (.102) .020 .006 .082 .011 .036 (.056) .020
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.035) .080 .070 .172 .104 .128 .033 .020
- ---------------------------------------------------------------------------------------------------------------------------------
Less dividends:
Distributions from net investment income .060 .060 .050 .060 .020 .090 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on
investments .024 .030 .030 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain
on investments .006 -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total dividends .090 .090 .080 .060 .020 .090 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.142 1.267 1.277 1.287 1.175 1.091 1.053 1.020
=================================================================================================================================
TOTAL RETURN (%) (2.74) 6.48 5.90 15.22 9.81 13.14 3.27 --
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .63 .60 .61 .63 .58 .53 1.81 --(b)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.69 5.05 6.08 7.42 8.48 8.73 7.94 --(b)
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands) $95,782 121,912 98,814 59,064 31,929 14,878 1,170 311
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 606 534 492 141 174 28 25 --
=================================================================================================================================
</TABLE>

NOTES TO GOVERNMENT SECURITIES PORTFOLIO:

(a) KFS waived its investment management fee from March 1, 1989 to March 1,
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
1.04% and 8.22%, respectively, in 1989 and .66% and 8.40%, respectively, in
1990.
(b) Because of the short start-up period from the Government Securities
Portfolio's initial public offering to December 31, 1987, ratios of expenses
and net investment income to average net assets for 1987 are not meaningful.
(c) For the period from September 3, 1987 (inception) through December 31, 1987.

INTERNATIONAL PORTFOLIO

<TABLE>
<CAPTION>
Year ended
December 31,
-------------------
1994 1993 1992(a)
-------- ------ -------
<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:
Distributions from net investment income -- .009 --
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions 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>

NOTE TO INTERNATIONAL PORTFOLIO:

(a) For the period from January 6, 1992 (inception) through December 31, 1992.

5
<PAGE> 8

SMALL CAPITALIZATION EQUITY PORTFOLIO

<TABLE>
<CAPTION>
December 31, 1994(a)
--------------------
<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 TO SMALL CAPITALIZATION EQUITY PORTFOLIO:

(a) For the period from May 2, 1994 (inception) through December 31, 1994.

NOTE:

Ratios for all Portfolios have been determined on an annualized basis. Total
return is not annualized.

6
<PAGE> 9

INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS

The Fund has adopted for each Portfolio certain fundamental investment
restrictions which, together with the investment objective and policies, cannot
be changed with respect to a Portfolio without approval by holders of a majority
of the outstanding voting shares as defined in the Investment Company Act of
1940 ("1940 Act"). See "Investment Restrictions" in the Statement of Additional
Information.

Each Portfolio has a different investment objective which it pursues through
separate investment policies, as described below. The differences in objectives
and policies among the Portfolios can be expected to affect the degree of market
and financial risk to which each Portfolio is subject and the return of each
Portfolio. There are market risks in any investment and therefore there can be
no assurance that the objective of any Portfolio will be achieved. The actual
return of a holder of a variable life or variable annuity contract will be
affected by charges imposed by the separate accounts of Participating Insurance
Companies.

MONEY MARKET PORTFOLIO. The Money Market Portfolio seeks maximum current income
to the extent consistent with stability of principal from a portfolio of the
following types of U.S. Dollar denominated money market instruments that mature
in twelve months or less:

1. Obligations of, or guaranteed by, the U.S. or Canadian Governments,
their agencies or instrumentalities. The two broad categories of U.S.
Government debt instruments are: (a) direct obligations of the U.S.
Treasury and (b) securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government. Some obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government are
backed by the full faith and credit of the United States and others are
backed exclusively by the agency or instrumentality with limited rights of
the issuer to borrow from the U.S. Treasury.

2. Bank certificates of deposit, time deposits or bankers' acceptances
limited to U.S. banks or Canadian chartered banks having total assets in
excess of $1 billion.

3. Bank certificates of deposit, time deposits or bankers' acceptances of
U.S. branches of foreign banks having total assets in excess of $10
billion.

4. Commercial paper rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or A-1 or A-2 by Standard & Poor's Corporation ("S&P"), or
commercial paper or notes of comparable quality, such as are issued by
companies with an unsecured debt issue outstanding currently rated A or
higher by Moody's or S&P where the obligation is on the same or a higher
level of priority as the rated issue, and investments in other corporate
obligations such as publicly traded bonds, debentures and notes rated A or
higher by Moody's or S&P. See "Appendix--Ratings of Investments" in the
Statement of Additional Information for a description of the ratings.

5. Repurchase agreements of obligations which are suitable for investment
under the categories set forth above. Repurchase agreements are discussed
under "Investment Techniques--Repurchase Agreements."

In addition, the Money Market Portfolio limits its portfolio investments to
securities that meet the quality and diversification requirements of Rule 2a-7
of the 1940 Act. See "Net Asset Value."

To the extent the Money Market Portfolio purchases Eurodollar certificates of
deposit issued by London branches of U.S. banks, or commercial paper issued by
foreign entities, consideration will be given to their marketability, possible
restrictions on international currency transactions and to regulations imposed
by the domicile country of the foreign issuer. Eurodollar certificates of
deposit may not be subject to the same regulatory requirements as certificates
issued by U.S. banks and associated income may be subject to the imposition of
foreign taxes. The Money Market Portfolio will normally invest at least 25% of
its net assets in instruments issued by domestic or foreign banks.

The Money Market Portfolio seeks to maintain its net asset value at $1.00 per
share by valuing its portfolio of investments on the amortized cost method in
accordance with Rule 2a-7 of the 1940 Act. See "Net Asset Value." While the
Portfolio will make every effort to maintain a fixed net asset value at $1.00
per share, there can be no assurance that this objective will be achieved.

The Money Market Portfolio may invest in instruments that bear rates of interest
that are adjusted periodically or that "float" continuously according to
formulae intended to minimize fluctuations in values of the instruments
("Variable Rate Securities"). The Fund determines the maturity of Variable Rate
Securities in accordance with Securities and Exchange Commission ("SEC") rules
that allow the Fund to consider certain of such instruments as having maturities
earlier than the maturity date on the instrument.

TOTAL RETURN PORTFOLIO. The Total Return Portfolio seeks a high total return, a
combination of income and capital appreciation, by investing in a combination of
debt securities and common stocks. The Portfolio's investments will

7
<PAGE> 10

normally consist of domestic and foreign fixed income and equity securities.
Fixed income securities will include bonds, money market instruments (including
repurchase agreements) and other debt securities (such as U.S. and foreign
government securities and investment grade and high yield corporate obligations)
and preferred stocks, some of which may have a call on common stocks through
attached warrants or a conversion privilege. The Portfolio may invest in fixed
income securities that are in the lower rating categories and those that are
non-rated (sometimes called "junk bonds"). The characteristics of the rating
categories are described in "Appendix--Ratings of Investments" in the Statement
of Additional Information. For a discussion of lower rated and non-rated
securities and related risks, see "High Yield Portfolio" and "Special Risk
Factors--High Yield (High Risk) Bonds" below. 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). For a further
description of equity securities, see "Equity Portfolio" below. The percentage
of assets invested in specific categories of fixed-income and equity securities
will vary from time to time depending upon the judgment of the investment
manager as to general market and economic conditions, trends in yields and
interest rates, and changes in fiscal or monetary policies.

The Portfolio does not make investments for short-term profits nor does it have
a separate portfolio turnover policy for equity and fixed income segments of its
portfolio. The Portfolio is not restricted in policy with regard to portfolio
turnover and will make changes in its investment portfolio from time to time as
business and economic conditions or market prices may dictate and as its
investment policy may require.

The Portfolio may write and purchase put and call options traded on national
securities exchanges or over-the-counter, including options on securities
indices. The Portfolio may also engage in financial futures transactions and may
purchase foreign securities and engage in related foreign currency transactions.
The Portfolio may purchase or sell portfolio securities on a when-issued or
delayed delivery basis. See "Special Risk Factors--Foreign Securities" and
"Investment Techniques."

HIGH YIELD PORTFOLIO. The High Yield Portfolio seeks to provide a high level of
current income by investing in fixed income securities. Fixed income obligations
include corporate debt securities, U.S. and Canadian Government securities,
obligations of U.S. and Canadian banking institutions, convertible securities,
assignments or participations in loans, preferred stock, and cash and cash
equivalents, including repurchase agreements.

The fixed income securities purchased by the Portfolio may include those in the
lower rating categories of the established rating services and those that are
non-rated (sometimes called "junk bonds"). Investments in such securities entail
relatively greater risk of loss of income or principal than investments in
higher rated securities; market prices may fluctuate more than market prices of
higher rated securities. See "Special Risk Factors--High Yield Bonds (High
Risk)" below for a discussion of such risks. These fixed income securities (debt
and preferred stock issues, including convertibles) normally offer a current
yield or yield to maturity that is significantly higher than the yield available
from securities rated in the four highest categories assigned by Moody's or S&P.
See "Appendix--Ratings of Investments" in the Statement of Additional
Information for a description of Moody's and S&P ratings.

The average maturity and the mix of investments of the Portfolio will vary as
the investment manager seeks to provide a high level of income considering the
available alternatives in the market. See "Appendix--Portfolio Composition of
High Yield Bonds" in this prospectus. Since interest rates vary with changes in
economic, market, political and other conditions, there can be no assurance that
historic interest rates are indicative of rates which may prevail in the future.
Since the value of securities in the Portfolio fluctuates depending upon market
factors and inversely with current interest rate levels, the net asset value of
its shares will fluctuate. The investment adviser will adjust the investments of
the Portfolio as considered advisable in view of prevailing or anticipated
market conditions. Accordingly, certain portfolio securities may be purchased or
sold in anticipation of a rise or a decline in interest rates.

The Portfolio does not make investments for short-term profits, but it is not
restricted in policy with regard to portfolio turnover and will make changes in
its investment portfolio from time to time as business and economic conditions
or market prices may dictate and as its investment policy may require.

EQUITY PORTFOLIO. The Equity Portfolio seeks maximum appreciation of capital
through diversification of investment securities having potential for capital
appreciation. Current income will not be a significant factor. The Portfolio's

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investments normally will consist of equity securities and securities
convertible into or exchangeable for equity securities; however, it may also
make private placement investments (which are normally restricted securities).

As a non-fundamental investment policy, the Equity Portfolio will invest at
least 65% of its total assets in equity securities under normal circumstances.
Equity securities include common stocks, preferred stocks, securities
convertible into or exchangeable for common or preferred stocks, equity
investments in partnerships, joint ventures and other forms of non-corporate
investment and warrants, options and rights exercisable for equity securities.
The common stocks or the other securities selected will be those which, in the
investment manager's judgment, have significant appreciation possibilities.
Investment opportunities will often be sought among securities of small, less
well-known companies; but securities of large, well-known companies will also be
purchased, particularly when the investment manager considers such securities to
be priced favorably in comparison with securities of smaller companies.

For defensive purposes the Portfolio may temporarily hold a significant portion
of its assets in cash or defensive type securities, such as liquid high grade
debt securities, high quality money market instruments and repurchase
agreements.

The Portfolio does not intend to engage actively in trading for short-term
profits, but it is not restricted in policy with regard to portfolio turnover
and will make changes in its investment portfolio from time to time as business
and economic conditions or market prices may dictate and as its investment
policy may require.

GOVERNMENT SECURITIES PORTFOLIO. The Government Securities Portfolio seeks high
current return consistent with preservation of capital from a portfolio composed
primarily of 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. The Portfolio may purchase or
sell portfolio securities on a when-issued or delayed delivery basis. See
"Investment Techniques." The Portfolio's current return is sought from interest
income and net short-term gains on securities and options and futures
transactions.

Under normal market conditions, the Portfolio will, as a fundamental policy,
invest at least 65% of its total assets in U.S. Government securities and
repurchase agreements of U.S. Government securities. There are two broad
categories of U.S. Government securities: (a) direct obligations of the U.S.
Treasury and (b) obligations issued or guaranteed by agencies and
instrumentalities of the United States. Some obligations issued or guaranteed by
agencies or instrumentalities are backed by the full faith and credit of the
United States (such as Government National Mortgage Association "GNMA"
Certificates) and others are backed exclusively by the agency or instrumentality
with limited rights of the issuer to borrow from the U.S. Treasury (such as
Federal National Mortgage Association Bonds). GNMA Certificates are debt
securities which represent an interest in one or a pool of mortgages which are
insured by the Federal Housing Administration or the Farmers Home
Administration, or guaranteed by the Veterans Administration. U.S. Government
securities may include "zero coupon" securities that have been stripped by the
U.S. Government of their unmatured interest coupons (see "Investment Policies
and Techniques" in the Statement of Additional Information for a discussion of
their features and risks) and collateralized obligations issued or guaranteed by
a U.S. Government agency or instrumentality (see "Investment Techniques").

U.S. Government securities of the type in which the Portfolio may invest have
historically involved little risk of loss of principal if held to maturity. The
government guarantee of the securities in the Portfolio, however, does not
guarantee the market value of the shares of the Portfolio. There are market
risks inherent in all investments in securities and the value of an investment
in the Portfolio will fluctuate over time. Normally, the value of the
Portfolio's investments varies inversely with changes in interest rates. For
example, as interest rates rise, the value of the Portfolio's investments will
tend to decline and, as interest rates fall, the value of the Portfolio's
investments will tend to increase. In addition, the potential for appreciation
in the event of a decline in interest rates may be limited or negated by
increased principal prepayments in respect to certain mortgage-backed
securities, such as GNMA certificates. Prepayment of high interest rate
mortgage-backed securities during times of declining interest rates will tend to
lower the return of the Portfolio and may even result in losses to the Portfolio
if some securities were acquired at a premium. With respect to securities
supported only by the credit of the issuing agency or by an additional line of
credit with the U.S. Treasury, there is no guarantee that the U.S. Government
will provide support to such agencies and such securities may involve risk of
loss of principal and interest.

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<PAGE> 12

The Portfolio will seek to enhance income through limited investment (up to 35%
of total assets) in fixed income securities other than U.S. Government
securities. Such other fixed-income securities include: (a) corporate debt
securities that are rated at the time of purchase within the four highest grades
by either Moody's (Aaa, Aa, A, or Baa) or S&P (AAA, AA, A, or BBB); (b)
commercial paper that is rated at the time of purchase within the two highest
grades by either Moody's (Prime-1 or Prime-2) or S&P (A-1 or A-2); (c) bank
certificates of deposit (including term deposits) or bankers' acceptances issued
by domestic banks (including their foreign branches) and Canadian chartered
banks having total assets in excess of $1 billion; and (d) repurchase agreements
with respect to any of the foregoing; provided, however, the Portfolio may
invest up to 10% of its total assets in fixed income securities without regard
to the foregoing limitations, including securities that are rated below Baa by
Moody's and BBB by S&P or are non-rated (sometimes called "junk bonds"). The
characteristics of the rating categories are described in "Appendix--Ratings of
Investments" in the Statement of Additional Information. For a discussion of
lower rated and non-rated securities and related risks, see "High Yield
Portfolio" above and "Special Risk Factors--High Yield Bonds (High Risk)" below.

The Portfolio may also invest in collateralized obligations which, consistent
with the limitations reflected above, may be privately issued or may be issued
or guaranteed by U.S. Government agencies or instrumentalities. See "Investment
Techniques."

During temporary defensive periods when the Fund's investment manager deems it
appropriate, the Portfolio may invest all or a portion of its assets in cash or
short-term high quality money market instruments, including short-term U.S.
Government securities and repurchase agreements with respect to such securities.
The yields on these securities tend to be lower than the yields on other
securities to be purchased by the Portfolio.

INTERNATIONAL PORTFOLIO. The International Portfolio seeks a total return, a
combination of capital growth and income, principally through an internationally
diversified portfolio of equity securities. Investments may be made for capital
growth or for income or any combination thereof for the purpose of achieving a
high overall return. There is no limitation on the percentage or amount of the
Portfolio's assets that may be invested for growth or income, and therefore at
any particular time the investment emphasis may be placed solely or primarily on
growth of capital or on income. While the Portfolio invests principally in
equity securities of non-U.S. issuers, it may also invest in convertible and
debt securities and foreign currencies. The Portfolio invests primarily in
non-U.S. issuers, and under normal circumstances more than 80% of the
Portfolio's total assets will be invested in non-U.S. issuers. In determining
whether the Portfolio will be invested for capital growth or income, the
investment manager analyzes the international equity and fixed income markets
and seeks to assess the degree of risk and level of return that can be expected
from each market. Also see "Special Risk Factors--Foreign Securities."

In pursuing its objective, the Portfolio invests primarily in common stocks of
established non-U.S. companies believed to have potential for capital growth,
income or both. However, there is no requirement that the Portfolio invest
exclusively in common stocks or other equity securities. The Portfolio may
invest in any other type of security including, but not limited to, convertible
securities (including warrants), preferred stocks, bonds, notes and other debt
securities of companies (including Euro-currency instruments and securities) or
obligations of domestic or foreign governments and their political subdivisions.
When the investment manager believes that the total return potential in debt
securities equals or exceeds that of equity securities, the Portfolio may
substantially increase its holdings of such debt securities. The Portfolio may
establish and maintain reserves for defensive purposes or to enable it to take
advantage of future buying opportunities. The Portfolio's reserves may be
invested in domestic as well as foreign short-term money market instruments
including, but not limited to, government obligations, certificates of deposit,
bankers' acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements.

The Portfolio makes investments in various countries. Under normal
circumstances, business activities in not less than three different foreign
countries will be represented in the portfolio. The Portfolio may, from time to
time, have more than 25% of its assets invested in any major industrial or
developed country that in the view of KFS poses no unique investment risk. The
Portfolio may purchase securities of companies, wherever organized, that have
their principal activities and interests outside the United States. Under
exceptional economic or market conditions abroad, the Portfolio may, for
defensive purposes, invest all or a major portion of its assets in U.S.
Government obligations or securities of companies incorporated in and having
their principal activities in the United States. The Portfolio may also invest
its reserves in domestic short-term money market instruments as described above.

In determining the appropriate distribution of investments among various
countries and geographic regions, the investment manager ordinarily considers
such factors as: prospects for relative economic growth among foreign countries;
expected levels of inflation; relative price levels of the various capital
markets; government policies influencing business conditions; the outlook for
currency relationships and the range of individual investment

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<PAGE> 13

opportunities available to the international investor. Currently, more than 60%
of the market capitalization of equity securities are represented by securities
in currencies other than the U.S. Dollar.

The Portfolio may purchase and sell options on securities, index options,
financial futures contracts and options on financial futures contracts. The
Portfolio may enter into forward foreign currency exchange contracts, foreign
currency options and foreign currency futures contracts and options thereon to
protect against uncertainty in the level of future foreign exchange rates. See
"Investment Techniques" below.

Generally, the Portfolio will not trade in securities for short-term profits
but, when circumstances warrant, securities may be sold without regard to the
length of time held.

Investors should understand that the expense ratio of the Portfolio can be
expected to be higher than that of portfolios investing in domestic securities
since the costs of operation are higher.

SMALL CAP PORTFOLIO. The Small Cap Portfolio seeks maximum appreciation of
investors' capital. Current income will not be a significant factor. The
Portfolio is designed primarily for investors with substantial resources and the
investment experience to consider their shares as a long-term investment
involving financial risk commensurate with potential substantial gains. Since
many of the securities in the Portfolio may be considered speculative in nature
by traditional investment standards, substantially greater than average market
volatility and investment risk may be involved. There is no assurance that the
Portfolio's objective will be achieved and its returns and net asset value will
fluctuate.

The Small Cap Portfolio seeks attractive areas for investment opportunity
arising from such factors as technological advances, new marketing methods, and
changes in the economy and population. Currently, the investment manager
believes that such investment opportunities may be found among the following:
(a) companies engaged in high technology fields such as electronics, medical
technology and computer software and specialty retailing; (b) companies having a
significantly improved earnings outlook as the result of a changed economic
environment, acquisitions, mergers, new management, changed corporate strategy
or product innovation; (c) companies supplying new or rapidly growing services
to consumers and businesses in such fields as automation, data processing,
communications, and marketing and finance; and (d) companies having innovative
concepts or ideas.

As a non-fundamental investment policy, at least 65% of the Small Cap
Portfolio's total assets normally will be invested in the equity securities of
smaller companies, i.e., those having a market capitalization of $1 billion or
less at the time of investment, many of which would be in the early stages of
their life cycle. The investment manager currently believes that investment in
such companies may offer greater opportunities for growth of capital than
larger, more established companies, but also involves certain special risks.
Smaller companies often have limited product lines, markets or financial
resources, and they may be dependent upon one or a few key people for
management. The securities of such companies generally are subject to more
abrupt or erratic market movements and may be less liquid than securities of
larger, more established companies or the market averages in general.

The Small Cap Portfolio's investment portfolio will normally consist primarily
of common stocks and securities convertible into or exchangeable for common
stocks, including warrants and rights. The Portfolio may also invest to a
limited degree in preferred stocks and debt securities when they are believed by
the investment manager to offer opportunities for capital growth. The Portfolio
may also write and purchase options, engage in financial futures transactions,
purchase foreign securities, engage in related foreign currency transactions and
lend its portfolio securities. See "Special Risk Factors--Foreign Securities"
and "Investment Techniques" below. When a defensive position is deemed
advisable, the Portfolio may, without limit, invest in high grade debt
securities and securities of the U.S. Government and its agencies or
instrumentalities or retain cash or cash equivalents, including repurchase
agreements.

In the selection of investments, long-term capital appreciation will take
precedence over short range market fluctuations. The Small Cap Portfolio does
not intend to engage actively in trading for short-term profits, although it may
occasionally make investments for short-term capital appreciation when such
action is believed to be desirable and consistent with sound investment
procedure. Generally, the Portfolio will make long-term rather than short-term
investments. Nevertheless, it may dispose of such investments at any time it may
be deemed advisable because of a subsequent change in the circumstances of a
particular company or industry or in general market or economic conditions. The
rate of portfolio turnover is not a limiting factor when changes in investment
are deemed appropriate. In addition, market conditions, cash requirements for
redemption and repurchase of Portfolio shares or other factors could affect the
portfolio turnover rate.

SPECIAL RISK FACTORS--HIGH YIELD (HIGH RISK) BONDS. As reflected above, the
High Yield Portfolio intends to invest a substantial portion of its assets in
fixed income securities offering high current income. Subject to their specific
investment objectives and policies as described above, the Total Return and
Government Securities

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Portfolios also may invest a portion of their assets in such securities. Such
high yield (high risk) fixed income securities will ordinarily be in the lower
rating categories (securities rated below the fourth category) of recognized
rating agencies or will be non-rated. Lower rated and non-rated securities,
which are sometimes referred to by the popular press as "junk bonds," have
widely varying characteristics and quality. These lower rated and non-rated
fixed income securities are considered, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally involve more credit risk than
securities in the higher rating categories. Accordingly, an investment in the
High Yield Portfolio may not constitute a complete investment program and may
not be appropriate for all investors.

The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also are more sensitive to economic conditions than are
higher rated securities. Adverse publicity and investor perceptions regarding
lower rated bonds, whether or not based on fundamental analysis, may depress the
prices for such securities. These and other factors adversely affecting the
market value of high yield securities will adversely affect a Portfolio's net
asset value. Although some risk is inherent in all securities ownership, holders
of fixed income securities have a claim on the assets of the issuer prior to the
holders of common stock. Therefore, an investment in fixed income securities
generally entails less risk than an investment in common stock of the same
issuer.

The investment philosophy of the High Yield Portfolio with respect to high yield
(high risk) bonds is based upon the premise that over the long term a broadly
diversified portfolio of high yield fixed-income securities should, even taking
into account possible losses, provide a higher net return than that achievable
on a portfolio of higher rated securities. The Portfolio seeks to achieve the
highest yields possible while reducing relative risk through (a) broad
diversification, (b) credit analysis by the investment manager of the issuers in
which the Portfolio invests, (c) purchase of high yield securities at discounts
from par or stated value when practicable and (d) monitoring and seeking to
anticipate changes and trends in the economy and financial markets that might
affect the prices of portfolio securities. The investment manager's judgment as
to the "reasonableness" of the risk involved in any particular investment will
be a function of its experience in managing fixed income investments and its
evaluation of general economic and financial conditions; of a specific issuer's
business and management, cash flow, earnings coverage of interest and dividends,
ability to operate under adverse economic conditions, and fair market value of
assets; and of such other considerations as the investment manager may deem
appropriate. The investment manager, while seeking maximum current yield, will
monitor current corporate developments with respect to portfolio securities and
potential investments and to broad trends in the economy. In some circumstances,
defensive strategies may be implemented to preserve or enhance capital even at
the sacrifice of current yield. Defensive strategies, which may be used singly
or in any combination, may include, but are not limited to, investments in
discount securities or investments in money market instruments as well as
futures and options strategies.

High yield (high risk) securities frequently are issued by corporations in the
growth stage of their development. They may also be issued in connection with a
corporate reorganization or issued as part of a corporate takeover. Companies
that issue such high yielding securities often are highly leveraged and may not
have available to them more traditional methods of financing. Therefore, the
risk associated with acquiring the securities of such issuers generally is
greater than is the case with higher rated securities. For example, during an
economic downturn or recession, highly leveraged issuers of high yield
securities may experience financial stress. During such periods, such issuers
may not have sufficient revenues to meet their interest payment obligations. The
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss from default by the issuer is significantly greater for the holders
of high yielding securities because such securities are generally unsecured and
are often subordinated to other creditors of the issuer.

A Portfolio may have difficulty disposing of certain high yield (high risk)
securities because they may have a thin trading market. Because not all dealers
maintain markets in all high yield securities, the Fund anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market may have an adverse effect on
market price and a Portfolio's ability to dispose of particular issues and may
also make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing a Portfolio's assets. Market quotations generally are
available on many high yield issues only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales.

Zero coupon securities and pay-in-kind bonds involve additional special
considerations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are

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issued and traded at a discount from their face amount or par value. The market
prices of zero coupon securities are generally more volatile than the market
prices of securities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do securities paying interest
currently having similar maturities and credit quality. Zero coupon, pay-in-kind
or deferred interest bonds carry additional risk in that, unlike bonds that pay
interest throughout the period to maturity, a Portfolio will realize no cash
until the cash payment date unless a portion of such securities is sold and, if
the issuer defaults, a Portfolio may obtain no return at all on its investment.

Additional information concerning high yield (high risk) securities appears
under "Appendix--Portfolio Composition of High Yield Bonds" in this prospectus
and under "Appendix--Ratings of Investments" in the Statement of Additional
Information.

SPECIAL RISK FACTORS--FOREIGN SECURITIES. The Total Return, High Yield, Equity
and Small Cap Portfolios invest primarily in securities that are publicly traded
in the United States; but, they have discretion to invest a portion of their
assets in foreign securities that are traded principally in securities markets
outside the United States. As a non-fundamental policy, these Portfolios
currently limit investment in foreign securities not publicly traded in the
United States to 25% of their total assets. These Portfolios may also invest
without limit in U.S. Dollar denominated American Depository Receipts ("ADRs")
which are bought and sold in the United States. The Money Market Portfolio,
within its quality standards, may also invest in securities of foreign issuers.
However, such investments will be in U.S. Dollar denominated instruments.
Foreign securities in which a Portfolio may invest include any type of security
consistent with that Portfolio's investment objective and policies. In
connection with their foreign securities investments, such Portfolios may, to a
limited extent, engage in foreign currency exchange transactions and purchase
and sell foreign currency options and foreign currency futures contracts as a
hedge and not for speculation. The International Portfolio may invest without
limit in foreign securities and may engage in foreign currency exchange
transactions and may purchase and sell foreign currency options and foreign
currency futures contracts. See "Investment Techniques--Options and Financial
Futures Transactions--Foreign Currency Transactions." The International
Portfolio may invest without limitation in securities of foreign issuers.

Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based on the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.

Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possibility of imposition of exchange
controls. The prices of such securities may be more volatile than those of
domestic securities. In addition, there may be less publicly available
information about foreign issuers than about domestic issuers. Many foreign
issuers are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic issuers. There is generally
less regulation of stock exchanges, brokers, banks, and listed companies abroad
than in the United States. With respect to certain foreign countries, there is a
possibility of expropriation, excessive taxation or diplomatic developments
which could affect investment in these countries.

Emerging Markets. While a Portfolio's investments in foreign securities will
principally be in developed countries, a Portfolio may make investments in
developing or "emerging" countries, which involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing or emerging
market country can be considered to be a country that is in the initial stages
of its industrialization cycle. Currently, emerging markets generally include
every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for a Portfolio's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As opportunities to invest in securities in emerging markets develop, a
Portfolio may expand and further broaden the group of emerging markets in which
it invests. In the past, markets of developing or emerging market countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. The investment
manager believes that these characteristics can be expected to continue in the
future.

Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of domestic product, rates of
inflation, currency

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depreciation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Many emerging markets have experienced substantial rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have very negative effects on the economies and
securities markets of certain developing markets. Economies in emerging markets
generally are dependent heavily upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be affected adversely
by economic conditions in the countries with which they trade.

Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.

In addition, brokerage commissions, custodial services and other needs relating
to investment in foreign markets generally are more expensive than in the United
States; and this is particularly true with respect to emerging markets. Such
markets have different settlement and clearance procedures. In certain markets
there have been times when settlements could not keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. Such
settlement problems may cause emerging market securities to be illiquid. The
inability of a Portfolio to make intended securities purchases because of
settlement problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of a portfolio security because of
settlement problems could result in losses to a Portfolio from subsequent
declines in value of the portfolio security or, if a Portfolio has entered into
a contract to sell the security, it could result in possible liability to the
purchaser. Certain emerging markets may lack clearing facilities equivalent to
those in developed countries. Accordingly, settlements can pose additional risks
in such markets and ultimately can expose the Portfolio to the risk of losses
resulting from a Portfolio's inability to recover from a counterparty.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading in securities may cease or may be
substantially curtailed and prices for a Portfolio's securities in such markets
may not be readily available. A Portfolio's securities in the affected markets
will be valued at fair value determined in good faith by or under the direction
of the Board of Trustees of the Fund.

Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Portfolio. Emerging markets may require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market country's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.

Fixed Income. Since most foreign fixed income securities are not rated, a
Portfolio will invest in foreign fixed income securities based on KFS's analysis
without relying on published ratings. Since such investments will be based upon
KFS's analysis rather than upon published ratings, achievement of a Portfolio's
goals may depend more upon the abilities of KFS than would otherwise be the
case.

The value of the foreign fixed income securities held by a Portfolio, and thus
the net asset value of the Portfolio's shares, generally will fluctuate with (a)
changes in the perceived creditworthiness of the issuers of those securities,
(b) movements in interest rates, and (c) changes in the relative values of the
currencies in which a Portfolio's investments in fixed income securities are
denominated with respect to the U.S. Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of a Portfolio's
investments in foreign fixed income securities, and the extent to which a
Portfolio hedges its interest rate, credit and currency exchange rate risks.
Many of the foreign fixed income obligations in which a Portfolio will invest
will have long maturities. A longer average maturity generally is associated
with a higher level of volatility in the market value of such securities in
response to changes in market conditions.

Investments in sovereign debt, including Brady Bonds, involve special risks.
Brady Bonds are debt securities issued under a plan implemented to allow debtor
nations to restructure their outstanding commercial bank indebtedness. Foreign
governmental issuers of debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or pay
interest when due. In the event of default, there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Political conditions, especially a sovereign entity's
willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same

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<PAGE> 17

sovereign entity may not contest payments to the holders of sovereign debt in
the event of default under commercial bank loan agreements. In addition, there
is no bankruptcy proceeding with respect to sovereign debt on which a sovereign
has defaulted, and a Portfolio may be unable to collect all or any part of its
investment in a particular issue.

Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceeds of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of a Portfolio. A significant
portion of the sovereign debt in which a Portfolio may invest is issued as part
of debt restructuring and such debt is to be considered speculative. There is a
history of defaults with respect to commercial bank loans by public and private
entities issuing Brady Bonds. All or a portion of the interest payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.

Privatized Enterprises. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked on privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Portfolio's investments in the
securities of privatized enterprises include privately negotiated investments in
a government or state-owned or controlled company or enterprise that has not yet
conducted an initial equity offering, investments in the initial offering of
equity securities of a state enterprise or former state enterprise and
investments in the securities of a state enterprise following its initial equity
offering.

In certain jurisdictions, the ability of a foreign entity to participate in
privatizations may be limited by local law, or the price or terms on which the
entity may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.

In the case of the enterprises in which a Portfolio may invest, large blocks of
the stock of those enterprises may be held by a small group of stockholders,
even after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.

Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization or management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprises's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.

Prior to privatization, most of the state enterprises in which a Portfolio may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition.

Depositary Certificates. For many foreign securities, there are U.S.
Dollar-denominated ADRs, which are bought and sold in the United States and are
issued by domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in the domestic bank or a correspondent bank. ADRs do
not eliminate all the risk inherent in investing in the securities of foreign
issuers. However, by investing in ADRs rather than directly in foreign issuers'
stock, the Portfolios avoid currency risks during the settlement period. In
general, there is a large, liquid market in the United States for most ADRs. The
Portfolios may also invest in European Depository Receipts ("EDRs"), which are
receipts evidencing an arrangement with a European bank similar to that for ADRs
and are designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.

THE FUND. The portfolio turnover rates for the Portfolios are listed under
"Financial Highlights." Since securities with maturities of less than one year
are excluded from portfolio turnover rate calculations, the portfolio turnover
rate for the Money Market Portfolio is zero. Frequency of portfolio turnover
will not be a limiting factor should the investment manager deem it desirable to
purchase or sell securities. Higher portfolio turnover (over 100%) involves
correspondingly greater brokerage commissions or other transaction costs. Higher
portfolio turnover may result in the realization of greater net short-term
capital gains. In order to continue to qualify as a regulated investment company
for federal income tax purposes, less than 30% of the annual gross income of a
Portfolio must be derived

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<PAGE> 18

from the sale or disposition of securities and certain other investments held by
a Portfolio for less than three months. See "Dividends and Taxes" in the
Statement of Additional Information.

A Portfolio will not, as a non-fundamental policy, purchase illiquid securities
including repurchase agreements maturing in more than seven days, if, as a
result thereof, more than 15% (10% for the Money Market Portfolio) of the
Portfolio's net assets, valued at the time of the transactions, would be
invested in such securities.

INVESTMENT TECHNIQUES

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, any of the Portfolios may lend securities (principally to
broker-dealers) where such loans are callable at any time and are continuously
secured by segregated collateral (cash or U.S. Government securities) equal to
no less than the market value, determined daily, of the securities loaned. The
Portfolio will receive amounts equal to dividends or interest on the securities
loaned. It will also earn income for having made the loan. Any cash collateral
pursuant to these loans will be invested in short-term money market instruments.
As with other extensions of credit there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, the loans would be made only to firms deemed by the Fund's
investment manager to be of good standing, and when the Fund's investment
manager believes the potential earnings justify the attendant risk. The Fund
will limit such lending to not more than one-third of the value of a Portfolio's
total assets.

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. The Total Return, High Yield,
Equity, Government Securities, International and Small Cap Portfolios may each
deal in options on securities and securities indices, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
The Money Market Portfolio does not engage in options transactions. The ability
to engage in options transactions enables a Portfolio to pursue its investment
objective and also to hedge against currency and market risks but is not
intended for speculation. In connection with their foreign securities
investments, the Total Return, High Yield, Equity, International and Small Cap
Portfolios may also purchase and sell foreign currency options.

The Government Securities Portfolio individually may write (sell) covered call
options on up to 100% of net assets, may write (sell) secured put options on up
to 50% of net assets and may purchase put and call options provided that no more
than 5% of net assets may be invested in premiums on such options. The Total
Return, High Yield, Equity, International and Small Cap Portfolios may write
(sell) covered call and secured put options on up to 25% of net assets and may
purchase put and call options provided that no more than 5% of its net assets
may be invested in premiums on such options.

The Total Return, High Yield, Equity, Government Securities, International and
Small Cap Portfolios may write (sell) covered call options so long as they own
securities or other assets that are acceptable for escrow purposes. Also, such
Portfolios may write (sell) secured put options, which means that so long as the
Portfolio is obligated as a writer of a put option, it will invest an amount not
less than the exercise price of the put option in money market instruments.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period. The writer of a covered call owns
securities or other assets that are acceptable for escrow and the writer of a
secured put invests an amount not less than the exercise price in eligible
securities or other assets to the extent that it is obligated as a writer. If a
call written by a Portfolio is exercised, the Portfolio foregoes any possible
profit from an increase in the market price of the underlying security or other
asset over the exercise price plus the premium received. In writing puts, there
is a risk that a Portfolio may be required to take delivery of the underlying
security or other asset at a disadvantageous price.

Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. Such options are transacted with dealers directly
and not with a clearing corporation and there is a risk of non-performance by
the dealer as a result of the insolvency of such dealer or otherwise, in which
event a Portfolio may experience material losses. However, in writing options
the premium is paid in advance by the dealer. OTC options are available for a
greater variety of securities or other assets, and a wider range of expiration
dates and exercise prices, than for exchange traded options.

A Portfolio, as part of its option transactions, also may use index options.
Through the writing or purchase of index options a Portfolio can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon

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<PAGE> 19

exercise of the option, an amount of cash if the closing level of the securities
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option.

Price movements in securities which a Portfolio owns or intends to purchase
probably will not correlate perfectly with movements in the level of an index
and, therefore, a Portfolio bears the risk of a loss on an index option which is
not completely offset by movements in the price of such securities. Because
index options are settled in cash, a call writer cannot determine the amount of
its settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities.

The Total Return, High Yield, Equity, Government Securities, International and
Small Cap Portfolios may each engage in financial futures transactions. The
Money Market Portfolio does not engage in financial futures transactions.
Financial futures contracts are commodity contracts that obligate the long or
short holder to take or make delivery of a specified quantity of a financial
instrument, such as a security, or the cash value of a securities index during a
specified future period at a specified price. A Portfolio will "cover" futures
contracts sold by the Portfolio and maintain in a segregated account certain
liquid assets in connection with futures contracts purchased by the Portfolio as
described under "Investment Policies and Techniques" in the Statement of
Additional Information. In connection with their foreign securities investments,
the Total Return, High Yield, Equity, International and Small Cap Portfolios may
also engage in foreign currency financial futures transactions. A Portfolio will
not enter into any futures contracts or options on futures contracts if the
aggregate of the contract value of the outstanding futures contracts of the
Portfolio and futures contracts subject to outstanding options written by the
Portfolio would exceed 50% of the total assets of the Portfolio.

The Portfolios may engage in financial futures transactions and may use index
options as an attempt to hedge against currency and market risks. For example,
when the near-term market view is bearish but the portfolio composition is
judged satisfactory for the longer term, exposure to temporary declines in the
market may be reduced by entering into futures contracts to sell securities or
the cash value of an index. Conversely, where the near-term view is bullish, but
a Portfolio is believed to be well positioned for the longer term with a high
cash position, the Portfolio can hedge against market increases by entering into
futures contracts to buy securities or the cash value of an index. In either
case, the use of futures contracts would tend to reduce portfolio turnover and
facilitate a Portfolio's pursuit of its investment objective. Also, if a
Portfolio owned long-term bonds and interest rates were expected to rise, it
could sell financial futures contracts. If interest rates did increase, the
value of the bonds in the Portfolio would decline, but this decline would be
offset in whole or in part by an increase in the value of the Portfolio's
futures contracts. If, on the other hand, long-term interest rates were expected
to decline, the Portfolio could hold short-term debt securities and benefit from
the income earned by holding such securities, while at the same time the
Portfolio could purchase futures contracts on long-term bonds or the cash value
of a securities index. Thus, the Portfolio could take advantage of the
anticipated rise in the value of long-term bonds without actually buying them.
The futures contracts and short-term debt securities could then be liquidated
and the cash proceeds used to buy long-term bonds.

Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators,
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager still may not result in a successful hedging
transaction. A Portfolio could also experience losses if it could not close out
its futures position because of an illiquid secondary market. If any of these
events should occur, a Portfolio could lose money on the financial futures
contracts and also on the value of its portfolio assets. The costs incurred in
connection with futures transactions could reduce a Portfolio's return.

Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a
Portfolio may expire worthless, in which case a Portfolio would lose the premium
paid therefor.

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<PAGE> 20

A Portfolio may engage in futures transactions only on commodities exchanges or
boards of trade. A Portfolio will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities which the Portfolio owns or intends to
purchase.

FOREIGN CURRENCY TRANSACTIONS. As indicated under "Investment Objectives,
Policies and Risk Factors--Special Risk Factors--Foreign Securities," the Total
Return, High Yield, Equity and Small Cap Portfolios may invest a limited portion
of their assets, and the International Portfolio may invest without limit, in
securities denominated in foreign currencies. These Portfolios may engage in
foreign currency transactions in connection with their investments in foreign
securities but will not speculate in foreign currency exchange.

The value of the foreign securities investments of a Portfolio measured in U.S.
Dollars may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Portfolio may incur
costs in connection with conversions between various currencies. A Portfolio
will conduct its foreign currency exchange transactions either on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or through forward contracts to purchase or sell foreign currencies. A forward
foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers.

When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Portfolio is able to protect itself
against a possible loss between trade and settlement date resulting from an
adverse change in the relationship between the U.S. Dollar and such foreign
currency. However, this tends to limit potential gains that might result from a
positive change in such currency relationships. A Portfolio may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.

When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Portfolio's securities denominated in such foreign
currency. In this situation the International Portfolio may, instead, enter into
a forward contract to sell a different foreign currency for a fixed U.S. Dollar
amount when the investment manager believes that the U.S. Dollar value of the
currency to be sold pursuant to the forward contract will fall whenever there is
a decline in the U.S. Dollar value of the currency in which portfolio securities
of the International Portfolio are denominated ("cross-hedge"). The forecasting
of short-term currency market movement is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.

It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary for
a Portfolio to purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Portfolio is obligated to deliver when a decision
is made to sell the security and make delivery of the foreign currency in
settlement of a forward contract. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the
Portfolio is obligated to deliver.

The Portfolios will not speculate in foreign currency exchange. A Portfolio will
not enter into such forward contracts or maintain a net exposure in such
contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities or other assets
(a) denominated in that currency or (b), in the case of a "cross-hedge" for the
International Portfolio, denominated in a currency or currencies that the Fund's
investment manager believes will have price movements that closely correlate
with that currency. The Fund's custodian bank segregates cash or liquid
high-grade debt securities in an amount not less than the value of each
Portfolio's total assets committed to forward foreign currency exchange
contracts entered into for the purchase of a foreign currency. If the value of
the securities segregated declines, additional cash or securities are added so
that the segregated amount is not less than the amount of the Portfolio's
commitments with respect to such contracts. The Portfolios do not intend to
enter into such forward contracts if they would have more than 15% of the value
of their total assets committed to such contracts. A Portfolio generally does
not enter into a forward contract with a term longer than one year.

RISK CONSIDERATIONS. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures and foreign currency transactions. See "Investment Policies and
Techniques" in the Statement of Additional Information. The principal risks are:
(a) possible imperfect correlation

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<PAGE> 21

between movements in the prices of options, currencies or futures contracts and
movements in the prices of the securities or currencies hedged or used for
cover; (b) lack of assurance that a liquid secondary market will exist for any
particular option, futures or foreign currency contract at any particular time;
(c) the need for additional skills and techniques beyond those required for
normal portfolio management; (d) losses on futures contracts resulting from
market movements not anticipated by the investment manager; and (e) the possible
need to defer closing out certain options or futures contracts in order to
continue to qualify for beneficial tax treatment afforded regulated investment
companies under the Internal Revenue Code.

To the extent a Portfolio engages in when-issued or delayed delivery
transactions, it will do so for the purpose of acquiring portfolio securities
consistent with the Portfolio's investment objective and policies and not for
the purpose of investment leverage or to speculate in interest rate changes. A
Portfolio will make commitments to purchase securities on a when-issued or
delayed delivery basis only with the intention of actually acquiring the
securities, but a Portfolio reserves the right to sell these securities before
the settlement date if deemed advisable.

In some instances, the third-party seller of when-issued or delayed delivery
securities may determine prior to the settlement date that it will be unable to
meet its existing transaction commitments without borrowing securities. If
advantageous from a yield perspective, a Portfolio may, in that event, agree to
resell its purchase commitment to the third-party seller at the current market
price on the date of sale and concurrently enter into another purchase
commitment for such securities at a later date. As an inducement for a Portfolio
to "roll over" its purchase commitment, the Portfolio may receive a negotiated
fee.

REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements,
under which it acquires ownership of a security and the broker-dealer or bank
agrees to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the Portfolio's holding period. The
investment manager will evaluate the creditworthiness of all entities with which
the Fund intends to engage in repurchase agreements pursuant to procedures
adopted by the Board of Trustees of the Fund. Maturity of the securities subject
to repurchase may exceed one year. In the event of a bankruptcy or other default
of a seller of a repurchase agreement, the Portfolio might have expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying securities and loss of income. Repurchase agreements
maturing in more than seven days will be considered illiquid for purposes of the
Portfolios' limitations on illiquid securities.

SECTION 4(2) PAPER. Subject to its investment objectives and policies, a
Portfolio may invest in commercial paper issued by major corporations under the
Securities Act of 1933 in reliance on the exemption from registration afforded
by Section 3(a)(3) thereof. Such commercial paper may be issued only to finance
current transactions and must mature in nine months or less. Trading of such
commercial paper is conducted primarily by institutional investors through
investment dealers, and individual investor participation in the commercial
paper market is very limited. A Portfolio also may invest in commercial paper
issued in reliance on the so-called "private placement" exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 ("Section
4(2) paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional investors such
as a Portfolio who agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) paper normally is resold to other
institutional investors like the Portfolio through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2) paper, thus
providing liquidity. The Fund's investment adviser considers the legally
restricted but readily saleable Section 4(2) paper to be liquid; however,
pursuant to procedures approved by the Board of Trustees of the Fund, if a
particular investment in Section 4(2) paper is not determined to be liquid, that
investment will be included within the 10% limitation on illiquid securities.
The Fund's investment manager monitors the liquidity of the Fund's investments
in Section 4(2) paper on a continuing basis.

COLLATERALIZED OBLIGATIONS. Subject to its investment objectives and policies, a
Portfolio may purchase collateralized obligations, including interest only
("IO") and principal only ("PO") securities. A collateralized obligation is a
debt security issued by a corporation, trust or custodian, or by a U.S.
Government agency or instrumentality, that is

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collateralized by a portfolio or pool of mortgages, mortgage-backed securities,
U.S. Government securities or other assets. The issuer's obligation to make
interest and principal payments is secured by the underlying pool or portfolio
of securities. Collateralized obligations issued or guaranteed by a U.S.
Government agency or instrumentality, such as the Federal Home Loan Mortgage
Corporation, are considered U.S. Government securities for purposes of this
prospectus. Privately-issued collateralized obligations collateralized by a
portfolio of U.S. Government securities are not direct obligations of the U.S.
Government or any of its agencies or instrumentalities and are not considered
U.S. Government securities for purposes of this prospectus. A variety of types
of collateralized obligations are available currently and others may become
available in the future.

Since the collateralized obligations may be issued in classes with varying
maturities and interest rates, the investor may obtain greater predictability of
maturity than with direct investments in mortgage-backed securities. Classes
with shorter maturities may have lower volatility and lower yield while those
with longer maturities may have higher volatility and higher yield. This
provides the investor with greater control over the characteristics of the
investment in a changing interest rate environment. With respect to interest
only and principal only securities, an investor has the option to select from a
pool of underlying collateral the portion of the cash flows that most closely
corresponds to the investor's forecast of interest rate movements. These
instruments tend to be highly sensitive to prepayment rates on the underlying
collateral and thus place a premium on accurate prepayment projections by the
investor.

A Portfolio, other than the Money Market Portfolio, may invest in collateralized
obligations whose yield floats inversely against a specified index rate. These
"inverse floaters" are more volatile than conventional fixed or floating rate
collateralized obligations and the yield thereon, as well as the value thereof,
will fluctuate in inverse proportion to changes in the index upon which rate
adjustments are based. As a result, the yield on an inverse floater will
generally increase when market yields (as reflected by the index) decrease and
decrease when market yields increase. The extent of the volatility of inverse
floaters depends on the extent of anticipated changes in market rates of
interest. Generally, inverse floaters provide for interest rate adjustments
based upon a multiple of the specified interest index, which further increases
their volatility. The degree of additional volatility will be directly
proportional to the size of the multiple used in determining interest rate
adjustments.

Additional information concerning collateralized obligations is contained in the
Statement of Additional Information under "Investment Policies and
Techniques--Collateralized Obligations."

NET ASSET VALUE

TOTAL RETURN, HIGH YIELD, EQUITY, GOVERNMENT SECURITIES, INTERNATIONAL AND SMALL
CAP PORTFOLIOS. The net asset value per share is determined by calculating the
total value of a Portfolio's assets, deducting total liabilities, and dividing
the result by the number of shares outstanding of such Portfolio. Portfolio
securities 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 price
available, 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 current prices provided by market makers are used.
Over-the-counter traded fixed income options are valued based upon current
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. Other securities and assets are valued at
fair value as determined in good faith by the Board of Trustees. 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 does not necessarily take place
contemporaneously with the determination of the prices of a Portfolio's foreign
securities. For purposes of determining a Portfolio's net asset value, any
assets and liabilities initially expressed in foreign currency values will be
converted into U.S. Dollar values at the mean between the bid and offered
quotations of such currencies against U.S. Dollars as last quoted by a
recognized dealer. If an event were to occur, after the value of a security was
so established but before the net asset value per share was determined, which
was likely to materially change the net asset value, then that security would be
valued using fair value considerations by the Board of Trustees or its
delegates. On each day the New York Stock Exchange ("Exchange") is open for
trading, the net asset value is determined as of the earlier of 3:00 p.m.
Central time or the

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close of the Exchange, except that the net asset value will not be computed on a
day in which no order to purchase shares was received or no shares were tendered
for redemption.

MONEY MARKET PORTFOLIO. The net asset value per share of the Money Market
Portfolio is determined at 11:00 a.m. and as of the earlier of 3:00 p.m. Central
time or the close of the Exchange on each day the Exchange is open for trading,
except that the net asset value will not be computed on a day in which no orders
to purchase shares were received or no shares were tendered for redemption. The
net asset value per share is determined by dividing the total assets of the
Portfolio minus its liabilities by the total number of its shares outstanding.
The net asset value per share of the Money Market Portfolio is ordinarily $1.00
calculated at amortized cost in accordance with Rule 2a-7 under the 1940 Act.
While this rule provides certainty in valuation, it may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Portfolio would have received if all its investments were sold. Under the
direction of the Board of Trustees, certain procedures have been adopted to
monitor and stabilize the price per share for the Portfolio. Calculations are
made to compare the value of its investments valued at amortized cost with
market-based values. Market-based values will be obtained by using actual
quotations provided by market makers, estimates of market value, or values
obtained from yield data relating to classes of money market instruments or
government securities published by reputable sources at the mean between the bid
and asked prices for the instruments. 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-based 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. In order to value its investments at amortized cost, the
Money Market Portfolio purchases only securities with a maturity of one year or
less and maintains a dollar-weighted average portfolio maturity of 90 days or
less. In addition, the Money Market Portfolio limits its portfolio investments
to securities that meet the quality and diversification requirements of Rule
2a-7. Under the quality requirements of Rule 2a-7, the Money Market Portfolio
may only purchase U.S. Dollar-denominated instruments that are determined to
present minimal credit risks and that are at the time of acquisition "Eligible
Securities" as defined in Rule 2a-7. "Eligible Securities" under Rule 2a-7
include only securities that are rated in the top two rating categories by the
required number of nationally recognized statistical rating organizations (at
least two or, if only one such organization has rated the security that one
organization) or, if unrated, are deemed comparable in quality. The
diversification requirements of Rule 2a-7 provide generally that the Fund may
not at the time of acquisition invest more than 5% of its assets in securities
of any one issuer or invest more than 5% of its assets in securities that are
Eligible Securities that have not been rated in the highest category by the
required number of rating organizations or, if unrated, have not been deemed
comparable in quality, except U.S. Government securities and repurchase
agreements of such securities.

PURCHASE AND REDEMPTION

The separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of each Portfolio based on, among other things, the
amount of premium payments to be invested and surrender and transfer requests to
be effected on that day pursuant to VLI and VA contracts. The shares of Total
Return, High Yield, Equity, Government Securities, International and Small Cap
Portfolios are each purchased and redeemed at the net asset value of each
Portfolio's shares determined that same day or, in the case of an order not
resulting automatically from VLI and VA contract transactions, next determined
after an order in proper form is received. An order is considered to be in
proper form if it is communicated by telephone or wire by an authorized employee
of the Participating Life Insurance Company.

From time to time, the Fund may temporarily suspend the offering of shares of
one or more of its Portfolios. During the period of such suspension,
shareholders of such Portfolio are normally permitted to continue to purchase
additional shares and to have dividends reinvested.

The Fund seeks to have its Money Market Portfolio as fully invested as possible
at all times in order to achieve maximum income. Since the Money Market
Portfolio will be investing in instruments which normally require immediate
payment in Federal funds (monies credited to a bank's account with its regional
Federal Reserve Bank), the Fund has adopted certain procedures for the
convenience of its shareholders and to ensure that the Money Market Portfolio
receives investable funds.

No fee is charged the shareholders when they purchase or redeem Portfolio
shares.

21
<PAGE> 24

DIVIDENDS AND TAXES

DIVIDENDS FOR MONEY MARKET PORTFOLIO. The Money Market Portfolio's net
investment income is declared as a dividend daily. Shareholders will receive
dividends monthly in additional shares. If a shareholder withdraws its entire
account, all dividends accrued to the time of withdrawal will be paid at that
time.

DIVIDENDS FOR ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO. The Fund normally
follows the practice of declaring and distributing substantially all the net
investment income and any net short-term and long-term capital gains of these
Portfolios at least annually.

TAXES. Under the current Internal Revenue Code ("Code"), Participating
Insurance Companies are taxed as life insurance companies and the operations of
their separate accounts are taxed as part of their total operations. Under
current interpretations of existing federal income tax law, investment income
and capital gains of separate accounts are not subject to federal income tax to
the extent applied to increase the values of VLI or VA contracts. Tax
consequences to VLI or VA contract holders are described in the separate
prospectuses issued by the Participating Insurance Companies.

Each Portfolio intends to continue to qualify as a regulated investment company
under subchapter M of the Code. As a result, with respect to any fiscal year in
which a Portfolio distributes all its net investment income and net realized
capital gains, that Portfolio will not be subject to federal income tax.
Subchapter M includes other requirements relating to the diversification of
investments. Subchapter M's diversification requirements are in addition to
diversification requirements under Section 817(h) of the Code and the 1940 Act.
Each applicable law's diversification requirement could require the sale of
assets of a Portfolio, which could have an adverse impact on the net asset value
of such Portfolio.

The preceding is a brief summary of certain of the relevant tax considerations.
The Statement of Additional Information includes a more detailed discussion.
This discussion is not intended, even as supplemented by the Statement of
Additional Information, as a complete explanation or a substitute for careful
tax planning and consultation with individual tax advisers.

CAPITAL STRUCTURE AND GENERAL INFORMATION

The Fund was organized as a business trust under the laws of Massachusetts on
March 24, 1987. The Fund may issue an unlimited number of shares of beneficial
interest all having no par value. Since the Fund offers multiple Portfolios, it
is known as a "series company." Shares of a Portfolio have equal noncumulative
voting rights and equal rights with respect to dividends, assets and liquidation
of such Portfolio. Shares are fully paid and nonassessable when issued, and have
no preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment advisory
contract. If shares of more than one Portfolio are outstanding, shareholders
will vote by Portfolio and not in the aggregate except when voting in the
aggregate is required under the 1940 Act, such as for the election of trustees.
The Board of Trustees may authorize the issuance of additional Portfolios if
deemed desirable, each with its own investment objective, policies and
restrictions.

On November 3, 1989, KILICO Money Market Separate Account, KILICO Total Return
Separate Account, KILICO Income Separate Account and KILICO Equity Separate
Account (collectively, the Accounts), which were separate accounts organized as
open-end management investment companies, were restructured into one continuing
separate account (KILICO Variable Annuity Separate Account) in unit investment
trust form with subaccounts investing in corresponding Portfolios of the Fund.
An additional subaccount also was created to invest in the Fund's Government
Securities Portfolio. The restructuring and combining of the Accounts is
referred to as the Reorganization. In connection with the Reorganization,
approximately $550,000,000 in assets was added to the Fund (which at that time
consisted of approximately $6,000,000 in assets). Because the assets added to
the Fund as a result of the Reorganization were significantly greater than the
existing assets of the Fund, the per share financial highlights of the Money
Market, Total Return, High Yield and Equity Portfolios in this Prospectus
reflect the Accounts as the continuing entities.

Information about the Portfolios' investment performance is contained in the
Fund's 1994 Annual Report to Shareholders, which may be obtained without charge
from the Fund.

Shareholder inquiries should be made by writing the Fund at the address shown on
the front cover of this Prospectus.

22
<PAGE> 25

INVESTMENT MANAGER

INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. KFS is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, the Kemper insurance companies, Kemper Corporation and other
corporate, pension, profit-sharing and individual accounts representing
approximately $60 billion under management. KFS acts as investment adviser for
24 open-end and seven closed-end investment companies, with 60 separate
investment portfolios representing more than 3 million shareholder accounts. KFS
is a wholly-owned subsidiary of Kemper Financial Companies, Inc., which is a
financial services holding company that is more than 96% owned by Kemper
Corporation, a diversified insurance and financial services holding company.

Kemper Corporation has entered into an agreement in principle with an investor
group led by Zurich Insurance Company ("Zurich") pursuant to which Kemper
Corporation would be acquired by the investor group in a merger transaction. As
part of the transaction, Zurich or an affiliate would purchase KFS.

A definitive agreement is expected in early May, 1995, subject to the completion
of the investor group's due diligence. Consummation of the transaction is
subject to a number of contingencies, including approval by the board and
stockholders of Kemper Corporation and the Zurich board and regulatory
approvals. Because the transaction would constitute an assignment of the Fund's
investment management agreement with KFS under the Investment Company Act of
1940, and therefore a termination of such agreement, the transaction is subject
also to approval of new agreements by Kemper Fund boards and shareholders. If
the contingencies are timely met, the transaction is expected to close early in
the fourth quarter of 1995.

After consummation of the transaction, it is anticipated that the KFS management
team and the Kemper Fund portfolio managers would remain in place and that the
Kemper Funds would be operated in the same manner as they are currently.

Responsibility for overall management of the Fund rests with the Board of
Trustees and officers of the Fund. Professional investment supervision is
provided by KFS. The investment management agreement provides that KFS shall act
as the Fund's investment adviser, manage its investments and provide it with
various services and facilities. For its services, KFS is paid a management fee
at an effective annual rate, payable monthly, of .50%, .55%, .60%, .60%, .55%,
.75% and .65% of average daily net assets of the Money Market, Total Return,
High Yield, Equity, Government Securities, International and Small
Capitalization Equity Portfolios, respectively. KFS may from time to time use
the services of Kemper Investment Management Company Limited ("KIMCO"), 1 Fleet
Place, London EC4M 7RQ, a wholly owned subsidiary of KFS, with respect to
foreign securities investments of the Portfolios including analysis, research,
execution and trading services.

Frank J. Rachwalski, Jr. is the portfolio manager of the Money Market Portfolio.
He has served in this capacity since the Portfolio commenced operations in 1982.
Mr. Rachwalski joined KFS in January 1973 and is currently a Senior Vice
President of KFS and a Vice President of the Fund. He received a B.B.A. and an
M.B.A. from Loyola University, Chicago, Illinois.

Karen A. Hussey has been the portfolio manager of the Small Cap Portfolio since
September 1994 when she joined KFS. She is a Vice President of the Fund. Prior
to joining KFS, she was a portfolio manager for a national bank. She received a
B.S. from Southwest Missouri State, Springfield, Missouri and did graduate work
towards an M.B.A. at St. Louis University. Ms. Hussey is a Chartered Financial
Analyst.

Dennis H. Ferro has been the portfolio manager for the International Portfolio
since March 1994 when he joined KFS. He is an Executive Vice President and the
Director of International Equity Investments of KFS and a Vice President of the
Fund. Mr. Ferro was President, Managing Director and Chief Investment Officer of
an international investment advisory firm prior to joining KFS. He received a
B.A. in Political Science from Villanova University, Villanova, Pennsylvania and
an MBA in Finance from St. Johns University, Jamaica, New York. Mr. Ferro is a
Chartered Financial Analyst.

Michael A. McNamara (since 1990) and Harry E. Resis, Jr. (since 1993) are the
co-portfolios managers of the High Yield Portfolio. Mr. McNamara joined KFS in
February 1972 and is currently a Senior Vice President of KFS and a Vice
President of the Fund. He received a B.S. in Business Administration from the
University of Missouri, St. Louis, Missouri, and an M.B.A. in Finance from
Loyola University, Chicago, Illinois. Mr. Resis joined KFS in 1988 and is
currently a First Vice President of KFS and a Vice President of the Fund. He
received a B.A. in Finance from Michigan State University, Lansing, Michigan.
Mr. Resis holds a number of NYSE and NASD licenses.

23
<PAGE> 26

C. Beth Cotner has been the portfolio manager of the Equity Portfolio since
1986. Ms. Cotner joined KFS in January 1985 and is currently an Executive Vice
President and the Director of Domestic Equity Portfolio Management of KFS and a
Vice President of the Fund. She received a B.A. from Ohio State University,
Columbus, Ohio, and an M.B.A. from George Washington University, Washington,
D.C.

Paul F. Sloan has been the portfolio manager of the Government Securities
Portfolio since April 1995 when he joined KFS. Prior to joining KFS, Mr. Sloan
was the Director of Institutional Portfolio Management at an investment
management company and prior thereto he was a Vice President and Investment
Officer for a regional bank. He received a B.A. in English Literature from the
University of Detroit, Detroit, Michigan, and an M.B.A. in Finance and Business
Economics from Wayne State University, Detroit, Michigan.

Gary A. Langbaum has been the portfolio manager for the Total Return Portfolio
since February 1995. He is assisted by investment personnel who specialize in
certain areas. Mr. Langbaum joined KFS in 1988 and is currently an Executive
Vice President of KFS. He received a B.A. in Finance from the University of
Maryland, College Park, Maryland.

KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, C. Beth Cotner, James H. Coxon, Richard A. Goers, Karen A.
Hussey, Frank D. Korth, Gary A. Langbaum, James R. Neel, Thomas M. Regner and
Stephen B. Timbers. The portfolio managers work together as a team with the
Equity Investment Committee and various equity analysts and equity traders to
manage the Fund's equity Portfolios. Equity analysts--through research, analysis
and evaluation--work to develop investment ideas appropriate for these
Portfolios. These ideas are studied and debated by the Equity Investment
Committee and, if approved, are added to a list of eligible investments. The
portfolio managers use the list of eligible securities to help them structure
the Portfolios in a manner consistent with each Portfolio's objective. The KFS
international investments area, directed by Dennis H. Ferro, provides research
and analysis regarding foreign investments to the portfolio managers. After
investment decisions are made, equity traders execute the portfolio manager's
instructions through various broker-dealer firms.

KFS also has a Fixed Income Investment Committee that determines overall
investment strategy for fixed income portfolios managed by KFS. The Fixed
Income Committee is currently comprised of the following members: J. Patrick
Beimford, Jr., Frank E. Collecchia, George Klein, Michael A. McNamara,
Christopher J. Mier, Frank J. Rachwalski, Jr., Harry E. Resis, Jr., Robert H.
Schumacher, John E. Silvia, Paul F. Sloan and Christopher T. Vincent. The
portfolio managers work together as a team with the Fixed Income Committee and
various fixed income analysts and traders to manage the Fund's fixed income
Portfolios. Analysts provide market, economic and financial research and
analysis that is used by the Fixed Income Committee to establish broad
parameters for these Portfolios, including duration and cash levels. In
addition, credit research by analysts is used by portfolio managers in selecting
securities appropriate for the Portfolios' policies. The KFS international
investments area provides research and analysis regarding foreign investments to
the fixed income portfolio managers, as it does for the equity portfolio
managers. After investment decisions are made, fixed income traders execute the
portfolio manager's instructions through various broker-dealer firms.

CUSTODIAN. Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street,
Kansas City, Missouri 64105, as custodian, and the United Missouri Bank, n.a.,
Tenth and Grand Streets, Kansas City, Missouri 64106 and State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as
sub-custodians, have custody of all securities and cash of the Fund maintained
in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech Center,
Brooklyn, New York 11245, as custodian, has custody of all securities and cash
held outside the United States. They attend to the collection of principal and
income, and payment for and collection of proceeds of securities bought and sold
by the Fund. IFTC is also the Fund's transfer agent and dividend-paying agent.
IFTC receives an annual custodian fee from the Portfolios of $.085 for each
$1,000 of average monthly net assets plus certain transaction charges and
out-of-pocket expense reimbursements subject to the custody agreement. For its
services as custodian and transfer agent for the fiscal year ended December 31,
1994, IFTC received fees of $514,000. Prior to February 1, 1995, IFTC was 50%
owned by KFS.

PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of a
Portfolio's securities. Subject to seeking best execution of orders, KFS may
consider sales of shares of the Fund and other funds managed by KFS or variable
life insurance and variable annuity contracts funded by the Fund as a factor in
selecting broker-dealers. See "Portfolio Transactions" in the Statement of
Additional Information.

Each Portfolio pays its respective fees and expenses of independent auditors,
counsel, custodian, the cost of reports and notices to owners of VLI and VA
contracts, brokerage commissions or transaction costs, taxes and registration
fees.

24
<PAGE> 27

DISTRIBUTOR

Kemper Distributors, Inc. ("KDI"), an affiliate of KFS, serves as distributor
and principal underwriter for the Fund pursuant to an underwriting agreement.
KDI bears all its expenses of providing services pursuant to the agreement. KDI
provides for the preparation of advertising or sales literature, and bears the
cost of printing and mailing prospectuses to persons other than shareholders.
KDI bears the cost of qualifying and maintaining the qualification of Fund
shares for sale under the securities laws of Massachusetts and the Fund bears
the expense of registering its shares with the Securities and Exchange
Commission. KDI will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under Federal and state
laws, a portion of the toll free telephone service and of computer terminals,
and of any activity which is primarily intended to result in the sale of shares
issued by the Fund, unless a plan pursuant to Rule 12b-1 under the 1940 Act
("12b-1 Plan") is in effect that provides that the Fund shall bear some or all
of such expenses.

KDI currently offers shares of each Portfolio of the Fund continuously to the
separate accounts of Participating Insurance Companies where permitted by
applicable law. The underwriting agreement provides that KDI accepts orders for
shares at net asset value, as no sales commission or load is charged. KDI has
made no firm commitment to acquire shares of the Fund.

NOTE: Although the Fund does not currently have a 12b-1 Plan and shareholder
approval would be required in order to adopt one, the underwriting agreement
provides that the Fund will also pay those fees and expenses permitted to be
paid or assumed by the Fund pursuant to a 12b-1 Plan, if any, adopted by the
Fund, notwithstanding any other provision to the contrary in the underwriting
agreement, and the Fund or a third party will pay those fees and expenses not
specifically allocated to KDI in the underwriting agreement.

25
<PAGE> 28

APPENDIX--PORTFOLIO COMPOSITION OF HIGH YIELD BONDS

The table below reflects the composition by quality rating of the investment
portfolio of the High Yield Portfolio. Percentages for the Portfolio reflect the
net asset weighted average of the percentage for each category on the last day
of each month in the 12 month period ended December 31, 1994. The table reflects
the percentage of net assets represented by fixed income securities rated by
Moody's or S&P, by non-rated fixed income securities and by other assets. The
percentage shown reflects the higher of the Moody's or S&P rating. U.S.
Government securities, whether or not rated, are reflected as Aaa and AAA
(highest quality). Cash equivalents include money market instruments, repurchase
agreements, net payables and receivables and cash. Other assets include options,
financial futures contracts and equity securities. As noted under "Investment
Objectives, Policies and Risk Factors," the High Yield Portfolio invests in high
yielding, fixed income securities without relying upon published ratings. The
allocations in the table are not necessarily representative of the composition
of the Portfolio at other times. Portfolio composition will change over time.

END OF THE MONTH COMPOSITION OF PORTFOLIO BY QUALITY AS A PERCENTAGE OF

NET ASSETS (JANUARY 1994--DECEMBER 1994)

<TABLE>
<CAPTION>
HIGH
MOODY'S/S&P RATING YIELD GENERAL DESCRIPTION
OR OTHER CATEGORY PORTFOLIO OF BOND QUALITY
- ------------------------------------- ---- -------------------------------------------------
<S> <C> <C>
Cash Equivalents..................... 6%
Aaa/AAA.............................. 2 Highest quality
Aa/AA................................ 0 High quality
A/A.................................. 0 Upper medium grade
Baa/BBB.............................. 0 Medium grade
Ba/BB................................ 18 Some speculative elements
B/B.................................. 61 Speculative
Caa/CCC.............................. 6 More speculative
Ca/CC, C/C........................... 1 Very speculative
D.................................... 1 In default
Non-rated, Not in Default............ 2
Non-rated, In Default................ 0
Other Assets......................... 3
----
Net Assets........................... 100%
</TABLE>

The description of each bond quality category set forth in the table above is
intended to be a general guide and not a definitive statement as to how Moody's
and S&P define such rating category. A more complete description of the rating
categories is set forth under "Appendix--Ratings of Investments" in the
Statement of Additional Information. The ratings of Moody's and S&P represent
their opinions as to the quality of the securities that they undertake to rate.
It should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality.

26
<PAGE> 29

KEMPER INVESTORS FUND

CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
- ----------------------------------------------- ---------------------------------------------
<S> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques; Appendix--Ratings of
Investments
14. Management of the Fund................... Investment Manager and Distributor;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Distributor
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions; Investment Manager
and Distributor
18. Capital Stock and Other Securities....... Dividends and Taxes; Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Distributor
22. Calculation of Performance Data.......... Inapplicable
23. Financial Statements..................... Financial Statements; Report of Independent
Auditors; Statement of Net Assets
</TABLE>
<PAGE> 30

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1995

KEMPER INVESTORS FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus of Kemper Investors Fund (the "Fund") dated
May 1, 1995. The prospectus may be obtained without charge from the Fund.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Restrictions..................................... B-1

Investment Policies and Techniques.......................... B-4

Portfolio Transactions...................................... B-10

Investment Manager and Distributor.......................... B-11

Experts..................................................... B-12

Purchase and Redemption of Shares........................... B-12

Officers and Trustees....................................... B-13

Dividends and Taxes......................................... B-14

Shareholder Rights.......................................... B-15

Appendix--Ratings of Investments............................ B-16
</TABLE>

The financial statements appearing in the Fund's Annual Report for the fiscal
year ended December 31, 1994 are incorporated herein by reference. Such Report
accompanies this Statement of Additional Information.

KINF 5/95

<PAGE> 31

INVESTMENT RESTRICTIONS

The Fund has adopted for each Portfolio certain fundamental investment
restrictions which, together with the investment objective and policies of each
Portfolio, cannot be changed for a Portfolio without approval by a majority of
the outstanding voting shares of that Portfolio. As defined in the Investment
Company Act of 1940 ("1940 Act"), this means the lesser of the vote of (a) 67%
of the shares of a Portfolio present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (b) more than 50% of the
outstanding shares of a Portfolio. In addition to the fundamental investment
restrictions, each Portfolio has certain non-fundamental investment
restrictions, which can be changed by the Board of Trustees without shareholder
approval.

The following fundamental investment restrictions apply to each of the Money
Market, Total Return, High Yield, Equity and Government Securities Portfolios
except as indicated to the contrary. The Portfolio may not:

(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government or its agencies or
instrumentalities) if, as a result, more than five percent (5%) of the
Portfolio's total assets would be invested in securities of that issuer.
For the High Yield Portfolio only, the restriction is as follows: "With
respect to 75% of the Portfolio's total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
(a) more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer, or (b) the Portfolio would hold more than 10% of
the outstanding voting securities of that issuer."

(2) Except for the High Yield Portfolio, purchase more than ten percent
(10%) of any class of securities of any issuer. All debt securities and all
preferred stocks are each considered as one class.

(3) For the Money Market Portfolio only, enter into repurchase agreements
if, as a result thereof, more than ten percent (10%) of the Portfolio's
total assets valued at the time of the transaction would be subject to
repurchase agreements maturing in more than seven (7) days.

(4) Make loans to others (except the purchase of debt obligations or
repurchase agreements or by lending its Portfolio securities) in accordance
with its objective and policies.

(5) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to
one-third ( 1/3) of the value of its total assets, in order to meet
redemption requests without immediately selling any portfolio securities
(any such borrowings under this section will not be collateralized). If,
for any reason, the current value of the Portfolio's total assets falls
below an amount equal to three (3) times the amount of its indebtedness
from money borrowed, the Portfolio will reduce, within three (3) business
days, its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes. The Portfolio will not purchase any
investments while borrowings are outstanding.

(6) Make short sales of securities or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, the Total Return, High Yield, Equity
and Government Securities Portfolios may make margin deposits in connection
with financial futures and options transactions.

(7) Concentrate more than 25% of a Portfolio's net assets in any one
industry; provided, however, that the Money Market Portfolio intends, under
normal conditions, to invest more than 25% of its net assets in instruments
issued by banks in accordance with its investment objective and policies.
There is no limitation in respect to investments in obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities.

(8) For the Money Market Portfolio only, invest more than five percent (5%)
of the Portfolio's total assets in securities restricted as to disposition
under the Federal securities laws.

(9) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts; or
in real estate, although it may invest in securities which are secured by
real estate and securities of issuers which invest or deal in real estate;
provided that the Total Return, High Yield and Equity Portfolios may
purchase foreign currency on a spot basis (in cash).

(10) Purchase securities of other investment companies, except as permitted
under the 1940 Act including in connection with a merger, consolidation,
reorganization or acquisition of assets.

B-1
<PAGE> 32

(11) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the Federal securities laws, in
connection with the disposition of portfolio securities.

(12) Issue senior securities except as permitted under the 1940 Act.

(13) For the Money Market Portfolio only, write, purchase or sell puts,
calls or combinations thereof.

(14) For the Total Return, High Yield and Equity Portfolios only, engage in
put or call option transactions; except it may write (sell) put or call
options on up to 25% of its net assets and may purchase put and call
options if no more than 5% of its net assets would be invested in premiums
on put and call options, combinations thereof or similar options; and it
may buy and sell options on financial futures contracts.

The following non-fundamental investment restrictions apply to each of the Money
Market, Total Return, High Yield, Equity and Government Securities Portfolios
except as indicated to the contrary. The Portfolio may not:

(1) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser own
beneficially more than .50% of the securities of such issuer and together
own more than 5% of the securities of such issuer.

(2) Except for the Money Market Portfolio, invest more than 15% of its net
assets in illiquid securities.

(3) Invest for the purpose of exercising control or management of another
issuer.

(4) Invest in oil, gas or other mineral exploration or developmental
programs, although it may invest in the securities of issuers which invest
in or sponsor such programs.

The following investment restrictions apply to the International Portfolio. The
International Portfolio may not:

(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or any foreign government or their
agencies or instrumentalities) if, as a result, more than 5% of the
Portfolio's total assets would be invested in securities of that issuer.
With respect to 75% of its assets, the Portfolio will limit its investments
in the securities of any one foreign government issuer to 5% of the
Portfolio's total assets.

(2) Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities. All debt securities are considered as one
class and all preferred stocks are considered as one class.

(3) Lend money provided that the making of time or demand deposits with
banks and the purchase of debt securities such as bonds, debentures,
commercial paper, repurchase agreements and short-term obligations in
accordance with its objective and policies are not prohibited.

(4) Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to
exceed 5% of the Portfolio's net assets; or pledge the Portfolio's
securities or receivables or transfer or assign or otherwise encumber them
in an amount exceeding the amount of the borrowing secured thereby.

(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, the Portfolio may make margin deposits
in connection with financial futures and options transactions.

(6) Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may it purchase
put or call options if more than 5% of the Portfolio's net assets would be
invested in premiums on put and call options, combinations thereof or
similar options; however, the Portfolio may buy or sell options on
financial futures contracts.

(7) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry. This limitation shall not apply to
obligations issued by the United States or any foreign government or their
agencies or instrumentalities.

(8) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts and
may enter into foreign currency transactions; or in real estate, although
it may invest in securities which are secured by real estate and securities
of issuers which invest or deal in real estate.

(9) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase
in the open market of securities of closed-end investment companies where
no underwriter or dealer's commission or profit, other than customary
broker's commission,

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is involved and only if immediately thereafter not more than (i) 3% of the
total outstanding voting stock of such company is owned by the Fund, (ii)
5% of the Fund's total assets would be invested in any one such company,
and (iii) 10% of the Fund's total assets would be invested in such
securities.

(10) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities. The Fund
may buy and sell securities outside the United States which are not
registered with the Securities and Exchange Commission or marketable in the
United States.

(11) Issue senior securities except as permitted under the 1940 Act.

The following non-fundamental investment restrictions apply to the International
Portfolio. The International Portfolio may not:

(1) Invest more than 5% of the Portfolio's total assets in securities of
issuers which with their predecessors have a record of less than three
years continuous operation.

(2) Invest more than 15% of its net assets in illiquid securities.

(3) Purchase or retain the securities or any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns
beneficially more than 1/2 of 1% of the securities of such issuer and
together own more than 5% of the securities of such issuer.

(4) Invest for the purpose of exercising control or management of another
issuer.

(5) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest in or sponsor such programs.

The following fundamental investment restrictions apply to the Small
Capitalization Equity Portfolio ("Small Cap Portfolio"). The Small Cap Portfolio
may not:

(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Portfolio's total
assets would be invested in securities of that issuer.

(2) Purchase more than 10% of the outstanding voting securities of any
issuer.

(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term
obligations are not prohibited and the Portfolio may lend its portfolio
securities.

(4) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to
one-third ( 1/3) of the value of its total assets, in order to meet
redemption requests without immediately selling any portfolio securities
(any such borrowings under this section will not be collateralized). If,
for any reason, the current value of the Portfolio's total assets falls
below an amount equal to three (3) times the amount of its indebtedness
from money borrowed, the Portfolio will reduce, within three (3) business
days, its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes. The Portfolio will not purchase any
investments while borrowings are outstanding.

(6) Write (sell) put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may the
Portfolio purchase put or call options if more than 5% of the Portfolio's
net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Portfolio may buy or
sell options on financial futures contracts.

(7) Concentrate 25% or more of the value of its assets in any one industry.
Water, communications, electric and gas utilities shall each be considered
a separate industry.

(8) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts; or
in real estate, although it may invest in securities which are secured by
real estate and securities of issuers which invest or deal in real estate.

(9) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

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<PAGE> 34

(10) Issue senior securities except as permitted under the 1940 Act.

The Small Cap Portfolio has adopted the following non-fundamental policies. The
Portfolio may not:

(1) Invest more than 5% of the Portfolio's total assets in securities of
issuers which with their predecessors have a record of less than three
years continuous operation.

(2) Purchase or retain the securities of any issuer if any of the officers
or trustees of the Portfolio or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more
than 5% of the securities of such issuer.

(3) Invest for the purpose of exercising control or management of another
issuer.

(4) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest in or sponsor such programs.

(5) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.

(6) Invest more than 15% of its net assets in illiquid securities.

Except as specifically noted, if a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage beyond the
specified limit resulting from a change in values or net assets will not be
considered a violation.

INVESTMENT POLICIES AND TECHNIQUES

The Total Return, High Yield, Equity, Government Securities, International and
Small Cap Portfolios each may engage in options transactions and each may engage
in futures transactions in accordance with their respective investment
objectives and policies. Each such Portfolio intends to engage in such
transactions if it appears to the investment manager to be advantageous to do so
in order to pursue its objective and also to hedge (i.e., protect) against the
effects of market risks but not for speculative purposes. The Money Market
Portfolio does not engage in options and futures transactions. The use of
futures and options, and possible benefits and attendant risks, are discussed
below along with information about other investment policies and techniques.

OPTIONS ON SECURITIES. The Portfolios may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain with the Fund's custodian for the term of the option a
segregated account consisting of cash, U.S. Government securities or other
liquid high-grade debt obligations ("eligible securities") having a value at
least equal to the fluctuating market value of the optioned securities. A Fund
may write "covered" put options provided that, as long as the Fund is obligated
as a writer of a put option, the Fund will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
with the custodian in a segregated account eligible securities having a value
equal to or greater than the exercise price of the option. A call option gives
the purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during the option period. A put option
gives the purchaser the right to sell, and the writer has the obligation to buy,
the underlying security at the exercise price during the option period. The
premium received for writing an option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to such market price, the price volatility of the underlying
security, the option period, supply and demand and interest rates. The
Portfolios may write or purchase spread options, which are options for which the
exercise price may be a fixed dollar spread or yield spread between the security
underlying the option and another security that is used as a bench mark. The
exercise price of an option may be below, equal to or above the current market
value of the underlying security at the time the option is written. The buyer of
a put who also owns the related security is protected by ownership of a put
option against any decline in that security's price below the exercise price
less the amount paid for the option. The ability to purchase put options allows
the Portfolio to protect capital gains in an appreciated security it owns,
without being required to actually sell that security. At times a Portfolio
would like to establish a position in securities upon which call options are
available. By purchasing a call option, the Portfolio is able to fix the cost of
acquiring the security, this being the cost of the call plus the exercise price
of the option. This procedure also provides some protection from an unexpected
downturn in the market, because the Portfolio is only at risk for the amount of
the premium paid for the call option which it can, if it chooses, permit to
expire.

During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the

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<PAGE> 35

underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.

If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the money market investment.
If the secured put writer has to buy the underlying security because of the
exercise of the put option, the secured put writer incurs an unrealized loss to
the extent that the current market value of the underlying security is less than
the exercise price of the put option. However, this would be offset in whole or
in part by gain from the premium received and any interest income earned on the
money market investment.

OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Techniques--Options and Financial Futures Transactions"), the Total Return, High
Yield, Equity, Government Securities, International and Small Cap Portfolios may
deal in over-the-counter traded options ("OTC options"). OTC options differ from
exchange traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation, and there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise, in which event a Portfolio may experience material losses. However,
in writing options the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities, and a wider range of expiration
dates and exercise prices, than are exchange traded options. Since there is no
exchange, pricing is normally done by reference to information from market
makers, which information is carefully monitored by the investment manager and
verified in appropriate cases.

A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Portfolio may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale with the dealer that issued it. Similarly, when a
Portfolio writes an OTC option, it generally can close out that option prior to
its expiration only by entering into a closing purchase transaction with the
dealer to which the Portfolio originally wrote it. If a covered call option
writer cannot effect a closing transaction, it cannot sell the underlying
security until the option expires or the option is exercised. Therefore, a
covered call option writer may not be able to sell an underlying security even
though it might otherwise be advantageous to do so. Likewise, a secured put
writer may be unable to sell the securities pledged to secure the put for other
investment purposes while it is obligated as a put writer. Similarly, a
purchaser of such put or call options might also find it difficult to terminate
its position on a timely basis in the absence of a secondary market.

The Fund understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Fund has adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Fund's portfolios. A brief description of
such procedures is set forth below.

A Portfolio will only engage in OTC options transactions with dealers that have
been specifically approved by the Fund's investment manager pursuant to
procedures adopted by the Board of Trustees of the Fund. The Fund's investment
manager believes that the approved dealers should be able to enter into closing
transactions if necessary and, therefore, present minimal credit risks to a
Portfolio. The investment manager will monitor the creditworthiness of the
approved dealers on an on-going basis. A Portfolio currently will not engage in
OTC options transactions if the amount invested by the Portfolio in OTC options,
plus a "liquidity charge" related to OTC options written by the Portfolio, plus
the amount invested by the Portfolio in illiquid securities, would exceed 15% of
the Portfolio's net assets. The "liquidity charge" referred to above is computed
as described below.

The Fund anticipates entering into agreements with dealers to which a Portfolio
sells OTC options. Under these agreements a Portfolio would have the absolute
right to repurchase the OTC options from the dealer at any time at a price no
greater than a price established under the agreements (the "Repurchase Price").
The "liquidity charge" referred to above for a specific OTC option transaction
will be the Repurchase Price related to the OTC option less the intrinsic value
of the OTC option. The intrinsic value of an OTC call option for such purposes
will be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an

B-5
<PAGE> 36

OTC put option, intrinsic value will be the amount by which the exercise price
exceeds the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow the Portfolio to repurchase a specific OTC
option written by the Portfolio, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.

OPTIONS ON SECURITIES INDICES. The Portfolios, as part of their options
transactions, may also use options on securities indices in an attempt to hedge
against market conditions affecting the value of securities that the Portfolio
owns or intends to purchase, and not for speculation. Through the writing or
purchase of index options, a Portfolio can achieve many of the same objectives
as through the use of options on individual securities. Options on securities
indices are similar to options on a security except that, rather than the right
to take or make delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Unlike security options, all
settlements are in cash and gain or loss depends on price movements in the
market generally (or in a particular industry or segment of the market) rather
than price movements in individual securities. Price movements in securities
that the Fund owns or intends to purchase probably will not correlate perfectly
with movements in the level of an index since the prices of such securities may
be affected by somewhat different factors and, therefore, a Portfolio bears the
risk that a loss on an index option would not be completely offset by movements
in the price of such securities.

When a Portfolio writes an option on a securities index, it will be required to
deposit with its custodian and mark-to-market eligible securities equal in value
to at least 100% of the exercise price in the case of a put, or the contract
value in the case of a call. In addition, where the Portfolio writes a call
option on a securities index at a time when the contract value exceeds the
exercise price, the Portfolio will segregate and mark-to-market, until the
option expires or is closed out, cash or cash equivalents equal in value to such
excess.

A Portfolio may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described below. Also, an option purchased by a
Portfolio may expire worthless, in which case the Portfolio would lose the
premium paid therefor.

FINANCIAL FUTURES CONTRACTS. The Portfolios may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency, or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e. protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Portfolio holds or intends to purchase. A "sale" of a futures contract means
the undertaking of a contractual obligation to deliver the securities or the
cash value of an index or foreign currency called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index or foreign currency at a specified price
during a specified delivery period. At the time of delivery, in the case of
fixed income securities pursuant to the contract, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than that specified in the contract. In some cases,
securities called for by a futures contract may not have been issued at the time
the contract was written.

Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery of the underlying assets by
purchasing (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same month. Such a
transaction, if effected through a member of an exchange, cancels the obligation
to make or take delivery of the underlying securities or other assets. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded. A
Portfolio will incur brokerage fees when it purchases or sells contracts, and
will be required to maintain margin deposits. At the time a Portfolio enters
into a futures contract, it is required to deposit with its custodian, on behalf
of the broker, a specified amount of cash or eligible securities, called
"initial margin." The initial margin required for a futures contract is set by
the exchange on which the contract is traded. Subsequent payments, called
"variation margin," to and from the broker are made on a daily basis as the
market price of the futures contract fluctuates. The costs incurred in
connection with futures transactions could reduce the Portfolio's return.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of markets or exchange rates is wrong, the overall performance
may be poorer than if no contracts had been entered into.

B-6
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There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures markets are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Due to the possibility
of price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager may still not result in a successful hedging
transaction. If any of these events should occur, the Portfolio could lose money
on the financial futures contracts and also on the value of its portfolio
assets.

OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Portfolios may purchase and write
call and put options on financial futures contracts. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time during the period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise price. The Portfolio
would be required to deposit with its custodian initial margin and maintenance
margin with respect to call and put options on futures contracts written by it.
A Portfolio will establish segregated accounts or will provide cover with
respect to written options on financial futures contracts in a manner similar to
that described under "Options on Securities." Options on futures contracts
involve risks similar to those risks relating to transactions in financial
futures contracts described above. Also, an option purchased by a Portfolio may
expire worthless, in which case the Portfolio would lose the premium paid
therefor.

DELAYED DELIVERY TRANSACTIONS. The Total Return, High Yield, Equity and
Government Securities Portfolios may purchase or sell portfolio securities on a
when-issued or delayed delivery basis. When-issued or delayed delivery
transactions arise when securities are purchased by the Portfolio with payment
and delivery to take place in the future in order to secure what is considered
to be an advantageous price and yield to the Portfolio at the time of entering
into the transaction. When the Portfolio enters into a delayed delivery
transaction, it becomes obligated to purchase securities and it has all of the
rights and risks attendant to ownership of a security, although delivery and
payment occur at a later date. The value of fixed income securities to be
delivered in the future will fluctuate as interest rates vary. At the time a
Portfolio makes the commitment to purchase a security on a when-issued or
delayed delivery basis, it will record the transaction and reflect the liability
for the purchase and the value of the security in determining its net asset
value. Likewise, at the time a Portfolio makes the commitment to sell a security
on a delayed delivery basis, it will record the transaction and include the
proceeds to be received in determining its net asset value; accordingly, any
fluctuations in the value of the security sold pursuant to a delayed delivery
commitment are ignored in calculating net asset value so long as the commitment
remains in effect. The Portfolio generally has the ability to close out a
purchase obligation on or before the settlement date, rather than take delivery
of the security.

To the extent the Portfolio engages in when-issued or delayed delivery
transactions, it will do so for the purpose of acquiring portfolio securities
consistent with the Portfolio's investment objective and policies and not for
the purpose of investment leverage or to speculate in interest rate changes. The
Portfolio will only make commitments to purchase securities on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
but the Portfolio reserves the right to sell these securities before the
settlement date if deemed advisable.

REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a delayed delivery purchase or a forward currency exchange purchase, a
Portfolio will maintain in a segregated account cash, U.S. Government securities
or liquid high grade debt securities equal to the value of such contracts. A
Portfolio will use cover in connection with selling a futures contract.

A Portfolio will not engage in transactions in financial futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
interest rates or market conditions affecting the value of securities which the
Portfolio holds or intends to purchase.

FOREIGN CURRENCY OPTIONS. The Total Return, High Yield, Equity, International
and Small Cap Portfolios may engage in foreign currency options transactions. A
foreign currency option provides the option buyer with the right to buy or sell
a stated amount of foreign currency at the exercise price at a specified date or
during the option period. A call option gives its owner the right, but not the
obligation, to buy the currency, while a put option gives

B-7
<PAGE> 38

its owner the right, but not the obligation, to sell the currency. The option
seller (writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.

A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Portfolio against an adverse movement in
the value of a foreign currency, it does not limit the gain which might result
from a favorable movement in the value of such currency. For example, if a
Portfolio were holding securities denominated in an appreciating foreign
currency and had purchased a foreign currency put to hedge against a decline in
the value of the currency, it would not have to exercise its put. Similarly, if
the Portfolio had entered into a contract to purchase a security denominated in
a foreign currency and had purchased a foreign currency call to hedge against a
rise in value of the currency but instead the currency had depreciated in value
between the date of purchase and the settlement date, the Portfolio would not
have to exercise its call but could acquire in the spot market the amount of
foreign currency needed for settlement.

FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of their financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Total Return, High Yield, Equity, International
and Small Cap Portfolios may use foreign currency futures contracts and options
on such futures contracts. Through the purchase or sale of such contracts, a
Portfolio may be able to achieve many of the same objectives as through forward
foreign currency exchange contracts more effectively and possibly at a lower
cost.

Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Total Return, High Yield,
Equity, International and Small Cap Portfolios may engage in forward foreign
currency transactions. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days ("term") from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. The investment manager believes that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interest of a Portfolio. A Portfolio will not speculate in
foreign currency exchange.

If a Portfolio retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in
forward contract prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between a Portfolio's entering
into a forward contract for the sale of foreign currency and the date when it
enters into an offsetting contract for the purchase of the foreign currency, the
Portfolio would realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio would suffer a loss to the extent
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain that might result should the value of such
currency increase. A Portfolio may have to convert its holdings of foreign
currencies into U.S. Dollars from time to time in order to meet such needs as
Portfolio expenses and redemption requests. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies.

The returns available from foreign currency denominated debt instruments can be
adversely affected by changes in exchange rates. The investment manager believes
that the use of foreign currency hedging techniques, including "cross-hedges"
for the International Portfolio, can help protect against declines in the U.S.
Dollar value of income available for distribution to shareholders, and against
declines in the net asset value of a Portfolio's shares resulting from adverse
changes in currency exchange rates. For example, the return available from
securities denominated in a particular foreign currency would diminish if the
value of the U.S. Dollar increased against that currency. Such a decline could
be partially or completely offset by the increased value of a cross-hedge
involving a forward foreign currency exchange contract to sell a different
foreign currency, if that contract were available on terms more advantageous to
the International Portfolio than a contract to sell the currency in which the
position being hedged is denominated. The investment manager believes that
cross-hedges can therefore provide significant protection of net

B-8
<PAGE> 39

asset value in the event of a general rise in the U.S. Dollar against foreign
currencies. However, a cross-hedge cannot provide assured protection against
exchange rate risks and, if the investment manager misjudges future exchange
rate relationships, the International Portfolio could be in a less advantageous
position than if such a hedge had not been established.

A Portfolio will not enter into forward contracts or maintain a net exposure in
such contracts when the Portfolio would be obligated to deliver an amount of
foreign currency in excess of the value of the Portfolio's securities or other
assets (a) denominated in that currency or (b), in the case of a "cross-hedge"
for the International Portfolio (see "Investment Objectives and Policies" in the
prospectus), denominated in a currency or currencies that the investment manager
believes will have price movements that tend to correlate closely with that
currency. The investment manager will normally seek to select currencies for
sale under a forward contract for a "cross-hedge" that would reflect a price
movement correlation of .8 or higher with respect to the currency being hedged
(1 reflects a perfect correlation, 0 reflects a random relationship and -1
reflects a diametrically opposite correlation). There is, of course, no
assurance that any specific correlation can be maintained for any specific
transaction. See "Foreign Currency Transactions" under "Investment Techniques"
in the prospectus. The Fund's custodian bank segregates cash or liquid
high-grade securities in an amount not less than the value of a Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of foreign currency. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the Portfolio's commitments
with respect to such contracts. The Portfolios currently do not intend to enter
into such forward contracts if they would have more than 15% of the value of
their total assets committed to such contracts. A Portfolio generally will not
enter into a forward contract with a term longer than one year.

EURODOLLAR INSTRUMENTS. The Money Market, Total Return, High Yield, Equity and
Small Cap Portfolios may contain negotiable certificates of deposit and time
deposits of foreign branches of American banks and Canadian banks. U.S.
Dollar-denominated obligations issued by non-United States institutions are
generally called Eurodollar instruments. Certain risks applicable to foreign
securities, described above, apply to Eurodollar instruments. Investment risks
from these securities include future political and economic developments,
possible withholding taxes on interest, possible seizure of foreign deposits, or
the possible establishment of exchange controls affecting payment on these
securities. Foreign branches of American banks have extensive government
regulation which may limit both the amount and type of loans and interest rates.
In addition, the banking industry's profitability is closely linked to
prevailing money market conditions for financing lending operations. Both
general economic conditions and credit risks play an important part in the
operations of the industry. American banks are required to maintain reserves,
are limited in how much they can loan a single borrower, and are subject to
other regulations to promote financial soundness. Not all of these laws and
regulations apply to foreign branches of American banks. In addition, the
foreign countries have accounting and reporting principles that differ from
those in the United States.

COLLATERALIZED OBLIGATIONS. A Portfolio will currently invest in only those
collateralized obligations that are fully collateralized and that meet the
quality standards otherwise applicable to the Portfolio's investments. Fully
collateralized means that the collateral will generate cash flows sufficient to
meet obligations to holders of the collateralized obligations under even the
most conservative prepayment and interest rate projections. Thus, the
collateralized obligations are structured to anticipate a worst case prepayment
condition and to minimize the reinvestment rate risk for cash flows between
coupon dates for the collateralized obligations. A worst case prepayment
condition generally assumes immediate prepayment of all securities purchased at
a premium and zero prepayment of all securities purchased at a discount.
Reinvestment rate risk may be minimized by assuming very conservative
reinvestment rates and by other means such as by maintaining the flexibility to
increase principal distributions in a low interest rate environment. The
effective credit quality of the collateralized obligations in such instances is
the credit quality of the issuer of the collateral. The requirements as to
collateralization are determined by the issuer or sponsor of the collateralized
obligation in order to satisfy rating agencies, if rated. None of the Portfolios
currently intends to invest more than 5% of its total assets in collateralized
obligations that are collateralized by a pool of credit card or automobile
receivables or other types of assets rather than a pool of mortgages,
mortgage-backed securities or U.S. Government securities. Currently, none of the
Portfolios intends to invest more than 10% of its total assets in inverse
floaters as described in the prospectus (see "Investment
Techniques--Collateralized Obligations"). The Money Market Portfolio does not
invest in inverse floaters.

Payments of principal and interest on the underlying collateral securities are
not passed through directly to the holders of the collateralized obligations as
such. Collateralized obligations often are issued in two or more classes with
varying maturities and stated rates of interest. Because interest and principal
payments on the underlying securities are not passed through directly to holders
of collateralized obligations, such obligations of varying maturities may be
secured by a single portfolio or pool of securities, the payments on which are
used to pay interest

B-9
<PAGE> 40

on each class and to retire successive maturities in sequence. These
relationships may in effect "strip" the interest payments from principal
payments of the underlying securities and allow for the separate purchase of
either the interest or the principal payments, sometimes called interest only
("IO") and principal only ("PO") securities. Collateralized obligations are
designed to be retired as the underlying securities are repaid. In the event of
prepayment on or call of such securities, the class of collateralized obligation
first to mature generally will be paid down first. Therefore, although in most
cases the issuer of collateralized obligations will not supply additional
collateral in the event of such prepayment, there will be sufficient collateral
to secure collateralized obligations that remain outstanding. It is anticipated
that no more than 5% of a Portfolio's total assets will be invested in IO and PO
securities. Governmentally-issued and privately-issued IO's and PO's will be
considered illiquid for purposes of a Portfolio's limitation on illiquid
securities, however, the Board of Trustees may adopt guidelines under which
governmentally-issued IO's and PO's may be determined to be liquid.

In reliance on an interpretation by the SEC, a Portfolio's investments in
certain qualifying collateralized obligations are not subject to the limitations
in the 1940 Act regarding investments by a registered investment company, such
as a Portfolio, in another investment company.

ZERO COUPON GOVERNMENT SECURITIES. Subject to its investment objective and
policies, a Portfolio may invest in zero coupon U.S. Government securities. Zero
coupon bonds are purchased at a discount from the face amount. The buyer
receives only the right to receive a fixed payment on a certain date in the
future and does not receive any periodic interest payments. These securities may
include those created directly by the U.S. Treasury and those created as
collateralized obligations through various proprietary custodial, trust or other
relationships. The effect of owning instruments which do not make current
interest payments is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount accretion during the life of the
obligations. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest distributions at a rate as high as the
implicit yield on the zero coupon bond, but at the same time eliminates any
opportunity to reinvest earnings at higher rates. For this reason, zero coupon
bonds are subject to substantially greater price fluctuations during periods of
changing market interest rates than those of comparable securities that pay
interest currently, which fluctuation is greater as the period to maturity is
longer. Zero coupon bonds created as collateralized obligations are similar to
those created through the U.S. Treasury, but the former investments do not
provide absolute certainty of maturity or of cash flows after prior classes of
the collateralized obligations are retired. No Portfolio currently intends to
invest more than 5% of its net assets in zero coupon U.S. Government securities
during the current year.

PORTFOLIO TRANSACTIONS

Kemper Financial Services, Inc. ("KFS") is the investment manager for the Kemper
Funds, and KFS and its affiliates also furnish investment management services to
other clients including Kemper Corporation and the Kemper insurance companies.
KFS is the sole shareholder of Kemper Asset Management Company and Kemper
Investment Management Company Limited. These three entities share some common
research and trading facilities. At times investment decisions may be made to
purchase or sell the same investment security for one or more Portfolios and for
one or more of the clients managed by KFS. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated as to amount and price in a manner considered
equitable to each.

National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options the
Fund will be able to write on a particular security.

The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to the Portfolios.
On the other hand, the ability of the Portfolios to participate in volume
transactions may produce better executions for the Portfolios in some cases. The
Board of Trustees of the Fund believes that the benefits of KFS's organization
outweigh any limitations that may arise from simultaneous transactions or
position limits.

The Fund may purchase instruments issued by banks which are receiving service
payments or commissions; however, no preferences will be given in making such
portfolio purchases. Money market instruments are normally purchased in
principal transactions directly from the issuer or from an underwriter or market
maker. There usually will be no brokerage commissions paid for such purchases.
Purchases from underwriters will include a commission

B-10
<PAGE> 41

or concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers will include the spread between the bid and asked
prices.

KFS, in effecting purchases and sales of portfolio securities for the account of
each Portfolio, will implement the policy of seeking best execution of orders,
which includes best net prices, except to the extent that KFS may be permitted
to pay higher brokerage commissions for research services as described below.
Consistent with this policy, orders for portfolio transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, clearance
procedures, wire service quotations and statistical and other research
information provided to the Portfolios, KFS and KILICO. KILICO obtains most of
its investment research information from KFS. Any research benefits derived are
available for all clients, including clients of affiliated companies of KFS and
KILICO. Since it is only supplementary to KFS's own research efforts and must be
analyzed and reviewed by KFS's staff, the receipt of research information is not
expected to materially reduce expenses. In selecting among the firms believed to
meet the criteria for handling a particular transaction, KFS may give
consideration to those firms that have sold or are selling shares of other funds
managed by KFS or variable life insurance and variable annuity contracts funded
by the Fund, as well as to those firms that provide market, statistical and
other research information to the Fund and KFS; although KFS is not authorized
to pay higher commissions or, in the case of principal trades, higher prices to
firms that provide such services, except as described below.

KFS may in certain instances be permitted to pay higher brokerage commissions
(not including principal trades) solely for receipt of market, statistical and
other research services. Subject to Section 28(e) of the Securities Exchange Act
of 1934 and procedures adopted by the Board of Trustees of the Fund, the Fund
could pay a firm that provides research services to KFS commissions for
effecting a securities transaction for the Fund in excess of the amount other
firms would have charged for the transaction if KFS determines in good faith
that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or KFS's overall responsibilities to the Fund or other
clients. Not all of such research services may be useful or of value in advising
a particular Portfolio. Research benefits will be available for all clients of
KFS and its subsidiaries. The investment management fee paid by the Fund to KFS
is not reduced because KFS receives these research services.

The table below shows total brokerage commissions paid by each Portfolio then
existing for the last three fiscal years and, for the most recent fiscal year,
the percentage thereof that was allocated to firms based upon research
information provided or sales of Kemper Fund shares.

<TABLE>
<CAPTION>
ALLOCATED TO FIRMS
BASED ON
RESEARCH/SALES OF
KEMPER FUND SHARES
PORTFOLIO FISCAL 1994 IN FISCAL 1994 FISCAL 1993 FISCAL 1992
- --------------------------------------------- ----------- ------------------ ----------- -----------
<S> <C> <C> <C> <C>
Money Market................................. $ 0 0% $ 0 $ 0
Total Return................................. $ 2,594,000 77% $ 3,044,000 $ 1,771,000
High Yield................................... $ 1,480,000 0% $ 1,749,000 $ 218,000
Equity....................................... $ 1,058,000 90% $ 880,000 $ 666,000
Government Securities........................ $ 27,000 1% $ 38,000 $ 0
International................................ $ 996,000 98% $ 566,000 $ 126,000
Small Cap.................................... $ 32,000+ 58% $ N/A N/A
</TABLE>

- ---------------

+ Commencement of Operations on May 1, 1994 through December 31, 1994

INVESTMENT MANAGER AND DISTRIBUTOR

INVESTMENT MANAGER. KFS is the Fund's investment manager. Pursuant to an
investment management agreement, KFS acts as the Fund's investment manager,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, provides shareholder and information services and permits any of its
officers or employees to serve without compensation as trustees or officers of
the Fund if elected to such positions. The agreement provides that the Fund pays
the charges and expenses of its operations including the fees and expenses of
the trustees (except those who are officers or employees of KFS), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value,

B-11
<PAGE> 42

taxes and membership dues. The Fund bears the expenses of registration of its
shares with the Securities and Exchange Commission, while the principal
underwriter pays the cost of qualifying and maintaining the qualification of the
Fund's shares for sale under the securities laws of the various states, if any.

The agreement provides that KFS shall not be liable for any error of judgment or
of law, or for any loss suffered by the Fund in connection with the matters to
which the agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of KFS in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the agreement.

The investment management agreement continues in effect from year to year so
long as its continuation is approved at least annually by a majority of the
trustees who are not parties to such agreement or interested persons of any such
party except in their capacity as trustees of the Fund and by the shareholders
or the Board of Trustees. It may be terminated at any time upon 60 days' notice
by either party, or by a majority vote of the outstanding shares, and will
terminate automatically upon assignment. Upon termination of the agreement and
when so requested by KFS, the Fund will refrain from using the term "Kemper" in
its name or in its business in any form or combination. If additional Fund
Portfolios become subject to the investment management agreement, the provisions
concerning continuation, amendment and termination and the allocation of the
management fees and the application of the expense limitation shall be on a
Portfolio by Portfolio basis. Additional Portfolios may be subject to different
agreements.

The Fund pays an investment management fee payable monthly at an effective
annual rate of .50%, .55%, .60%, .60%, .55%, .75% and .65% of average daily net
assets of the Money Market, Total Return, High Yield, Equity, Government
Securities, International and Small Cap Portfolios, respectively. For management
services and facilities furnished for the fiscal year ended December 31, 1994,
the Fund incurred fees in the Money Market, Total Return, High Yield, Equity,
Government Securities, International and Small Cap Portfolios of $512,000,
$3,403,000, $1,329,000, $1,768,000, $583,000, $842,000 and $26,000,
respectively. For management services and facilities furnished for the fiscal
year ended December 31, 1993, the Fund incurred fees in the Money Market, Total
Return, High Yield, Equity, Government Securities and International Portfolios
of $357,000, $3,223,000, $1,225,000, $1,472,000, $629,000 and $295,000,
respectively. For management services and facilities furnished for the fiscal
year ended December 31, 1992, the Fund incurred fees in the Money Market, Total
Return, High Yield, Equity, Government Securities and International Portfolios
of $404,000, $2,478,000, $897,000, $937,000, $435,000 and $83,000, respectively.

PRINCIPAL UNDERWRITER. Kemper Distributors, Inc. ("KDI"), an affiliate of KFS,
is the distributor and principal underwriter for shares of the Fund in the
continuous offering of its shares. The Fund pays the cost for the prospectus and
shareholder reports to be set in type and printed for existing shareholders, and
KDI pays for the printing and distribution of copies thereof used in connection
with the offering of shares to prospective shareholders. KDI also pays for
supplementary sales literature and advertising costs. Terms of continuation,
termination and assignment under the underwriting agreement are identical to
those described above with regard to the investment management agreement, except
that termination other than upon assignment requires six month's notice.

Investors Fiduciary Trust Company ("IFTC"), has entered into an agreement with
KILICO whereby KILICO provides certain record keeping services. During the year
ended December 31, 1994, no fees for record keeping or dividend-paying agents'
services, were paid to KILICO.

EXPERTS

The financial statements of the Fund at December 31, 1994 and for the five years
in the period then ended have been audited by Ernst & Young LLP, 233 South
Wacker Drive, Chicago, Illinois 60606, independent auditors, as set forth in
their report appearing elsewhere herein and incorporated herein by reference;
and those financial statements are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

PURCHASE AND REDEMPTION OF SHARES

Fund shares are sold at their net asset value next determined after an order and
payment are received as described in the Fund's prospectus.

Upon receipt by Investors Fiduciary Trust Company ("IFTC"), the Fund's Transfer
Agent, of a request for redemption, shares will be redeemed by the Fund at the
applicable net asset value as described in the Fund's prospectus.

B-12
<PAGE> 43

The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed, other than customary weekend and holiday closings or during any period
in which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably practicable for the
Portfolio to determine the value of its net assets, or (c) for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of the Fund's shareholders.

OFFICERS AND TRUSTEES

The officers and trustees of the Fund, their principal occupations and their
affiliations, if any, with Kemper Financial Services, Inc., the Fund's
investment manager and Kemper Distributors, Inc., the Fund's principal
underwriter, are as follows (The number following each person's title is the
number of investment companies managed by Kemper Financial Services, Inc. for
which he or she holds similar positions):

ARTHUR R. GOTTSCHALK, Trustee (10), 10642 Brookridge Drive, Frankfort, Illinois;
Retired; formerly, President, Illinois Manufacturers Association; Trustee,
Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.

FREDERICK T. KELSEY, Trustee (10), 3133 Laughing Gull Court, John's Island,
South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.

DAVID B. MATHIS, Trustee* (28), Kemper Center, Long Grove, Illinois; Chairman,
Chief Executive Officer and Director of Kemper Corporation; Director, Kemper
Financial Services, Inc. and Kemper Financial Companies, Inc.; Director, IMC
Global Inc.

STEPHEN B. TIMBERS, President and Trustee* (31), 120 S. LaSalle St., Chicago,
Illinois; President, Chief Operating Officer and Director, Kemper Corporation;
Chairman, Chief Executive Officer, Chief Investment Officer and Director, Kemper
Financial Services, Inc.; Director, Kemper Financial Companies, Inc. and Kemper
Securities, Inc.; Director, Gillett Holdings, Inc. and LTV Corporation.

JOHN B. TINGLEFF, Trustee (10), 2015 South Lake Shore Drive, Harbor Springs,
Michigan; Retired; formerly President, Tingleff & Associates (management
consulting firm); formerly, Senior Vice President, Continental Illinois National
Bank & Trust Company.

JOHN G. WEITHERS, Trustee (10), 311 Springlake, Hinsdale, Illinois; Retired;
formerly, Chairman of the Board and Chief Executive Officer, Chicago Stock
Exchange; Director, Federal Life Insurance Company; Vice Chairman and Trustee,
DePaul University.

J. PATRICK BEIMFORD, JR., Vice President* (24), 120 South LaSalle Street,
Chicago, Illinois; Executive Vice President/Director of Fixed Income
Investments, Kemper Financial Services, Inc.

PHILIP J. COLLORA, Vice President and Secretary* (31), 120 South LaSalle Street,
Chicago, Illinois; Attorney, Senior Vice President and Assistant Secretary,
Kemper Financial Services, Inc.

C. BETH COTNER, Vice President* (8), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of Domestic Equity Portfolio
Management, Kemper Financial Services, Inc.

CHARLES F. CUSTER, Vice President and Assistant Secretary* (31), 222 North
LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman & Kammholz
(attorneys), Legal Counsel to the Fund.

DAVID F. DIERENFELDT, Vice President and Assistant Secretary* (1), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President, Associate
General Counsel and Assistant Secretary, Kemper Financial Services, Inc.

JEROME L. DUFFY, Treasurer* (31), 120 South LaSalle Street, Chicago, Illinois;
Senior Vice President, Kemper Financial Services, Inc.

DENNIS H. FERRO, Vice President* (4), 120 South LaSalle Street, Chicago,
Illinois; Executive Vice President and Director of International Equity
Investments, Kemper Financial Services, Inc.; prior thereto, President, Managing
Director and Chief Investment Officer of an international investment advisory
firm.

KAREN A. HUSSEY, Vice President* (2), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, Kemper Financial Services, Inc.

B-13
<PAGE> 44

MICHAEL A. McNAMARA, Vice President* (4), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, Kemper Financial Services, Inc.

JOHN E. PETERS, Vice President* (31), 120 South LaSalle Street, Chicago,
Illinois; Senior Executive Vice President, Kemper Financial Services, Inc;
President and Director, Kemper Distributors, Inc.

FRANK J. RACHWALSKI, JR. Vice President* (9), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, Kemper Financial Services, Inc.

HARRY E. RESIS, JR., Vice President* (4), 120 South LaSalle Street, Chicago,
Illinois; First Vice President, Kemper Financial Services, Inc.

* Interested persons as defined in the Investment Company Act of 1940.

The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund, except that Mr. Custer's law firm
receives fees from the Fund as counsel to the Fund. The table below shows
amounts paid or accrued to those trustees who are not designated "interested
persons" during the Fund's 1994 calendar year.

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS KEMPER FUNDS
COMPENSATION ACCRUED AS PART OF PAID TO
NAME OF TRUSTEE FROM FUND FUND EXPENSES TRUSTEES**
- ------------------------------------------------ ------------ ------------------- ------------
<S> <C> <C> <C>
Arthur R. Gottschalk*........................... $ 20,100 $ 0 $ 65,000
Frederick T. Kelsey*............................ $ 20,800 $ 0 $ 66,800
John B. Tingleff................................ $ 19,600 $ 0 $ 63,500
John G. Weithers................................ $ 19,400 $ 0 $ 63,100
</TABLE>

- ---------------

* Includes deferred fees and interest thereon pursuant to deferred compensation
agreements with the Fund. Deferred amounts accrue interest monthly at a rate
equal to the yield of Kemper Money Market Fund -- Money Market Portfolio.

** Includes compensation for service for calendar year 1994 on the boards of 10
Kemper funds with 21 fund portfolios. Also includes amounts for new funds
estimated as if the fund had existed at the beginning of the year.

As of April 30, 1995, the trustees and officers as a group owned less than 1% of
the outstanding shares of each Portfolio of the Fund.

DIVIDENDS AND TAXES

DIVIDENDS. The Fund may at any time vary the dividend practices with respect to
a Portfolio and, therefore, reserves the right from time to time to either
distribute or retain for reinvestment such of its net investment income and its
net short-term and long-term capital gains as the Board of Trustees of the Fund
determines appropriate under the then current circumstances.

TAXES. Each Portfolio intends to continue to qualify as a regulated investment
company under subchapter M of the Internal Revenue Code ("Code") in order to
avoid taxation of the Fund and its shareholders. One of the subchapter M
requirements to be satisfied is that less than 30% of a Portfolio's gross income
during the fiscal year must be derived from gains from the sale or other
disposition of securities held for less than three months. A Portfolio may be
limited in its options, futures and foreign currency transactions in order to
prevent recognition of such gains.

Pursuant to the requirements of Section 817(h) of the Code, the only
shareholders of the Fund and its Portfolios will be insurance companies and
their separate accounts that fund variable insurance contracts. The prospectus
that describes a particular variable insurance contract discusses the taxation
of separate accounts and the owner of the particular variable insurance
contract.

Each Portfolio intends to comply with the requirements of Section 817(h) and
related regulations. Section 817(h) of the Code and the regulations issued by
the Treasury Department impose certain diversification requirements affecting
the securities in which the Portfolios may invest. These diversification
requirements are in addition to the diversification requirements under
subchapter M and the Investment Company Act of 1940. The consequences of failure
to meet the requirements of Section 817(h) could result in taxation of the
insurance company offering the variable insurance contract and immediate
taxation of the owner of the contract to the extent of appreciation on
investment under the contract.

B-14
<PAGE> 45

The preceding is a brief summary of certain of the relevant tax considerations.
The summary is not intended as a complete explanation or a substitute for
careful tax planning and consultation with individual tax advisers.

SHAREHOLDER RIGHTS

The Fund is generally not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which approval is required by the
1940 Act; (c) any termination of the Fund to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund or any Portfolio, establishing a
Portfolio, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (e) as to
whether a court action, preceding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Fund or the
shareholders, to the same extent as the stockholders of a Massachusetts business
corporation; and (f) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Fund, or any registration of the Fund
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.

Under current interpretations of the 1940 Act, the Fund expects that
Participating Insurance Company shareholders will offer VLI and VA contract
holders the opportunity to instruct them as to how Fund shares attributable to
such contracts will be voted with respect to the matters described above. The
separate prospectuses describing the VLI and VA contracts include additional
disclosure of how contract holder voting rights are computed.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, contains provisions designed to protect
shareholders from liability for acts or obligations of the Fund and requires
that notice of such provisions be given in each agreement, obligation or
instrument entered into or executed by the Fund or the trustees. Moreover, the
Declaration of Trust provides for indemnification out of Fund property for all
losses and expenses of any shareholders held personally liable for the
obligations of the Fund and the Fund will be covered by insurance which the
trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered by KFS remote and not material since it is limited to circumstances
in which the provisions limiting liability are inoperative and the Fund itself
is unable to meet its obligations.

The Declaration of Trust further provides that the trustees will not be liable
for errors of judgment or mistakes of fact or law. The Declaration of Trust does
not protect a trustee against any liability to which he or she should otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of a trustee. The Declaration of Trust permits
the Trust to purchase insurance against certain liabilities on behalf of the
trustees.

B-15
<PAGE> 46

APPENDIX--RATINGS OF INVESTMENTS

COMMERCIAL PAPER RATINGS

A-1, A-2 AND PRIME-1, PRIME-2 COMMERCIAL PAPER RATINGS

Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1 or A-2.

The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1 or 2.

CORPORATE BONDS
STANDARD & POOR'S CORPORATION BOND RATINGS

AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI. The rating CI is reserved for income bonds on which no interest is being
paid.

D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC. BOND RATINGS

AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

B-16
<PAGE> 47

A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

B-17
<PAGE> 48

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

1
<PAGE> 49

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.

2
<PAGE> 50

KEMPER INVESTORS FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

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.

3
<PAGE> 51

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.

4
<PAGE> 52

<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>

5
<PAGE> 53

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.

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.

6
<PAGE> 54

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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.

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

7
<PAGE> 55

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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.

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
----------------------------------------------------------------------------------------------------------------------
Small
Money Government Capitalization
Market Total Return High Yield Equity Securities International Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio(b)
--------- --------------- ---------------- --------------- ---------------- --------------- ---------------
(a) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------ ------ ------ ------- ----- ------- ------ ------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <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 78,847 $ 99,933 16,090 $16,218
Shares
issued in
reivestment
of
dividends.. 3,923 27,538 58,659 16,697 19,251 5,689 14,929 7,004 7,968 952 1,170 -- --
------- ------ ------- ------- ------- ------ ------- ------ ------ ------ ------- ------ -------
222,788 83,297 185,992 122,283 141,357 69,014 188,620 25,863 25,364 79,799 101,103 16,090 16,218
Less
shares
redeemed.. 207,144 54,564 122,637 111,925 130,274 45,216 125,080 38,208 37,653 49,218 61,575 3,671 3,680
------- ------ ------- ------- ------- ------ ------- ------ ------ ------ ------- ------ -------
Net
increase
(decrease)
from
capital
share
trans-
actions.... $ 15,644 28,733 $ 63,355 10,358 $ 11,083 23,798 $ 63,540 (12,345) $(12,289) 30,581 $ 39,528 12,419 $12,538
======== ====== ======== ====== ======== ====== ======== ====== ========= ====== ======== ====== =======
</TABLE>

8
<PAGE> 56

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<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.

(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>

9
<PAGE> 57

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>

10
<PAGE> 58

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>

11
<PAGE> 59

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>

12
<PAGE> 60

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.

13
<PAGE> 61

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.

14
<PAGE> 62

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.

15
<PAGE> 63

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. ....... 69,300 shs. 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
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
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

<CAPTION>
Number
of Shares Value
---------- --------
<S> <C> <C>
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
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
</TABLE>

16
<PAGE> 64

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>
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
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

<CAPTION>
Number
of Shares
or
Principal
Amount Value
---------- --------
<S> <C> <C>
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
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
</TABLE>

17
<PAGE> 65

KEMPER INVESTORS FUND

TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<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
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

<CAPTION>
Principal
Amount Value
---------- --------
<S> <C> <C>
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
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>

18
<PAGE> 66

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.

19
<PAGE> 67

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
Atlantis 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

<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
(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
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
</TABLE>

20
<PAGE> 68

KEMPER INVESTORS FUND

HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
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
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

<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
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
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
</TABLE>

21
<PAGE> 69

KEMPER INVESTORS FUND

HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Principal
Amount Value
--------- --------
<S> <C> <C>
(b)Polymer Group, Inc., 12.25%,
2002............................. $ 820 $ 820
Rexnord Inc., 11.875%, 1999........ 700 658
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
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

<CAPTION>
Principal
Amount
or Number
of Shares Value
--------- --------
<S> <C> <C>
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
(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.................... 32,859 452
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
--------
</TABLE>

22
<PAGE> 70

KEMPER INVESTORS FUND

HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>

TOTAL INVESTMENTS--102.1%
(Cost: $240,184)............... $224,046

LIABILITIES, LESS CASH
AND OTHER ASSETS--(2.1)%............. (4,631)
--------

<CAPTION>
Number of
Shares or
Principal
Amount Value
--------- --------
<S> <C> <C>

NET ASSETS--100%..................... $219,415
========
</TABLE>

See accompanying notes to portfolio of investments.

23
<PAGE> 71

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.

24
<PAGE> 72

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
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

<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
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
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
</TABLE>

25
<PAGE> 73

KEMPER INVESTORS FUND

EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Number
of Shares Value
--------- --------
<S> <C> <C>
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
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

<CAPTION>
Number
of Shares
or
Principal
Amount Value
--------- --------
<S> <C> <C>
Carrefour S.A..................... 650 $ 269
(a)General Nutrition Centers......... 65,100 1,888
Hagemeyer N.V. ................... 1,400 114
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

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
</TABLE>

26
<PAGE> 74

KEMPER INVESTORS FUND

EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Principal
Amount
or Number
of Shares Value
--------- --------
<S> <C> <C>
LIABILITIES, LESS
OTHER ASSETS--(1.8)%................ $ (5,981)
--------
<CAPTION>
Principal
Amount
or Number
of Shares Value
--------- --------
<S> <C> <C>
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.

27
<PAGE> 75

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.

28
<PAGE> 76

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
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

<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
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)Armada,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
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
</TABLE>

29
<PAGE> 77

KEMPER INVESTORS FUND

INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
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
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

<CAPTION>
Number of
Shares Value
--------- --------
<S> <C> <C>
(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>

30
<PAGE> 78

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.

31
<PAGE> 79

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
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

<CAPTION>
Number of
Shares Value
--------- -------
<S> <C> <C>
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>

32
<PAGE> 80

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.

33
<PAGE> 81

PART C.

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements:

<TABLE>
<S> <C>
(i) Financial Statements included in Part A of the Registration Statement:
Financial Highlights

(ii) Financial Statements included in Part B of the Registration Statement:
All Portfolios
Statement of Assets and Liabilities--December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for each of the two years in the period ended
December 31, 1994 (except for the Small Capitalization Equity Portfolio, for
which the period is May 2, 1994 through December 31, 1994)
Notes to Financial Statements
Portfolios of Investments--December 31, 1994
</TABLE>

Schedules II, III, IV, V, VI and VII have been omitted as the required
information is not present.

Schedule I has been omitted as the required information is presented in the
Portfolio of Investments at December 31, 1994.

(b) Exhibits:

<TABLE>
<S> <C>
99.b1. (a) Agreement and Declaration of Trust.
99.b1. (b) Written Instrument Amending the Agreement and Declaration of Trust.
99.b1. (c) Written Instrument Amending the Agreement and Declaration of Trust.
99.b2. By-laws.
99.b3. Not Applicable.
99.b4. Text of Share certificate.
99.b5. (a) Investment Management Agreement.
99.b5. (b) Investment Management Agreement (Small Capitalization Equity
Portfolio).
99.b6. (a) Underwriting Agreement.
99.b6. (b) Assignment and Assumption Agreement.
99.b7. Not Applicable.
99.b8. (a) Custody Agreement.
99.b8. (b) Foreign Custodian Agreement.
99.b9. Agency Agreement.
99.b10. Not Applicable.
99.b11. Consent of Ernst & Young LLP.
99.b12. Not Applicable.
99.b13. Not Applicable.
99.b14. Not Applicable.
99.b15. Not Applicable.
99.b16. Organizational Chart.
99.b17. Representation of Counsel (Rule 485(b)).
99.b18. Powers of Attorney.
99.b27. Financial Data Schedule.
</TABLE>

C-1
<PAGE> 82

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Shares of the Registrant will be offered and sold to Kemper Investors Life
Insurance Company ("KILICO"), a stock insurance company organized under the laws
of Illinois, and its separate investment accounts, "KILICO Variable Separate
Account" and "KILICO Variable Annuity Separate Account" (the "Separate
Accounts"). The purchasers of insurance contracts and annuity contracts issued
in connection with such accounts will have the right to instruct KILICO with
respect to the voting of the Registrant's shares held by the Separate Accounts.
Subject to such voting instruction rights, KILICO and the Separate Accounts
directly control the Registrant. KILICO is a wholly-owned subsidiary of Kemper
Financial Companies, Inc. ("KFC"), a non-operating holding company which owns
financial service subsidiaries and KILICO. Other information pertaining to
persons controlled by or under common control with Registrant is hereby
incorporated by reference to Exhibit 16, herein.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of April 15, 1995, there were three holders of record of each series of
shares of Kemper Investors Fund.

ITEM 27. INDEMNIFICATION

Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 28.(A) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Information pertaining to business and other connections of the
Registrant's investment adviser is hereby incorporated by reference to the
sections of the Prospectus captioned "Summary," "Investment Manager," and
"Distributor" and to the section of the Statement of Additional Information
captioned "Investment Manager and Distributor."

C-2
<PAGE> 83

Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser and/or principal underwriter of the following:

Kemper Mutual Funds: Kemper Closed-End Funds:
Kemper Technology Fund Kemper High Income Trust
Kemper Total Return Fund Kemper Intermediate Government Trust
Kemper Growth Fund Kemper Municipal Income Trust
Kemper Small Capitalization Equity Fund Kemper Multi-Market Income Trust
Kemper Income and Capital Preservation Fund Kemper Strategic Municipal Income
Trust
Kemper Money Market Fund The Growth Fund of Spain, Inc.

Kemper National Tax-Free Income Series

Kemper Diversified Income Fund Kemper Strategic Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund

Kemper Portfolios

Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund

Kemper Target Equity Fund

Kemper Environmental Services Fund
Cash Account Trust
Investors Cash Trust

Tax-Exempt New York Money Market Fund

Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund,
Sterling Funds and Kemper International Bond Fund.

C-3
<PAGE> 84

Item 28(b) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor

BORIS, JAMES R.
Director, Kemper Financial Services, Inc.
Director, INVEST Financial Corporation Holding Company
Director, INVEST Financial Corporation
Executive Vice President, Kemper Corporation
Director, Executive Vice President, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, Kemper Sales Company
Director, Chairman and Chief Executive Officer, Kemper Securities, Inc.

MATHIS, DAVID B.
Director, Kemper Financial Services, Inc.
Director, Federal Kemper Life Assurance Company
Director, Fidelity Life Association
Director, Chairman and Chief Executive Officer, Kemper Corporation
Director, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, Kemper Securities Holdings, Inc.
Director, Kemper Securities, Inc.
Director, IMC Global Inc.
Trustee, Kemper Mutual Funds
Trustee, Kemper Closed-End Funds
Trustee, Kemper International Bond Fund

TIMBERS, STEPHEN B.
Director, Chairman, Chief Executive Officer and Chief Investment Officer
Kemper Financial Services, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Vice President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corp.
Trustee and President, Kemper Closed-End Funds
Director, President and Chief Operating Officer, Kemper
Corporation
Director, Chairman, President and Chief Executive Officer, Kemper Financial
Companies, Inc.
Director, President, Kemper International Management, Inc.
Trustee and Vice President, Kemper Investors Fund
Director, Kemper Investors Life Insurance Company
Trustee and President, Kemper Mutual Funds
Director, Vice President, Kemper Portfolio Corp.

C-4
<PAGE> 85
Director, Vice President, Kemper Real Estate, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, Kemper Securities, Inc.
Director, Kemper Securities Holdings, Inc.
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Aaron Rents, Inc.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Trustee, Vice President, Sterling Funds
Director, The LTV Corporation
Director, Gillett Holdings, Inc.
Director, Investment Analysts Society of Chicago

C-5
<PAGE> 86
NEAL, JOHN E.
President and Chief Operating Officer, Kemper Financial Services, Inc.
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, President, Kemper Service Company
Director, Supervised Service Company
Director, Ardenwood Financial Corporation
Director, Avondale Redmond Inc.
Director, Bedford Holding Company
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Concord Aviation, Inc.
Director, Coast Broadcasting Company
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, FKLA Loire Court, Inc.
Director, President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Business Centre
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle, Inc.
Director, Two Corporate Center
Director, Venture Way, Inc.
Director, President, Kemper Portfolio Corporation
Director, President, KFC Portfolio Corporation
Director, President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI La Fiesta Square, Inc.
Director, President, KI Lafayette BART, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Enterprise Centers, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, President, SMS Realty Corp.

C-6
<PAGE> 87
PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, President, Kemper Distributors, Inc.
Director, President, Kemper Sales Company
Vice President, Kemper Asset Management Company
Vice President, Kemper Closed-End Funds
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Mutual Funds
Vice President, Kemper Target Equity Fund
Director, Kemper Service Company
Vice President, Sterling Funds

FITZPATRICK, JOHN H.
Chief Financial Officer, Kemper Financial Services, Inc.
Director, Ardenwood Financial Corporation
Director, Camelot Financial Corporation
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kacor Trust Deed Company
Director, Senior Vice President, and Chief Financial Officer, Federal Kemper
Life Assurance Company
Senior Vice President, Chief Financial Officer, Fidelity Life Association
Director, Vice President, FKLA Loire Court, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Executive Vice President and Chief Financial Officer,
Kemper Corporation
Director, Executive Vice President and Chief Financial Officer,
Kemper Financial Companies, Inc.
Senior Vice President, Kemper Investors Life Insurance Company
Director, Senior Vice President, Kemper Real Estate Management
Company
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Margarita Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Montgomery Gallery, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Property, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Seattle Gateway, Inc.
Director, SMS Realty Corp.
Director, Sutter Street, Inc.
Director, Time DC, Inc.
Director, Two Corporate Center
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Aaron Rents, Inc.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI Lafayette BART, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.

C-7
<PAGE> 88
Director, Vice President, KR Walnut Creek, Inc.

BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.

COTNER, C. BETH
Executive Vice President, Kemper Financial Services, Inc.
Trustee, Kemper Financial Services, Inc., Profit Sharing Plan
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Sterling Funds

COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company

FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund

C-8
<PAGE> 89
Director, Managing Director - Equities, Kemper Investment
Management Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
Vice President, The Growth Fund of Spain, Inc.

GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
Director, Kemper Sales Company

JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Director, Thames Heritage Parade Limited

LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.

SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
Director, Executive Vice President, Supervised Service Company, Inc.

BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.

BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.

CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund

CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund

COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Aaron Rents, Inc.
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI Lafayette BART, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.

C-9
<PAGE> 90
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Gulf Coast Factory Shops, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.

COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Closed-End Funds
Assistant Secretary, Kemper International Management, Inc.
Vice President and Secretary, Kemper Investors Fund
Vice President and Secretary, Kemper Mutual Funds
Vice President and Secretary, Kemper Target Equity Fund
Vice President and Secretary, Sterling Funds

DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary and Compliance Officer, Kemper Financial Services, Inc.
Director, Secretary, Kemper Advisors, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Sales Company
Secretary, Kemper Service Company
Secretary, Supervised Service Company, Inc.

DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Director, Treasurer and Chief Financial Officer, Kemper Advisors, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Director, Treasurer and Chief Financial Officer, Kemper Sales Company
Treasurer and Chief Financial Officer, Kemper Service Company
Treasurer and Chief Financial Officer, Supervised Service Company, Inc.
Director, Treasurer, Kemper Investment Management Company Limited

DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Closed-End Funds
Treasurer, Kemper International Bond Fund
Treasurer, Kemper Investors Fund
Treasurer, Kemper Mutual Funds
Treasurer, Kemper Target Equity Fund
Treasurer, Sterling Funds

GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.

GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund

GUENTHER, HAROLD E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Galaxy Offshore, Inc.

HUSSEY, KAREN A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund

INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters

KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Asset Management Company

KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.

C-10
<PAGE> 91
Vice President, Kemper Technology Fund

McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund

MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper Sterling Funds

NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Corporation

NEEL, JAMES R.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Asset Management Company

RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund

REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.

RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Fund
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund

SCHUMACHER, ROBERT H.
Senior Vice President, Kemper Financial Services, Inc.

URBASZEWSKI, KENNETH T.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund

C-11
<PAGE> 92

BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust

BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust

CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.

DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service Company
Vice President and Chief Accounting Officer, Supervised Service Company, Inc.

DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.

DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.

FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.

FISHER, REMY M.
First Vice President, Kemper Financial Services, Inc.

HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.

HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.

HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.

JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.

KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios

KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.

LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.

LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.

McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.

C-12
<PAGE> 93
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.

PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.

RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant Secretary,
Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.

SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.

STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund

THOUIN-LEERKAMP, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director - European Equities, Kemper Investment Management Company Limited

TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.

VINCENT, CHRISTOPHER T.
First Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Asset Management Company

WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust

WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.

CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.

COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.

GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.

C-13
<PAGE> 94
GERICKE, KATHLEEN E.
Vice President, Kemper Financial Services, Inc.

GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.

HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.

KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.

KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.

KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.

KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.

KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.

LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.

MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.

McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.

MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.

MINER, EDWARD
Vice President, Kemper Financial Services, Inc.

MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.

PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.

PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.

QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.

RADIS, STEVE A.
Vice President, Kemper Financial Services, Inc.

ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.

SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.

TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.

C-14
<PAGE> 95
WERTH, ELIZABETH W.
Vice President, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Sterling Funds

WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.

ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.

KOVACS, WILLIAM P.
Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Director, Kemper Advisors, Inc.

C-15
<PAGE> 96

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Kemper Distributors, Inc. acts as principal underwriter and distributor
of the Registrant's shares and acts as principal underwriter of the Kemper
Mutual Funds, the Kemper Closed End Funds, Sterling Funds and Kemper
International Bond Fund.

(b) Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriters for the Registrant is set forth below. The principal
business address is 120 South LaSalle Street, Chicago, Illinois 60603.

<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITIONS AND OFFICERS WITH UNDERWRITER REGISTRANT
- ------------------------------------------------------------------------------- --------------
<S> <C> <C>
John E. Peters Principal, Director and President Vice President
James L. Greenawalt Director, Executive Vice President None
Patrick H. Dudasik Financial Principal, Treasurer and Chief Financial None
Officer
Linda A. Bercher Senior Vice President None
Daniel T. O'Lear Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Thomas V. Bruns Vice President None
Carlene D. Merold Vice President None
Diane E. Ratekin Assistant Secretary None
</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All such accounts, books and other documents are maintained at the offices
of the Registrant, at the offices of the Registrant's investment manager, Kemper
Financial Services, Inc., 120 South LaSalle Street, Chicago, Illinois 60603, at
the offices of Registrant's principal underwriter, Kemper Distributors, Inc.,
120 South LaSalle Street, Chicago, Illinois 60603, at the offices of the
custodian, Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105 or at the offices of the custodian The Chase Manhattan Bank,
Chase MetroTech Center, Brooklyn, New York 11245.

ITEM 31. MANAGEMENT SERVICES

Not applicable.

ITEM 32. UNDERTAKINGS

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish to each person to whom a prospectus is
delivered, a copy of Registrant's latest annual report to shareholders, upon
request and without charge.

C-16
<PAGE> 97

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 27th day
of April, 1995.

KEMPER INVESTORS FUND

By /s/ STEPHEN B. TIMBERS

------------------------------------

Stephen B. Timbers, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on behalf of the following persons
in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------

<S> <C>
/s/ STEPHEN B. TIMBERS President (Principal
- --------------------------------------------- Executive Officer)
Stephen B. Timbers and Trustee

/s/ ARTHUR R. GOTTSCHALK* Trustee
- ---------------------------------------------

/s/ FREDERICK T. KELSEY* Trustee
- ---------------------------------------------

/s/ DAVID B. MATHIS* Trustee
- ---------------------------------------------

/s/ JOHN B. TINGLEFF* Trustee
- ---------------------------------------------

/s/ JOHN G. WEITHERS* Trustee
- ---------------------------------------------

/s/ JEROME L. DUFFY Treasurer (Principal
- --------------------------------------------- Financial and
Jerome L. Duffy Accounting Officer)
</TABLE>

* Philip J. Collora signs this document pursuant to powers of attorney filed
herewith.

/s/ PHILIP J. COLLORA

--------------------------------------

Philip J. Collora

<PAGE> 98

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
- ------- -------------------------------------------------------------------------------
<S> <C>
99.b1. (a) Agreement and Declaration of Trust.
99.b1. (b) Written Instrument Amending the Agreement and Declaration of Trust.
99.b1. (c) Written Instrument Amending the Agreement and Declaration of Trust.
99.b2. By-laws.
99.b3. Not Applicable.
99.b4. Text of Share certificate.
99.b5. (a) Investment Management Agreement.
99.b5. (b) Investment Management Agreement (Small Capitalization Equity Portfolio).
99.b6. (a) Underwriting Agreement.
99.b6. (b) Assignment and Assumption Agreement.
99.b7. Not Applicable.
99.b8. (a) Custody Agreement.
99.b8. (b) Foreign Custodian Agreement.
99.b9. Agency Agreement.
99.b10. Not Applicable.
99.b11. Consent of Ernst & Young LLP.
99.b12. Not Applicable.
99.b13. Not Applicable.
99.b14. Not Applicable.
99.b15. Not Applicable.
99.b16. Organizational Chart.
99.b17. Representation of Counsel (Rule 485(b) ).
99.b18. Powers of Attorney.
99.b27. Financial Data Schedule.
</TABLE>

<PAGE> 1
EXHIBIT 99.B1.(a)

KEMPER INVESTORS FUND

AGREEMENT AND DECLARATION OF TRUST

AGREEMENT AND DECLARATION OF TRUST, this 22nd day of
January, 1987, by the Trustees hereunder, and by the holders
of shares of beneficial interest to be issued hereunder as
hereinafter provided.

WITNESSETH

WHEREAS, the Trustees hereunder are desirous of forming
a trust for the purposes of carrying on the business of a
management investment company; and

WHEREAS, in furtherance of such purposes, the Trustees
are acquiring and may hereafter acquire assets and
properties, to hold and manage as trustees of a Massachusetts
voluntary association with transferable shares in accordance
with the provisions hereinafter set forth,

NOW, THEREFORE, the Trustees hereby declare that they
will hold all cash, securities and other assets and
properties, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the
pro rata benefit of the holders from time to time of shares
in this Trust as hereinafter set forth.

ARTICLE I

Name and Definitions

Name and Registered Agent

Section 1. This Trust shall be known as Kemper
Investors Fund and the Trustees shall conduct the business of
the Trust under that name or any other name as they may from
time to time determine. The registered agent for the Trust
in Massachusetts shall be CT Corporation System whose address
is 2 Oliver Street, Boston, Massachusetts or such other
person as the Trustees may from time to time designate.

<PAGE> 2

Definitions

Section 2. Whenever used herein, unless otherwise
required by the context or specifically provided:

(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of
Trust, as amended from time to time, pursuant to
Massachusetts General Laws, Chapter 182;

(b) "Trustees" refers to the Trustees of the Trust
named herein or elected in accordance with Article IV and
then in office;

(c) "Shares" mean the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than one
series of shares is authorized under or pursuant to Article
III, the equal proportionate transferable units of interest
into which each such series shall be divided from time to
time;

(d) "Shareholder" means a record owner of Shares;

(e) The "1940 Act" refers to the Investment Company Act
of 1940 (and any successor statute) and the Rules and
Regulations thereunder, all as amended from time to time;

(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter"
and "vote of a majority of the outstanding voting securities"
shall have the meanings given them in the 1940 Act;

(g) "Declaration of Trust" shall mean this Agreement
and Declaration of Trust as amended or restated from time to
time; and

(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time.

(i) "Net asset value" shall have the meaning set forth
in Section 6 of Article VI hereof.

ARTICLE II

Nature and Purpose

<PAGE> 3

The Trust is a voluntary association (commonly known as
a business trust) of the type referred to in Chapter 182 of
the General Laws of the Commonwealth of Massachusetts. The
Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general or a limited partnership,
joint venture, corporation or joint stock company, nor shall
the Trustees or Shareholders or any of them for any purpose
be deemed to be, or be treated in any way whatsoever as
though they were, liable or responsible hereunder as partners
or joint venturers. The purpose of the Trust is to engage
in, operate and carry on the business of an open-end
management investment company and to do any and all acts or
things as are necessary, convenient, appropriate, incidental
or customary in connection therewith.

ARTICLE III

Division of Beneficial Interest

Section 1. The Shares of the Trust shall be issued in
one or more series as the Trustees may, without Shareholder
approval, authorize from time to time. Each series shall be
preferred over all other series in respect of the assets
allocated to that series as hereinafter provided. The
beneficial interest in each series shall at all times be
divided in Shares (without par value) of such series, each of
which shall represent an equal proportionate interest in such
series with each other Share of the same series, none having
priority or preference over another Share of the same series.
The number of Shares authorized shall be unlimited, and the
Shares so authorized may be represented in part by fractional
Shares. The Trustees may from time to time divide or combine
the Shares of any series into a greater or lesser number
without thereby changing the proportionate beneficial
interests in the series. Without limiting the authority of
the Trustees set forth in this Section 1 to establish and
designate any further series, the Trustees hereby establish
and designate five series of Shares to be known as the "Money
Market Portfolio", "Total Return Portfolio", "High Yield
Portfolio", "Equity Portfolio" and "Government Securities
Portfolio". The establishment and designation of any series
of Shares in addition to the foregoing shall be effective
upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation
and the relative rights and preferences of such series. As
provided in Article IX, Section 1 hereof, any series of
Shares (whether or not there shall then be Shares outstanding

<PAGE> 4

of said series) may be terminated by the Trustees by written
notice to the Shareholders of such series or by the vote of
the Shareholders of such series entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter. In the event of any such termination, a majority of
the then Trustees shall execute an instrument setting forth
the termination of such series.

Ownership of Shares

Section 2. The ownership and transfer of Shares shall
be recorded on the books of the Trust or its transfer or
similar agent. No certificates certifying the ownership of
Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share
certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any
transfer or similar agent of the Trust, as the case may be,
shall be conclusive as to who are the Shareholders of each
series and as to the number of Shares of each series held
from time to time by each Shareholder.

Investment in the Trust; Assets of a Series

Section 3. The Trustees may issue Shares of the Trust
to such persons and on such terms and, subject to any
requirements of law, for such consideration, which may
consist of cash or tangible or intangible property or a
combination thereof, as they may from time to time authorize.

All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all
income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to such series of Shares for all
purposes, subject only to the rights of creditors, and shall
be so handled upon the books of account of the Trust and are
herein referred to as "assets of" such series.

Right to Refuse Orders

Section 4. The Trust by action of its Trustees shall
have the right to refuse to accept any subscription for its
Shares at any time without any cause or reason therefore
whatsoever. Without limiting the foregoing, the Trust shall
have the right not to accept subscriptions under

<PAGE> 5

circumstances or in amounts as the Trustees in their sole
discretion consider to be disadvantageous to existing
Shareholders and the Trust may from time to time set minimum
and/or maximum amounts which may be invested in Shares by a
subscriber.

Order in Proper Form

Section 5. The criteria for determining what
constitutes an order in proper form and the time of receipt
of such an order by the Trust shall be prescribed by
resolution of the Trustees.

When Shares Become Outstanding

Section 6. Shares subscribed for and for which an order
in proper form has been received shall be deemed to be
outstanding as of the time of acceptance of the order
therefor and the determination of the net price thereof,
which price shall be then deemed to be an asset of the Trust.

Merger or Consolidation

Section 7. In connection with the acquisition of all or
substantially all the assets or stock of another investment
company, investment trust, or of a company classified as a
personal holding company under Federal Income Tax laws, the
Trustees may issue or cause to be issued Shares of a series
and accept in payment therefor, in lieu of cash, such assets
at their market value, or such stock at the market value of
the assets held by such investment company or investment
trust, either with or without adjustment for contingent costs
or liabilities.

No Preemptive Rights, Etc.

Section 8. Shareholders shall have no preemptive or
other right to receive, purchase or subscribe for any
additional Shares or other securities issued by the Trust.
The Shareholders shall have no appraisal rights with respect
to their Shares and, except as otherwise determined by the
Trustees in their sole discretion, shall have no exchange or
conversion rights with respect to their Shares.

Status of Shares and Limitation of Personal Liability

<PAGE> 6

Section 9. Shares shall be deemed to be personal
property giving only the rights provided in this instrument.
Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the
terms of the Declaration of Trust and to have become a party
thereto. The death of a Shareholder during the continuance
of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of
said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole
or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as
specifically provided herein to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally
agree to pay.

Shareholder Inspection Rights

Section 10. Any Shareholder or his agent may inspect
and copy during normal business hours any of the following
documents of the Trust: By-Laws, minutes of the proceedings
of the Shareholders and annual financial statements of the
Trust, including a balance sheet and financial statements of
operations. The foregoing rights of inspection of
Shareholders of the Trust are the exclusive and sole rights
of the Shareholders with respect thereto and no Shareholder
of the Trust shall have, as a Shareholder, the right to
inspect or copy any of the books, records or other documents
of the Trust except as specifically provided in this Section
10 of this Article III or except as otherwise determined by
the Trustees.

ARTICLE IV

The Trustees

Number, Designation, Election, Term, Etc.

Section 1.

<PAGE> 7

(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some other
writing in which he accepts such Trusteeship and agrees to
the provisions hereof, shall become a Trustee hereof.

(b) Number. The Trustees serving as such, whether
named above or hereafter becoming Trustees, may increase or
decrease the number of Trustees to a number other than the
number theretofore determined which number shall not be less
than three nor more than fifteen except during the period
that the initial Trustee named above is sole Trustee. No
decrease in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of
his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to
subsection (e) of this Section 1.

(c) Term and Election. Each Trustee, whether named
above or hereafter becoming a Trustee, shall serve as a
Trustee until the next meeting of Shareholders, if any,
called for the purpose of considering the election or re-
election of such Trustee or of a successor to such Trustee,
and until the election and qualification of his successor, if
any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed. Upon the election and
qualification of a new Trustee, the Trust estate shall vest
in the new Trustee (together with the continuing or other new
Trustees) without any further act or conveyance. Prior to
any sale of Shares pursuant to any public offering, the
initial Trustee named above shall have the right to appoint
other persons as Trustees each to serve with such initial
Trustees as aforesaid until the first meeting of Shareholders
called for the purpose of the election or re-election of such
Trustee or of a successor to such Trustee.

(d) Resignation and Retirement. Any Trustee may resign
his trust or retire as a Trustee, by written instrument
signed by him and delivered to the other Trustees or to the
Chairman of the Board, if any, the President or the Secretary
of the Trust, and such resignation or retirement shall take
effect upon such delivery or upon such later date as is
specified in such instrument.

(e) Removal. Any Trustee may be removed for cause at
any time by written instrument, signed by at least a
majority of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective. Any Trustee may be removed with or without cause
(i) by the vote of the Shareholders entitled to vote more
than fifty percent (50%) of the votes entitled to be cast on
the matter voting together without regard to series at any
meeting called for such purpose, or (ii) by a written consent

<PAGE> 8

filed with the custodian of the Trust's portfolio securities
and executed by the Shareholders entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter voting together without regard to series.

Whenever ten or more Shareholders of record who have
been such for at least six months preceding the date of
application, and who hold in the aggregate Shares
constituting at least one percent of the outstanding Shares
of the Trust, shall apply to the Trustees in writing, stating
that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting to
consider removal of a Trustee and accompanied by a form of
communication and request that they wish to transmit, the
Trustees shall within five business days after receipt of
such application inform such applicants as to the approximate
cost of mailing to the Shareholders of record the proposed
communication and form of request. Upon the written request
of such applicants, accompanied by a tender of the material
to be mailed and of the reasonable expenses of mailing, the
Trustees shall, within reasonable promptness, mail such
material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the
foregoing, the Trustees may refuse to mail such material on
the basis and in accordance with the procedures set forth in
the last two paragraphs of Section 16(c) of the 1940 Act.

(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any
of the Trustees, or resulting from an increase in the number
of Trustees by the other Trustees may (but so long as there
are at least three remaining Trustees, need not unless
required by the 1940 Act) be filled either by a majority of
the remaining Trustees, even if less than a quorum, through
the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine or,
whenever deemed appropriate by the remaining Trustees, by the
election by the Shareholders, at a meeting called for such
purpose, of a person to fill such vacancy. Upon the
appointment or election and qualification of a new Trustee as
aforesaid, the Trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further
act or conveyance, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to
be effective at a later date shall become effective only at
or after the effective date of said retirement, resignation,
or increase in number of Trustees.

(g) Mandatory Election by Shareholders.
Notwithstanding the foregoing provisions of this Section 1,

<PAGE> 9

the Trustees shall call a meeting of the Shareholders for the
election of one or more Trustees at such time or times as may
be required in order that the provisions of the 1940 Act may
be complied with, and the authority hereinabove provided for
the Trustees to appoint any successor Trustee or Trustees
shall be restricted if such appointment would result in
failure of the Trust to comply with any provision of the 1940
Act.

(h) Effect of Death, Resignation, Etc. The death,
resignation, retirement, removal or incapacity of the
Trustees, or any one of them, shall not operate to annul or
terminate the Trust or to revoke or terminate any existing
agency or contract created or entered into pursuant to the
terms of this Declaration of Trust.

(i) No Accounting. Except under circumstances which
would justify his removal for cause, no person ceasing to be
a Trustee as a result of his death, resignation, retirement,
removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders
or remaining Trustees upon such cessation.

Powers

Section 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or
otherwise imposed by the 1940 Act or other applicable law,
shall have, without further or other authorization and free
from any power or control of the Shareholders, full, absolute
and exclusive power, control and authority over the Trust
assets and the business and affairs of the Trust to the same
extent as if the Trustees were the sole and absolute owners
thereof in their own right and to do all such acts and things
as in their sole judgment and discretion are necessary and
incidental to, or desirable for the carrying out of any of
the purposes of the Trust or conducting the business of the
Trust. Any determination made in good faith by the Trustees
of the purposes of the Trust or the existence of any power or
authority hereunder shall be conclusive. In construing the
provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to
the Trustees. Without limiting the foregoing, the Trustees
may adopt By-Laws not inconsistent with this Declaration of
Trust containing provisions relating to the business of the
Trust, the conduct of its affairs, its rights or powers and
the rights or powers of its Shareholders, Trustees, officers,
employees and other agents and may amend and repeal them to
the extent that such By-Laws do not reserve that right to the
Shareholders; fill vacancies in their number, including
vacancies resulting from increases in their number, unless a

<PAGE> 10

vote of the Trust's Shareholders is required to fill such
vacancies pursuant to the 1940 Act; elect and remove such
officers and appoint and terminate such agents as they
consider appropriate; appoint from their own number, and
terminate, any one or more committees consisting of two or
more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of
the powers and authority of the Trustees as the Trustees may
determine; appoint an advisory board, the members of which
shall not be Trustees and need not be Shareholders; employ
one or more investment advisers or managers as provided in
Section 6 of this Article IV; employ one or more custodians
of the assets of the Trust and authorize such custodians to
employ subcustodians and to deposit all or any part of such
assets in a system or systems for the central handling of
securities; retain a transfer agent or a Shareholder services
agent, or both; provide for the distribution of Shares by the
Trust, through one or more principal underwriters or
otherwise; set record dates for the determination of
Shareholders with respect to various matters; and in general
delegate such authority as they consider desirable to any
officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian
or underwriter.

In furtherance of and not in limitation of the
foregoing, the Trustees shall have power and authority:

(a) To invest and reinvest in, to buy or otherwise
acquire, to hold, for investment or otherwise, to sell or
otherwise dispose of, to lend or to pledge, to trade in or
deal in securities or interests of all kinds, however
evidenced, or obligations of all kinds, however evidenced, or
rights, warrants, or contracts to acquire such securities,
interests, or obligations, of any private or public company,
corporation, association, general or limited partnership,
trust or other enterprise or organization, foreign or
domestic, or issued or guaranteed by any national or state
government, foreign or domestic, or their agencies,
instrumentalities or subdivisions (including but not limited
to, bonds, debentures, bills, time notes and all other
evidences of indebtedness); negotiable or non-negotiable
instruments; any and all futures contracts; government
securities and money market instruments (including but not
limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of
repurchase agreements);

(b) To invest and reinvest in, to buy or otherwise
acquire, to hold, for investment or otherwise, to sell or
otherwise dispose of foreign currencies, and funds and
exchanges, and make deposits in banks, savings banks, trust

<PAGE> 11

companies, and savings and loan associations, foreign or
domestic;

(c) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop, and dispose of (by sale or
otherwise) any property, real or personal, and any interest
therein;

(d) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the
assets of the Trust.

(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and
discretion with relation to securities or property as the
Trustees shall deem proper;

(f) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;

(g) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of
the Trust or in the name of a custodian, subcustodian or
other depositary or a nominee or nominees or otherwise;

(h) To allocate assets, liabilities, income and
expenses of the Trust to a particular series of Shares or to
apportion the same among two or more series, provided that
any liabilities or expenses incurred by a particular series
shall be payable solely out of the assets of that series;

(i) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security or property of which is or was held in
the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer,
and to pay calls or subscriptions with respect to any
security held in the Trust;

(j) To join with other security holders in acting
through a committee, depositary, voting trustee or otherwise,
and in that connection to deposit any security with, or
transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and

<PAGE> 12

compensation of such committee, depositary or trustee as the
Trustees shall deem proper;

(k) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes;

(l) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;

(m) To borrow funds;

(n) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all such
obligations;

(o) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of
the Trust and payment of distribution and principal on its
portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters, or
independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted
by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal
underwriter, or independent contractor, including any action
taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and

(p) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means
of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the
Trust.

The Trustees shall not in any way be bound or limited by
any present or future law or custom in regard to investments
by trustees of common law trusts. Except as otherwise
provided herein or from time to time in the By-Laws, any

<PAGE> 13

action to be taken by the Trustees may be taken by a majority
of the Trustees present at a meeting of Trustees (if a quorum
by present), within or without Massachusetts, including any
meeting held by means of a conference telephone or other
communications equipment by means of which all persons
participating in the meeting can communicate with each other
simultaneously and participation by such means shall
constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.

Payment of Expenses, Allocation of Liabilities

Section 3. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust,
or partly out of principal and partly out of income, as they
deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
investment adviser or manager, principal underwriter,
auditor, counsel, custodian, transfer agent, shareholder
servicing agent, and such other agents or independent
contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur.

The assets of a particular series of Shares shall be
charged with the liabilities (including, in the discretion of
the Trustees or their delegate, accrued expenses and
reserves) incurred in respect of such series (but not with
liabilities incurred in respect of any other series) and such
series shall also be charged with its share of any other
liabilities. Any allocation of the liabilities of a series
among classes of Shares of that series shall be done in a
manner consistent with the preferences and special or
relative rights or privileges of such classes. The
determination of the Trustees shall be final and conclusive
as to the amount of liabilities to be charged to one or more
particular series. The Trustees may delegate from time to
time the power to make such allocation to one or more
Trustees or to an agent of the Trust appointed for such
purpose. The liabilities with which a series is so charged
are herein referred to as the "liabilities of" such series.

Section 4. The Trustees shall have the power, as
frequently as they may determine, to cause each Shareholder
to pay directly, in advance or arrears, for charges for the
Trust's custodian or transfer or shareholder service or
similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such

<PAGE> 14

Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of
such charges due from such Shareholder.

Ownership of Assets of the Trust

Section 5. Title to all of the assets of each series of
the Trust and of the Trust shall at all times be considered
as vested in the Trustees.

Advisory, Management and Distribution

Section 6. Subject to a favorable vote of a majority of
the outstanding voting securities of a series of the Trust,
the Trustees may on behalf of such series, at any time and
from time to time, contract for exclusive or nonexclusive
advisory and/or management services for such series with a
corporation, trust, association or other organization, every
such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the
Trustees may determine, including, without limitation,
authority to determine from time to time what investments
shall be purchased, held, sold or exchanged and what portion,
if any, of the assets of such series shall be held uninvested
and to make changes in such series' investments. The
Trustees may also, at any time and from time to time,
contract with a corporation, trust, association or other
organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the Shares, every
such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in
addition to said requirements and restrictions as the
Trustees may determine.

The fact that:

(a) any of the Shareholders, Trustees or officers
of the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, advisor, principal
underwriter, or distributor or agent of or for any
corporation, trust, association, or other organization,
or of or for any parent or affiliate of any organization,
with which an advisory or management or principal
underwriter's or distributor's contract, or transfer,
shareholder services or other agency contract may have
been or may hereafter be made, or that any such

<PAGE> 15

organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that

(b) any corporation, trust, association or other
organization with which an advisory or management or
principal underwriter's or distributor's contract, or
transfer, shareholder services or other agency contract
may have been or may hereafter be made also has an advi-
sory or management contract, or principal underwriter's
or distributor's contract, or transfer, shareholder
services or other agency contract with one or more other
corporations, trusts, associations, or other organiza-
tions, or has other businesses or interests

shall not affect the validity of any such contract or dis-
qualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.

ARTICLE V

Shareholders' Voting Powers and Meetings

Voting Powers

Section 1. The Shareholders shall have power to vote
only: (a) for the election or removal of Trustees as provided
in Article IV, Section 1; (b) with respect to any investment
advisor or manager as provided in Article IV, Section 6; (c)
with respect to any termination or reorganization of the
Trust or any series thereof to the extent and as provided in
Article IX, Section 1; (d) with respect to any amendment of
this Declaration of Trust to the extent and as provided in
Article IX, Section 4; and (e) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a
class action on behalf of the Trust or the Shareholders; and
(f) with respect to such additional matters relating to the
Trust as may be required by law, the 1940 Act, this Declara-
tion of Trust, the By-Laws or any registration of the Trust
with the Securities and Exchange Commission (or any successor
agency) or any state, or as the Trustees may consider neces-
sary or desirable.

Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of the Declaration of

<PAGE> 16

Trust, on any matter submitted to a vote of Shareholders all
Shares of the Trust then entitled to vote shall be voted by
individual series and not in the aggregate or by class,
except (a) when required by the 1940 Act, Shares shall be
voted in the aggregate and not by individual series; and (b)
when the Trustees have determined that the matter affects
only the interests of one or more series, then only
Shareholders of such series shall be entitled to vote
thereon. There shall be no cumulative voting in the election
of Trustees. Shares may be voted in person or by proxy.

A proxy with respect to Shares held in the name of two
or more persons shall be valid if executed by any one of them
unless at or prior to the exercise of the proxy the Trust
receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.

Until Shares of any series are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to
be taken by Shareholders.

Shareholder Meetings

Section 2. Meetings of Shareholders (including meetings
involving only one or more but less than all series) may be
called and held from time to time for the purpose of taking
action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Such
meetings shall be held at the principal office of the Trust
as set forth in the By-Laws of the Trust, or at any such
other place within the United States as may be designated in
the call thereof, which call shall be made by the Trustees or
the President of the Trust. Meetings of Shareholders may be
called by the Trustees or such other person or persons as may
be specified in the By-Laws upon written application by
Shareholders holding at least twenty-five percent (25%) (or
ten percent (10%) if the purpose of the meeting is to
determine if a Trustee is to be removed from office) of the
Shares then outstanding requesting a meeting be called for a
purpose requiring action by the Shareholders as provided
herein or in the By-Laws which purpose shall be specified in
any such written application.

Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.

<PAGE> 17

Quorum and Required Vote

Section 3. The presence at a meeting of Shareholders in
person or by proxy of Shareholders entitled to vote at least
thirty percent (30%) of all votes entitled to be cast at the
meeting of each series entitled to vote as a series shall be
a quorum for the transaction of business at a Shareholders'
meeting, except that where any provision of law or of this
Declaration of Trust permits or requires that the holders of
Shares shall vote in the aggregate and not as a series, then
the presence in person or by proxy of Shareholders entitled
to vote at least thirty percent (30%) of all votes entitled
to be cast at the meeting (without regard to series) shall
constitute a quorum. Any lesser number, however, shall be
sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date
set for the original meeting without the necessity of further
notice.

Except when a larger vote is required by any provisions
of the 1940 Act, this Declaration of Trust or the By-Laws, a
majority of the Shares of each series voted on the matter
shall decide that matter insofar as that series is concerned,
provided that where any provision of law or of this
Declaration of Trust permits or requires that the holders of
Shares vote in the aggregate and not as a series, then a
majority of the Shares voted on any matter (without regard to
series) shall decide such matter and a plurality shall elect
a Trustee.

Action by Written Consent

Section 4. Any action taken by Shareholders may be
taken without a meeting if Shareholders entitled to vote more
than fifty percent (50%) of the votes entitled to be cast on
the matter of each series or, where any provision of law or
of this Declaration of Trust permits or requires that the
holders of Shares vote in the aggregate and not as a series,
if Shareholders entitled to vote more than fifty percent
(50%) of the votes entitled to be cast thereon (without
regard to series) (or in either case such larger vote as
shall be required by any provision of this Declaration of
Trust or the By-Laws) consent to the action in writing and
such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for
all purposes as a vote taken at a meeting of Shareholders.

Additional Provisions

<PAGE> 18

Section 5. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.

ARTICLE VI

Distributions, Redemptions and Repurchases,
and Determination of Net Asset Value

Distributions

Section 1. The Trustees may in their sole discretion
from time to time distribute to the Shareholders of any
series such income and gains, accrued or realized, as the
Trustees may determine, after providing for actual and ac-
crued expenses and liabilities of such series (including such
reserves as the Trustees may establish) determined in accor-
dance with this Declaration of Trust and good accounting
practices. The Trustees shall have full discretion to deter-
mine which items shall be treated as income and which items
as capital and their determination shall be binding upon the
Shareholders. Distributions to any series, if any be made,
shall be in Shares of such series, in cash or otherwise and
on a date or dates determined by the Trustees. At any time
and from time to time in their discretion, the Trustees may
distribute to the Shareholders of any series as of a record
date or dates determined by the Trustees, in Shares of such
series, in cash or otherwise, all or part of any gains
realized on the sale or disposition of property of the series
or otherwise, or all or part of any other principal of the
Trust attributable to the series. Each distribution
pursuant to this Section 1 shall be made ratably according to
the number of Shares of the series held by the several
Shareholders on the applicable record date thereof, provided
that distributions from assets of a series may only be made
to the holders of the Shares of such series and provided that
no distributions need be made on Shares purchased pursuant to
orders received, or for which payment is made, after such
time or times as the Trustees may determine. Any
distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with this
Declaration of Trust. The Trustees have the power, in their
discretion, to distribute for any year amounts sufficient to
enable the Trust to qualify as a "regulated investment
company" under the Internal Revenue Code of 1954 as amended
(or any successor thereto) to avoid any liability for federal
income tax in respect of that year.

Redemptions and Repurchases

<PAGE> 19

Section 2. Any holder of Shares of the Trust may by
presentation of a request in proper form, together with his
certificates, if any, for such Shares, in proper form for
transfer to the Trust or duly authorized agent of the Trust,
request redemption of his shares for the net asset value
thereof determined and computed in accordance with the
provisions of this Section 2 and the provisions of Section 6
of this Article VI.

Upon receipt by the Trust or its duly authorized agent,
as the case may be, of such a request for redemption of
Shares in proper form, such Shares shall be redeemed at the
net asset value per share of the particular series next
determined after such request is received or determined as of
such other time fixed by the Trustees as may be permitted or
required by the 1940 Act. The criteria for determining what
constitutes a request for redemption in proper form and the
time of receipt of such request shall be fixed by the
Trustees.

The obligation of the Trust to redeem its Shares of each
series as set forth above in this Section 2 shall be subject
to the condition that such obligation may be suspended by the
Trust by or under authority of the Trustees during any period
or periods when and to the extent permissible under the 1940
Act. If there is such a suspension, any Shareholder may
withdraw any request for redemption which has been received
by the Trust during any such period and the applicable net
asset value with respect to which would but for such
suspension be calculated as of a time during such period.
Upon such withdrawal, the Trust shall return to the
Shareholder the certificates therefor, if any.

The Trust may also purchase, repurchase or redeem Shares
in accordance with such other methods, upon such other terms
and subject to such other conditions as the Trustee may from
time to time authorize at a price not exceeding the net asset
value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made.
Shares of any series redeemed or repurchased by the Trust
hereunder shall be canceled upon such redemption or
repurchase without further action by the Trust or the
Trustees and the number of issued and outstanding Shares of
the relevant series shall thereupon by reduced by such
amount.

Payment for Shares Redeemed

<PAGE> 20

Section 3. Payment of the redemption price for Shares
redeemed pursuant to this Article VI shall be made by the
Trust or its duly authorized agent after receipt by the Trust
or its duly authorized agent of a request for redemption in
proper form (together with any certificates for such Shares
as provided in Section 2 above) in accordance with
procedures and subject to conditions prescribed by the
Trustees; provided, however, that payment may be postponed
during the period in which the redemption of Shares is
suspended under Section 2 above. Subject to any generally
applicable limitation imposed by the Trustees, any payment on
redemption, purchase or repurchase by the Trust of Shares
may, if authorized by the Trustees, be made wholly or partly
in kind, instead of in cash. Such payment in kind shall be
made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a
portion of each of the series' holdings) and taken at their
value used in determining the net asset value of the Shares
in respect of which payment is made.

Redemptions at the Option of the Trust

Section 4. The Trust shall have the right at its option
and at any time and from time to time to redeem Shares of any
Shareholder at the net asset value thereof as determined in
accordance with Section 6 of this Article VI, if at such time
such Shareholder owns fewer Shares of a series than, or
Shares of a series having an aggregate net asset value of
less than, an amount determined from time to time by the
Trustees. Any such redemption at the option of the Trust
shall be made in accordance with such other criteria and
procedures for determining the Shares to be redeemed, the
redemption date and the means of effecting such redemption as
the Trustees may from time to time authorize.

Additional Provisions Relating to Dividends, Redemptions and
Repurchases

Section 5. The completion of redemption, purchase or
repurchase of Shares shall constitute a full discharge of the
Trust and the Trustees with respect to such Shares. No
dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any
series) with respect to, nor any redemption or repurchase of,
the Shares of any series shall be effected by the Trust other
than from the assets of such series.

<PAGE> 21

Determination of Net Asset Value

Section 6. The term "net asset value" of each Share of
a series as of any particular time shall be the quotient
obtained by dividing the value, as at such time, of the net
assets of such series (i.e., the value of the assets of such
series less the liabilities of such series, exclusive of
liabilities represented by the Shares of such series) by the
total number of Shares of such series outstanding at such
time, all determined and computed in accordance with the
Trust's current prospectus.

The Trustees, or any officer, or officers or agent of
the Trust designated for the purpose by the Trustees shall
determine the net asset value of the Shares of each series,
and the Trustees shall fix the time or times as of which the
net asset value of the Shares of each series shall be
determined and shall fix the periods during which any such
net asset value shall be effective as to sales, redemptions
and repurchases of, and other transactions in, the Shares of
such series, except as such times and periods for any such
transaction may be fixed by other provisions of this
Declaration of Trust or by the By-Laws.

Determinations in accordance with this Section 6 made in
good faith shall be binding on all parties concerned.

How Long Shares are Outstanding

Section 7. Shares of the Trust surrendered to the Trust
for redemption by it pursuant to the provisions of Section 2
of this Article VI shall be deemed to be outstanding until
the redemption price thereof is determined pursuant to this
Article VI and, thereupon and until paid, the redemption
price thereof shall be deemed to be a liability of the Trust.
Shares of the Trust purchased by the Trust in the open market
shall be deemed to be outstanding until confirmation of
purchase thereof by the Trust and, thereupon and until paid,
the purchase price thereof shall be deemed to be a liability
of the Trust. Shares of the Trust redeemed by the Trust
pursuant to Section 4 of this Article VI shall be deemed to
be outstanding until said Shares are deemed to be redeemed in
accordance with procedures adopted by the Trustees pursuant
to said Section 4.

ARTICLE VII

Compensation and Limitation of Liability of Trustees

<PAGE> 22

Compensation

Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust if the rate thereof is
prescribed by such Trustees. Nothing herein shall in any way
prevent the employment of any Trustee for advisory,
management, legal, accounting, investment banking or other
services and payment for the same by the Trust, it being
recognized that such employment may result in such Trustee
being considered an Affiliated Person or an Interested
Person.

Limitation of Liability

Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any
officer, agent, employee, investment advisor or manager,
principal underwriter or custodian, nor shall any Trustee be
responsible for the act or omission of any other Trustee.
Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.

Every note, bond, contract, instrument, certificate,
Share or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustee
or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or
with respect to their or his capacity as Trustees or Trustee
and neither such Trustees or Trustee nor the Shareholders
shall be personally liable thereon.

Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers
or officer shall give notice that this Declaration of Trust
is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust by them as Trustees or
Trustee or as officers or officer and not individually and
that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust or a
particular series of Shares, and may contain such further
recital as he or they may deem appropriate, but the omission
thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder
individually.

<PAGE> 23

All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of
Shares shall look only to the assets of the Trust or the
assets of that particular series of Shares, as the case may
be, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present
or future, shall be personally liable therefor.

Trustees' Good Faith Action, Expert Advice, No Bond or Surety

Section 3. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable only for his own
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust and
their duties as Trustees hereunder, and shall be under no
liability for any act or omission in accordance with such
advice or for failing to follow such advice. In discharging
their duties, the Trustees, when acting in good faith, shall
be entitled to rely upon the books of account of the Trust
and upon written reports made to the Trustees by any officer
appointed by them, any independent public accountant and
(with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of any other
party to any contract entered into pursuant to Section 2 of
Article IV. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.

Liability of Third Persons Dealing with Trustees

Section 4. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred
to the Trust or upon its order.

ARTICLE VIII

Indemnification

Subject to the exceptions and limitations contained in
this Article, every person who is, or has been, a Trustee or
officer of the Trust (including persons who serve at the
request of the Trust as directors, officers or trustees of

<PAGE> 24

another organization in which the Trust has an interest as a
shareholder, creditor or otherwise hereinafter referred to as
a "Covered Person", shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director or officer and
against amounts paid or incurred by him in settlement
thereof.

No indemnification shall be provided hereunder to a
Covered Person:

(a) against any liability to the Trust or its
Shareholders by reason of a final adjudication by the
court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;

(b) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the
best interest of the Trust; or

(c) in the event of a settlement or other
disposition not involving a final adjudication (as
provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either
a determination that such Covered Person did not engage
in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of his office by the court or other body approving the
settlement or other disposition or a reasonable
determination, based on a review of readily available
facts (as opposed to a full trial-type inquiry) that he
did not engage in such conduct:

(i) by a vote of a majority of the
Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested
Trustees then in office act on the matter); or

(ii) by written opinion of independent legal
counsel.

The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any
Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered

<PAGE> 25

Person shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust
personnel other than Covered Persons may be entitled by
contract or otherwise under law.

Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding subject to a claim for
indemnification under this Article shall be advanced by the
Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled
to indemnification under this Article, provided that either:

(a) such undertaking is secured by a surety bond or
some other appropriate security or the Trust shall be
insured against losses arising out of any such advances;
or

(b) a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the recipient ultimately
will be found entitled to indemnification.

As used in this Article, a "Disinterested Trustee" is
one (a) who is not an "interested person" of the Trust, as
defined in the 1940 Act (including anyone who has been
exempted from being an "interested person" by any rule,
regulation or order of the Commission), and (b) against whom
none of such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar
grounds is then or has been pending.

As used in this Article, the words "claim", "action",
"suit" or "proceeding" shall apply to all claims, actions,
suits or proceedings (civil, criminal or other, including
appeals), actual or threatened; and the words "liability" and
"expenses" shall include without limitation, attorneys' fees,
cost, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his or her
being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or
in the case of a corporation or other entity, its corporate

<PAGE> 26

or other general successor) shall be entitled to be held
harmless from and indemnified against all loss and expense
arising from such liability but only out of the assets of the
particular series of Shares of which he or she is or was a
Shareholder; provided, however, there shall be no liability
or obligation of the Trust arising hereunder to reimburse any
Shareholder for taxes paid by reason of such Shareholder's
ownership of Shares or for losses suffered by reason of any
changes in value of any Trust assets.

ARTICLE IX

Miscellaneous

Duration, Termination and Reorganization of Trust

Section 1. Unless terminated as provided herein, the
Trust shall continue without limitation of time. The Trust
may be terminated at any time by the Trustees by written
notice to the Shareholders without a vote of the Shareholders
of the Trust or by the vote of the Shareholders entitled to
vote more than fifty percent (50%) of the votes of each
series entitled to be cast on the matter. Any series of
Shares may be terminated at any time by the Trustees by
written notice to the Shareholders of such series without a
vote of the Shareholders of such series or by the vote of the
Shareholders of such series entitled to vote more than fifty
percent (50%) of the votes entitled to be cast on the matter.

Upon termination of the Trust or of any one or more
series of Shares, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or
accrued or anticipated, of the particular series as may be
determined by the Trustees, the Trust shall in accordance
with such procedures as the Trustees consider appropriate
reduce the remaining assets of the particular series to
distributable form in cash or other securities, or any
combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according the
number of Shares of such series held by the several
Shareholders of such series on the date of termination.

At any time by the affirmative vote of the Shareholders
of the affected series entitled to vote more than fifty
percent (50%) of the votes entitled to be cast on the matter,
the Trustees may sell, convey and transfer the assets of the
Trust, or the assets belonging to any one or more series, to
another trust, partnership, association or corporation

<PAGE> 27

organized under the laws of any state of the United States,
or to the Trust to be held as assets belonging to another
series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another
series of the Trust, Shares of such other series) with such
transfer being made subject to or with the assumption by the
transferee of, the liabilities belonging to each series the
assets of which are so distributed. Following such transfer,
the Trustees shall distribute such cash, shares or other
securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various
series the assets belonging to which have so been
transferred) among the Shareholders of the series the assets
belonging to which have been so transferred; and if all the
assets of the Trust have been so distributed, the Trust shall
be terminated.

Filing of Copies, References, Headings

Section 2. The original or a copy of this instrument
and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to
time be required. Anyone dealing with the Trust may rely on
a certificate by any officer of the Trust as to whether or
not any such amendments have been made and as to any matters
in connection with the Trust hereunder; and, with the same
effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all
expressions like "herein", "hereof", and "hereunder", shall
be deemed to refer to this instrument as amended from time to
time. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.

Applicable Law

Section 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the
type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may

<PAGE> 28

exercise all powers which are ordinarily exercised by such a
trust.

Amendments

Section 4. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of
the then Trustees when authorized so to do by vote of
Shareholders holding more than fifty percent (50%) of the
Shares of each series entitled to vote, except that an
amendment which shall affect the holders of one or more
series of Shares but not the holders of all outstanding
series shall be authorized by vote of the Shareholders
holding more than fifty percent (50%) of the Shares entitled
to vote of each series affected and no vote of Shareholders
of a series not affected shall be required. Amendments
having the purpose of changing the name of the Trust or any
series or of supplying any omission, curing any ambiguity or
curing, correcting or supplementing any provision which is
defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code and the regulations
thereunder for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment
companies shall not require authorization by Shareholder
vote.

IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal for himself and his assigns, as of the day and
year first above written.

/s/ Robert J. Engling
---------------------------

<PAGE> 1
EXHIBIT 99.B1(b)

KEMPER INVESTORS FUND

WRITTEN INSTRUMENT AMENDING THE
AGREEMENT AND DECLARATION OF TRUST

The undersigned, being a majority of the trustees of Kemper
Investors Fund (the "Trust"), a business trust organized pursuant
to an Agreement and Declaration of Trust dated January 22, 1987
(the "Declaration of Trust"), pursuant to Section 1 of Article
III of the Declaration of Trust, do hereby establish and
designate a sixth series of shares of the Trust to be known as
the "International Portfolio". The relative rights and
preferences of such series shall be as set forth in the
Declaration of Trust. This instrument shall constitute an
amendment to the Declaration of Trust.

IN WITNESS WHEREOF, the undersigned have this 18th day of
December, 1991 signed these presents.

/s/ Charles M. Kierscht
------------------------------------
Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521

(Signatures continue)

<PAGE> 2

/s/ Thomas R. Anderson
------------------------------------
Thomas R. Anderson, Trustee
209 S. Blackstone Ave.
LaGrange, Illinois 60525

/s/ Thomas T. Glidden
------------------------------------
Thomas T. Glidden, Trustee
3470 Mt. Diablo Boulevard, Ste. A-200
Lafayette, California 94549

/s/ Arthur R. Gottschalk
------------------------------------
Arthur R. Gottschalk, Trustee
2512 Braeburn Road
Flossmoor, Illinois 60422

/s/ Frederick T. Kelsey
------------------------------------
Frederick T. Kelsey, Trustee
120 Dewindt Road
Winnetka, Illinois 60093

/s/ John B. Tingleff
------------------------------------
John B. Tingleff, Trustee
2015 South Lake Shore Drive
Harbor Springs, Michigan 49740

<PAGE> 1
EXHIBIT 99.B1(c)

KEMPER INVESTORS FUND

WRITTEN INSTRUMENT AMENDING THE
AGREEMENT AND DECLARATION OF TRUST

The undersigned, being a majority of the trustees of Kemper
Investors Fund (the "Trust"), a business trust organized pursuant
to an Agreement and Declaration of Trust dated January 22, 1987
(the "Declaration of Trust"), pursuant to Section 1 of Article
III of the Declaration of Trust, do hereby establish and
designate a seventh series of shares of the Trust to be known as
the "Small Capitalization Equity Portfolio". The relative rights
and preferences of such series shall be as set forth in the
Declaration of Trust. This instrument shall constitute an
amendment to the Declaration of Trust.

IN WITNESS WHEREOF, the undersigned have this 15th day of
April, 1994 signed these presents.

/s/ Charles M. Kierscht
-----------------------------------
Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521

(Signatures continue)

<PAGE> 2

/s/ Arthur R. Gottschalk
-----------------------------------
Arthur R. Gottschalk, Trustee
2512 Braeburn Road
Flossmoor, Illinois 60422

/s/ Frederick T. Kelsey
-----------------------------------
Frederick T. Kelsey, Trustee
3133 Laughing Gull Court
Johns Island, South Carolina 29455

-----------------------------------
Charles M. Kierscht, Trustee
321 Princeton Road
Hinsdale, Illinois 60521

/s/ John B. Tingleff
-----------------------------------
John B. Tingleff, Trustee
2015 South Lake Shore Drive
Harbor Springs, Michigan 49740

/s/ John G. Weithers
-----------------------------------
John G. Weithers, Trustee
311 Springlake
Hinsdale, Illinois 60521

<PAGE> 1
EXHIBIT 99.B2

BY-LAWS OF
KEMPER INVESTORS FUND

SECTION 1. AGREEMENT AND DECLARATION OF
TRUST AND PRINCIPAL OFFICE

1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time
to time in effect (the "Declaration of Trust"), of Kemper
Investors Fund, the Massachusetts business trust established by
the Declaration of Trust (the "Trust").

1.2 Principal Office of the Trust; Resident Agent. The
principal office of the Trust shall be located in Chicago,
Illinois. Its resident agent in Massachusetts shall be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts or
such other person as the Trustees may from time to time select.

SECTION 2. SHAREHOLDERS

2.1 Shareholder Meetings. Meetings of the shareholders may be
called at any time by the Trustees, by the President or, if the
Trustees and the President shall fail to call any meeting of
shareholders for a period of 30 days after written application of
one or more shareholders who hold at least 25% of all shares
issued and outstanding and entitled to vote at the meeting (or
10% if the purpose of the meeting is to determine if a trustee
shall be removed from office), then such shareholders may call
such meeting. Each call of a meeting shall state the place,
date, hour and purposes of the meeting.

2.2 Place of Meetings. All meetings of the shareholders shall
be held at the principal office of the Trust, or, to the extent
permitted by the Declaration of Trust, at such other place within
the United States as shall be designated by the Trustees or the
President of the Trust.

2.3 Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes
of the meeting, shall be given at least seven days before the
meeting to each shareholder entitled to vote thereat by leaving
such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the
Trust. Such notice shall be given by the Secretary or an

<PAGE> 2

Assistant Secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need by given to a
shareholder if a written waiver of notice, executed before or
after the meeting by such shareholder or his attorney thereunto
duly authorized, is filed with the records of the meeting.

2.4 Ballots. No ballot shall be required for any election
unless requested by a shareholder present or represented at the
meeting and entitled to vote in the election.

2.5 Proxies and Voting. Shareholders entitled to vote may vote
either in person or by proxy in writing dated not more than six
months before the meeting named therein, which proxies shall be
filed with the Secretary or other person responsible to record
the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of
such meeting. At all meetings of shareholders, unless the voting
is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman
of the meeting.

SECTION 3. TRUSTEES

3.1 Committees and Advisory Board. The Trustees may appoint
from their number an executive committee and other committees.
Any such committee may be abolished and reconstituted at any time
and from time to time by the Trustees. Except as the Trustees
may otherwise determine, any such committee may make rules for
the conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more than five
members. The members of the advisory board shall be compensated
in such manner as the Trustees may determine and shall confer
with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall
hold office until the first meeting of the Trustees following the
meeting of the shareholders, if any, next following his
appointment and until his successor is appointed and qualified,
or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by
the Trustees.

3.2 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as
the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular

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<PAGE> 3

meeting of the Trustees may be held without call or notice
immediately after and at the same place as any meeting of the
shareholders.

3.3 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the
meeting, when called by the Chairman of the Board or by two or
more Trustees, sufficient notice thereof being given to each
Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.

3.4 Notice. It shall be sufficient notice to a Trustee to send
notice by mail at least three days or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at
his or her usual or last known business or residence address or
to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need
not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with
the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting
nor a waiver of a notice need specify the purposes of the
meeting.

3.5 Quorum. At any meeting of the Trustees, one-third of the
Trustees then in office shall constitute a quorum; provided,
however, a quorum (unless the Board of Trustees consists of two
or fewer persons) shall not be less than two. Any meeting may be
adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting
may be held as adjourned without further notice.

SECTION 4. OFFICERS AND AGENTS

4.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary and such other officers,
if any, as the Trustees from time to time may in their discretion
elect or appoint. The Trust may also have such agents, if any,
as the Trustees from time to time may in their discretion
appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same
person.

4.2 Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers
herein and in the Declaration of Trust set forth, such duties and
powers as are commonly incident to his or her office as if the
Trust were organized as a Massachusetts business corporation and

-3-

<PAGE> 4

such other duties and powers as the Trustees may from time to
time designate.

4.3 Election. The President, the Treasurer and the Secretary
shall be elected annually by the Trustees at their first meeting
in each calendar year or at such later meeting in such year as
the Trustees shall determine. Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at
any other time.

4.4 Tenure. The President, Treasurer and Secretary shall hold
office until the first meeting of Trustees in each calendar year
and until their respective successors are chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each other officer shall hold office
and each agent shall retain his or her authority at the pleasure
of the Trustees.

4.5 Chairman of the Board. The Chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the
Trustees and may hold office only so long as he continues to be a
Trustee. The Chairman of the Board, if any is so appointed,
shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall have such other duties
and powers as specified herein and as may be assigned to him by
the Trustees.

4.6 President and Vice Presidents. The President shall be the
chief executive officer of the Trust. The President shall,
subject to the control of the Trustees, have general charge and
supervision of the Trust and shall perform such other duties and
have such other powers as the Trustees shall prescribe from time
to time. Any Vice President shall at the request or in the
absence or disability of the President exercise the powers of the
President and perform such other duties and have such other
powers as shall be designated from time to time by the Trustees.

4.7 Treasurer and Controller. The Treasurer shall be the chief
financial officer of the Trust and, subject to any arrangement
made by the Trustees with a bank or trust company or other
organization as custodian or transfer or shareholder services
agent, shall be in charge of its valuable papers and shall have
such other duties and powers as may be designated from time to
time by the Trustees or by the President. If at any time there
shall be no Controller, the Treasurer shall also be the chief
accounting officer of the Trust and shall have the duties and
power prescribed herein for the Controller. Any Assistant
Treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.

-4-

<PAGE> 5

The Controller, if any be elected, shall be the chief accounting
officer of the Trust and shall be in charge of its books of
account and accounting records. The Controller shall be
responsible for preparation of financial statements of the Trust
and shall have such other duties and powers as may be designated
from time to time by the Trustees or the President.

4.8 Secretary and Assistant Secretaries. The Secretary shall
record all proceedings of the shareholders and the Trustees in
books to be kept therefor, which books shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a
temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.

SECTION 5. RESIGNATIONS AND REMOVALS

Any Trustee may resign his trust or retire as a Trustee in
accordance with procedures set forth in the Declaration of Trust.
Any officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of
the Board, the President or the Secretary or to a meeting of the
Trustees. The Trustees may remove any officer or advisory board
member elected or appointed by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the
extent expressly provided in a written agreement with the Trust,
no Trustee, officer, or advisory board member resigning, and no
officer or advisory board member removed shall have any right to
any compensation for any period following his or her resignation
or removal, or any right to damages on account of such removal.

SECTION 6. VACANCIES

A vacancy in the office of Trustee shall be filed in accordance
with the Declaration of Trust. Vacancies resulting from the
death, resignation, incapacity or removal of any officer may be
filled by the Trustees. Each successor of any such officer shall
hold office for the unexpired term, and in the case of the
President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or
she sooner dies, resigns, is removed or becomes disqualified.

SECTION 7. SHARES OF BENEFICIAL INTEREST

7.1 Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the Trustees may

-5-

<PAGE> 6

otherwise authorize. In the event that the Trustees authorize
the issuance of share certificates, subject to the provisions of
Section 7.3, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as
shall be prescribed form time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary. Such signatures may be facsimiles if the certificate
is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.

In lieu of issuing certificates for shares, the Trustees or the
transfer or shareholder services agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.

7.2 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees may prescribe.

7.3 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates
and may, by written notice to each shareholder, require the
surrender of share certificates to the Trust for cancellation.
Such surrender and cancellation shall not affect the ownership of
shares in the Trust.

7.4 Transfers. The Trustees shall have power and authority to
make such rules and regulations as it may deem expedient
concerning the issue, registration and transfer (including
limitations thereon) of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer
agent and registrar may be combined.

SECTION 8. RECORD DATE

The Trustees may fix in advance a time, which shall not be more
than 90 days before the date of any meeting of shareholders or
the date for the payment of any dividend or making of any other

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<PAGE> 7

distribution to shareholders, as the record date for determining
the shareholders having the right to notice and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding
any transfer of shares on the books of the Trust after the record
date.

SECTION 9. SEAL

The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust, cut or
engraved thereon; but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument, or
other paper executed and delivered by or on behalf of the Trust.

SECTION 10. EXECUTION OF PAPERS

Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the Trust shall
be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the President or by one of the
Vice Presidents or by the Treasurer or by whomsoever else shall
be designated for that purpose by the vote of the Trustees and
need not bear the seal of the Trust.

SECTION 11. FISCAL YEAR

The fiscal year of the Trust shall end on such date in each year
as the Trustees shall from time to time determine.

SECTION 12. AMENDMENTS

These By-Laws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such majority.

-7-

<PAGE> 1
EXHIBIT 99.B4

SHARE CERTIFICATE

[Name]
is the owner of [number] shares
of beneficial interest in the above noted Fund (the "FUND"), of
the series and class, if any, specified, fully paid and
nonassessable, the said shares being issued and held subject to
the provisions of the Agreement and Declaration of Trust of the
Fund, and all amendments thereto, copies of which are on file
with the Secretary of The Commonwealth of Massachusetts. The
said owner by accepting this certificate agrees to and is bound
by all of the said provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Fund properly
endorsed for transfer. This certificate is executed on behalf of
the Trustees of the Fund as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund or, if applicable, the
specified series of the Fund. The shares may be subject to a
contingent deferred sales charge. This certificate is not valid
unless countersigned by the Transfer Agent.

<PAGE> 1
EXHIBIT 99.B5(a)

INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT made this 14th day of June, 1994, by and
between KEMPER INVESTORS FUND, a Massachusetts business trust
(the "Fund"), and KEMPER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Adviser").

WHEREAS, the Fund is an open-end management investment
company registered under the Investment Company Act of 1940,
the shares of beneficial interest ("Shares") of which are
registered under the Securities Act of 1933;

WHEREAS, the Fund is authorized to issue Shares in
separate series or portfolios with each representing the
interests in a separate portfolio of securities and other
assets;

WHEREAS, the Fund wants to retain the Adviser under this
Agreement to render investment advisory and management
services to the portfolios of the Fund known as the Money
Market Portfolio, Total Return Portfolio, High Yield
Portfolio, Equity Portfolio, Government Securities Portfolio
and International Portfolio (the "Initial Portfolios"),
together with any other Fund portfolios which may be
established later and served by the Adviser hereunder, being
herein referred to collectively as the "Portfolios" and
individually referred to as a "Portfolio"; and

WHEREAS, the Adviser is willing to render such
investment advisory and management services for the Initial
Portfolios;

NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:

1. The Fund hereby employs the Adviser to act as the
investment adviser for the Initial Portfolios and other
Portfolios hereunder and to manage the investment and
reinvestment of the assets of each such Portfolio in
accordance with the applicable investment objectives and
policies and limitations, and to administer the affairs of
each such Portfolio to the extent requested by and subject to
the supervision of the Board of Trustees of the Fund for the
period and upon the terms herein set forth, and to place
orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by it;
and, in connection therewith, the Adviser is authorized as
the agent of the Fund to give instructions to the Custodian

<PAGE> 2

of the Fund as to the deliveries of securities and payments
of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board
of Trustees of the Fund determines, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty,
created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if
the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to the
clients of the Adviser as to which the Adviser exercises
investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates
are available for all clients, and that the Fund and other
clients may benefit thereby. The investment of funds shall
be subject to all applicable restrictions of the Agreement
and Declaration of Trust and By-Laws of the Fund as may from
time to time be in force.

The Adviser accepts such employment and agrees during
such period to render such services, to furnish office
facilities and equipment and clerical, bookkeeping and
administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions
and to assume the obligations herein set forth for the
compensation herein provided. The Adviser shall for all
purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the
Fund. It is understood and agreed that the Adviser, by
separate agreements with the Fund, may also serve the Fund in
other capacities.

2. In the event that the Fund establishes one or more
portfolios other than the Initial Portfolios with respect to
which it desires to retain the Adviser to render investment
advisory and management services hereunder, it shall notify
the Adviser in writing. If the Adviser is willing to render
such services, it shall notify the Fund in writing whereupon
such portfolio or portfolios shall become a Portfolio or
Portfolios hereunder.

<PAGE> 3

3. For the services and facilities described in Section 1,
the Fund will pay to the Adviser at the end of each calendar
month, an investment management fee computed at an annual
rate of the average daily net assets of each of the
Portfolios, as specified below:

<TABLE>
<CAPTION>
Portfolio Annual Rate
--------- -----------
<S> <C>
Money Market .50 of 1%
Total Return .55 of 1%
High Yield .60 of 1%
Equity .60 of 1%
Government Securities .55 of 1%
International .75 of 1%
</TABLE>

The fee as computed above shall be computed separately
for, and charged as an expense of, each Portfolio based upon
the average daily net assets of such Portfolio. For the
month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect
during the month and year, respectively.

4. The services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to
others so long as its services hereunder are not impaired
thereby.

5. In addition to the fee of the Adviser, the Fund shall
assume and pay any expenses for services rendered by a
custodian for the safekeeping of the Fund's securities or
other property, for keeping its books of account, for any
other charges of the custodian, and for calculating the net
asset value of the Fund as provided in the prospectus of the
Fund. The Adviser shall not be required to pay and the Fund
shall assume and pay the charges and expenses of its
operations, including compensation of the trustees (other
than those affiliated with the Adviser), charges and expenses
of independent auditors, of legal counsel, of any transfer or
dividend disbursing agent, and of any registrar of the Fund,
costs of acquiring and disposing of portfolio securities,
interest, if any, on obligations incurred by the Fund, costs
of share certificates and of reports, membership dues in the
Investment Company Institute or any similar organization,
costs of reports and notices to shareholders, other like

<PAGE> 4

miscellaneous expenses and all taxes and fees payable to
federal, state or other governmental agencies on account of
the registration of securities issued by the Fund, filing of
trust documents or otherwise. The Fund shall not pay or
incur any obligation for any expenses for which the Fund
intends to seek reimbursement from the Adviser as herein
provided without first obtaining the written approval of the
Adviser. The Adviser shall arrange, if desired by the Fund,
for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents
of the Fund if duly elected or appointed to such positions
and subject to their individual consent and to any
limitations imposed by law.

If expenses borne by the Fund for those Portfolios which
the Adviser manages in any fiscal year (including the
Adviser's fee, but excluding interest, taxes, fees incurred
in acquiring and disposing of portfolio securities,
distribution services fees, extraordinary expenses and any
other expenses excludable under state securities law
limitations) exceed any applicable limitation arising under
state securities laws, the Adviser will reduce its fee or
reimburse the Fund for any excess to the extent required by
such state securities laws. If for any month the expenses of
the Fund properly chargeable to the income account shall
exceed 1/12 of the percentage of average net assets allowable
as expenses, the payment to the Adviser for that month shall
be reduced and if necessary the Adviser shall make a refund
payment to the Fund so that the total net expense will not
exceed such percentage. As of the end of the Fund's fiscal
year, however, the foregoing computations and payments shall
be readjusted so that the aggregate compensation payable to
the Adviser for the year is equal to the percentage
calculated in accordance with Section 3 hereof of the average
net asset value as determined as described herein throughout
the fiscal year, diminished to the extent necessary so that
the total of the aforementioned expense items of the Fund
shall not exceed the expense limitation. The aggregate of
repayments, if any, by the Adviser to the Fund for the year
shall be the amount necessary to limit the said net expense
to said percentage in accordance with the foregoing.

The net asset value for each Portfolio shall be
calculated in accordance with the provisions of the Fund's
prospectus or as the trustees may determine in accordance
with the provisions of the Investment Company Act of 1940.
On each day when net asset value is not calculated, the net
asset value of a Portfolio shall be deemed to be the net
asset value of such Portfolio as of the close of business on
the last day on which such calculation was made for the
purpose of the foregoing computations.

<PAGE> 5

6. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are
or may be interested in the Adviser as officers, directors,
agents, shareholders or otherwise, and that the officers,
directors, shareholders and agents of the Adviser may be
interested in the Fund otherwise than as a trustee, officer
or agent.

7. The Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates,
except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the
performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this
Agreement.

8. This Agreement shall become effective with respect to
the Initial Portfolios on the date hereof and shall remain in
full force until April 1,1995, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved
for each Portfolio at least annually in the manner required
by the Investment Company Act of 1940 and the rules and
regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a
Portfolio, the Adviser may continue to serve in such capacity
for such Portfolio in the manner and to the extent permitted
by the Investment Company Act of 1940 and the rules and
regulations thereunder.

This Agreement shall automatically terminate in the
event of its assignment and may be terminated at any time
without the payment of any penalty by the Fund or by the
Adviser on sixty (60) days written notice to the other party.
The Fund may effect termination with respect to any Portfolio
by action of the Board of Trustees or by vote of a majority
of the outstanding voting securities of such Portfolio.

This Agreement may be terminated with respect to any
Portfolio at any time without the payment of any penalty by
the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of
the Adviser has taken any action which results in a breach of
the covenants of the Adviser set forth herein.

The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set

<PAGE> 6

forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.

Termination of this Agreement shall not affect the right
of the Adviser to receive payments on any unpaid balance of
the compensation described in Section 3 earned prior to such
termination.

9. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.

10. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the
other party at such address as such other party may designate
for the receipt of such notice.

11. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by
its representatives as such representatives and not
individually, and the obligations of the Fund hereunder are
not binding upon any of the trustees, officers, or
shareholders of the Fund individually but are binding upon
only the assets and property of the Fund. With respect to
any claim by the Adviser for recovery of that portion of the
investment management fee (or any other liability of the Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, the Adviser shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have
no recourse against the assets of any other Portfolio for
such purpose.

12. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 11 hereof
which shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of
Illinois.

13. This Agreement is the entire contract between the
parties relating to the subject matter hereof and supersedes
all prior agreements between the parties relating to the
subject matter hereof.

<PAGE> 7

IN WITNESS WHEREOF, the Fund and the Adviser have caused
this Agreement to be executed as of the day and year first
above written.

KEMPER INVESTORS FUND

By: /s/ John E. Peters
-----------------------------
Title: Vice President

ATTEST:

/s/ Philip J. Collora
----------------------------
Title: Assistant Secretary

KEMPER FINANCIAL SERVICES, INC.

By: /s/ Patrick H. Dudasik
-----------------------------
Title: Senior Vice President

ATTEST:

/s/ David F. Dierenfeldt
----------------------------
Title: Assistant Secretary

<PAGE> 1
EXHIBIT 99.B5(b)

INVESTMENT MANAGEMENT AGREEMENT

(Small Capitalization Equity Portfolio)

AGREEMENT made this 1st day of May, 1994, by and between
KEMPER INVESTORS FUND, a Massachusetts business trust (the
"Fund"), and KEMPER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Adviser").

WHEREAS, the Fund is authorized to issue Shares in
separate series or portfolios with each representing the
interests in a separate portfolio of securities and other
assets;

WHEREAS, the Fund wants to retain the Adviser under this
Agreement to render investment advisory and management
services to the portfolio of the Fund known as the Small
Capitalization Equity Portfolio (the "Initital Portfolio"),
together with any other Fund portfolios that hereafter become
subject to this Agreement pursuant to Section 2 hereof, being
herein referred to collectively as the "Portfolios" and
individually referred to as a "Portfolio"; and

WHEREAS, the Fund desires at this time to retain the
Adviser to render investment advisory and management services
to the Initial Portfolio, and the Adviser is willing to
render such services;

NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:

1. The Fund hereby employs the Adviser to act as the
investment adviser for the Initial Portfolio and other
Portfolios hereunder and to manage the investment and
reinvestment of the assets of each such Portfolio in
accordance with the applicable investment objectives and
policies and limitations, and to administer the affairs of
each such Portfolio to the extent requested by and subject to
the supervision of the Board of Trustees of the Fund for the
period and upon the terms herein set forth, and to place
orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by it;
and, in connection therewith, the Adviser is authorized as

<PAGE> 2

the agent of the Fund to give instructions to the Custodian
of the Fund as to the deliveries of securities and payments
of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board
of Trustees of the Fund determines, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty,
created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if
the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to the
clients of the Adviser as to which the Adviser exercises
investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates
are available for all clients, and that the Fund and other
clients may benefit thereby. The investment of funds shall
be subject to all applicable restrictions of the Agreement
and Declaration of Trust and By-Laws of the Fund as may from
time to time be in force.

2. In the event that the Fund establishes one or more
portfolios other than the Initial Portfolio with respect to
which it desires to retain the Adviser to render investment
advisory and management services hereunder, it shall notify
the Adviser in writing. If the Adviser is willing to render
such services, it shall notify the Fund in writing whereupon
such portfolio or portfolios shall become a Portfolio or
Portfolios hereunder.

<PAGE> 3

3. For the services and facilities described in Section 1,
the Fund will pay to the Adviser at the end of each calendar
month, an investment management fee for each Portfolio
computed by applying the following annual rates to the
average daily net assets of the Portfolio specified:

<TABLE>
<CAPTION>
Annual Rate
-----------
<S> <C>
Small Capitalization Equity Portfolio .65 of 1%
</TABLE>

<PAGE> 4

provided without first obtaining the written approval of the
Adviser. The Adviser shall arrange, if desired by the Fund,
for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents
of the Fund if duly elected or appointed to such positions
and subject to their individual consent and to any
limitations imposed by law.

<PAGE> 5

interested in the Fund otherwise than as a trustee, officer
or agent.

8. This Agreement shall become effective with respect to
the Initial Portfolio on the date hereof and shall remain in
full force until March 1, 1995, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved
for each Portfolio at least annually in the manner required
by the Investment Company Act of 1940 and the rules and
regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a
Portfolio, the Adviser may continue to serve in such capacity
for such Portfolio in the manner and to the extent permitted
by the Investment Company Act of 1940 and the rules and
regulations thereunder.

The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set
forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.

Termination of this Agreement shall not affect the right
of the Adviser to receive payments on any unpaid balance of

<PAGE> 6

the compensation described in Section 3 earned prior to such
termination.

9. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.

13. This Agreement is the entire contract between the
parties relating to the subject matter hereof and supersedes
all prior agreements between the parties relating to the
subject matter hereof.

<PAGE> 7

IN WITNESS WHEREOF, the Fund and the Adviser have caused
this Agreement to be executed as of the day and year first
above written.

KEMPER INVESTORS FUND

By: /s/ John E. Peters
------------------------------
Title: Vice President

ATTEST:

/s/ Philip J. Collora
----------------------------
Title: Assistant Secretary

KEMPER FINANCIAL SERVICES, INC.

By: Robert J. Engling
------------------------------
Title: Executive Vice President

ATTEST:

/s/ David F. Dierenfeldt
-----------------------------
Title: Assistant Secretary

<PAGE> 1
EXHIBIT 99.B6(a)

UNDERWRITING AGREEMENT

AGREEMENT made as of this 24th day of March, 1987 between
KEMPER INVESTORS FUND a Massachusetts business trust (hereinafter
called the "Fund"), and KEMPER FINANCIAL SERVICES, INC., a
Delaware corporation (hereinafter called the "Underwriter");

WITNESSETH:

In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:

1. The Fund hereby appoints the Underwriter its agent for
the distribution of shares of beneficial interest (hereinafter
called "shares") of the Fund in jurisdictions wherein shares of
the Fund may legally be offered for sale; provided, however, that
the Fund in its absolute discretion may (a) issue or sell shares
directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may
determine, whether in connection with the distribution of
subscription or purchase rights, the payment or reinvestment of
dividends or distributions, or otherwise; or (b) issue or sell
shares at net asset value to the shareholders of any other
investment company, for which the Underwriter shall act as
exclusive distributor, who wish to exchange all or a portion of
their investment in shares of such other investment company for
shares of the Fund.

2. The Underwriter hereby accepts appointment as agent for
the distribution of the shares of the Fund and agrees that it
will use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as
from time to time shall be effectively registered under the
Securities Act of 1933 ("Securities Act"), at prices determined
as hereinafter provided and on terms hereinafter set forth, all
subject to applicable Federal and state laws and regulations and
to the Agreement and Declaration of Trust of the Fund.

3. The Fund agrees that it will use its best efforts to
keep effectively registered under the Securities Act for sale as
herein contemplated such shares as the Underwriter shall
reasonably request and as the Securities and Exchange Commission
shall permit to be so registered.

<PAGE> 2

4. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever,
in its sole discretion, it deems such action to be desirable.

5. The Underwriter shall sell shares of the Fund to or
through qualified dealers or others in such manner, not
inconsistent with the provisions hereof and the then effective
registration statement of the Fund under the Securities Act (and
related prospectus), as the Underwriter may determine from time
to time, provided that no dealer or other person shall be
appointed or authorized to act as agent of the Fund without the
prior consent of the Fund. It is mutually agreed that, in
addition to sales made by it as agent of the fund, the
Underwriter may, in its discretion, also sell shares of the Fund
as principal to persons with whom it does not have dealer selling
group agreements.

6. Shares of the Fund offered for sale or sold by the
Underwriter shall be so offered or sold at a price per share
determined in accordance with the then current prospectus
relating to the sale of such shares except as departure from such
prices shall be permitted by the rules and regulations of the
Securities and Exchange Commission; provided, however, that any
public offering price for shares of the Fund shall be the net
value per share. The net asset value per share shall be
determined in the manner and at the times set forth in the then
current prospectus of the Fund relating to such shares.

7. The price the Fund shall receive for all shares
purchased from the Fund shall be the net asset value used in
determining the public offering price applicable to the sale of
such shares.

8. The Underwriter shall issue and deliver on behalf of the
Fund such confirmations of sales made by it as agent pursuant to
this agreement as may be required. At or prior to the time of
issuance of shares, the Underwriter will pay or cause to be paid
to the Fund the amount due the Fund for the sale of such shares.
Certificates shall be issued or shares registered on the transfer
books of the Fund in such names and denominations as the
Underwriter may specify.

9. The Fund will execute any and all documents and furnish
any and all information which may be reasonably necessary in
connection with the qualification of its shares for sale
(including the qualification of the Fund as a dealer where
necessary or advisable) in such states as the Underwriter may
reasonably request (it being understood that the Fund shall not
be required without its consent to comply with any requirement
which in its opinion is unduly burdensome).

<PAGE> 3

10. The Fund will furnish to the Underwriter from time to
time such information with respect to the Fund and its shares as
the Underwriter may reasonably request for use in connection with
the sale of shares of the Fund. The Underwriter agrees that it
will not use or distribute or authorize the use, distribution or
dissemination by its dealers or others in connection with the
sale of such shares any statements, other than those contained in
the Fund's current prospectus, except such supplemental
literature or advertising as shall be lawful under Federal and
state securities law and regulations, and that it will furnish
the Fund with copies of all such material.

11. The Underwriter shall order shares of the Fund from the
Fund only to the extent that it shall have received purchase
orders therefor. The Underwriter will not make, or authorize any
dealers or others to make any short sales of shares of the Fund.

12. The Underwriter, as agent of and for the account of the
Fund, may repurchase the shares of the Fund at such prices and
upon such terms and conditions as shall be specified in the
current prospectus of the Fund.

13. In selling or reacquiring shares of the Fund for the
account of the Fund, the Underwriter will in all respects conform
to the requirements of all state and Federal laws and the Rules
of Fair Practice of the National Association of Securities
Dealers, Inc., relating to such sale or reacquisition, as the
case may be, and will indemnify and save harmless the Fund from
any damage or expense on account of any wrongful act by the
Underwriter or any employee, representative or agent of the
Underwriter. The Underwriter will observe and be bound by all
the provisions of the Agreement and Declaration of Trust of the
Fund (and of any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940, notice of which
shall have been given to the Underwriter) which at the time in
any way require, limit, restrict or prohibit or otherwise
regulate any action on the part of the Underwriter.

14. The Underwriter will require each dealer to conform to
the provisions hereof and the Registration Statement (and related
prospectus) at the time in effect under the Securities Act with
respect to the public offering price of the Fund's shares, and
neither the Underwriter nor any such dealers shall withhold the
placing of purchases orders so as to make a profit thereby.

15. The Fund will pay or cause to the paid expenses
(including the fees and disbursements of its own counsel) and all
taxes and fees payable to the Federal, state or other
governmental agencies on account of the registration or
qualifications of securities issued by the Fund or otherwise.
The Fund will also pay or cause to be paid expenses incident to
the issuance of shares of beneficial interest, such as the cost

<PAGE> 4

of share certificates, issue taxes, and fees for the transfer
agent. The Underwriter will pay all expenses (other than
expenses which one or more dealers may bear pursuant to any
agreement with the Underwriter) incident to the sale and
distribution of the shares issued or sold hereunder, including,
without limiting the generality of the foregoing, all expenses of
printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of
the shares for sale (except that such expenses need not include
expenses incurred by the Fund in connection with the preparation,
typesetting, printing and distribution of any registration
statement or report or other communication to stockholders in
their capacity as such) and expenses of advertising in connection
with such offering.

16. The agreement shall become effective on the date hereof
and shall continue in effect until December 1, 1987 and from year
to year thereafter, but only so long as such continuance is
approved in the manner required by the Investment Company Act of
1940. Either party hereto may terminate this agreement on any
date by giving the other party at least six months prior written
notice of such termination specifying the date fixed therefor.
Without prejudice to any other remedies of the Fund in any such
event the Fund may terminate this agreement at any time
immediately upon any failure of fulfillment of any of the
obligations of the Underwriter hereunder.

17. This agreement shall automatically terminate in the
event of its assignment.

18. Any notice under this agreement shall be in writing,
addressed and delivered or mailed, postage postpaid, to the other
party at such address as such other party may designate for the
receipt of such notice.

19. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust dated 1987
and all amendments thereto, all of which are on file with the
Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained
therein. This Agreement has been executed by and on behalf of
the Fund by its representatives as such representatives and not
individually, and the obligations of the Fund hereunder are not
binding upon any of the Trustees, officers or shareholders of the
Fund individually but are binding upon only the assets and
property of the Fund. With respect to any claim by Underwriter
for recovery of any liability of the Fund arising hereunder
allocated to a particular series or portfolio ("Portfolio") of
the Fund if there be more than one, whether in accordance with
the express terms hereof or otherwise, the Underwriter shall have
recourse solely against the assets of that Portfolio to satisfy

<PAGE> 5

such claim and shall have no recourse against the assets of any
other Portfolio for such purpose.

IN WITNESS WHEREOF, the Fund and the Underwriter have each
caused this agreement to be executed on its behalf by an officer
thereunto duly authorized and its seal to be affixed on the day
and year first above written.

KEMPER INVESTORS FUND

By /s/ Charles M. Kierscht
---------------------------------

Attest: /s/ David F. Dierenfeldt
----------------------------

KEMPER FINANCIAL SERVICES, INC.

By /s/ Robert J. Engling
---------------------------------

Attest: /s/ Philip J. Collora
----------------------------

<PAGE> 1
EXHIBIT 99.B6.(b)

ASSIGNMENT AND ASSUMPTION

ASSIGNMENT AND ASSUMPTION ("Assignment and Assumption") made
and entered into as of February 1, 1995 by and between Kemper
Financial Services, Inc., a Delaware corporation ("Assignor"),
and Kemper Distributors, Inc., a Delaware corporation
("Assignee").

WHEREAS, Assignor serves as principal underwriter for Kemper
Investors Fund, a Massachusetts business trust (the "Fund"),
pursuant to that certain Underwriting Agreement dated March 24,
1987 by and between Assignor and the Fund (the "Agreement");

WHEREAS, Assignee is a wholly-owned subsidiary of Assignor;

WHEREAS, It has been proposed that the rights, duties and
responsibilities of Assignor under the Agreement be transferred
to and assumed by Assignee;

WHEREAS, The Fund has determined that such transfer of
rights, duties and responsibilities is reasonable and in the best
interests of the Fund and the Fund's shareholders; and

NOW, THEREFORE, in consideration of the covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:

1. Assignment and Assumption. Assignor assigns and
transfers to Assignee all of Assignor's rights, interests,
liabilities, duties and obligations under the Agreement
("Assigned Rights and Obligations"). Assignee accepts the
foregoing assignment and transfer of the Assigned Rights and
Obligations and agrees to assume, pay, perform and otherwise be
fully responsible for the same.

2. Further Assurances. From time to time, at the request
of either party, the other party will execute and deliver such
further instruments of assignment, transfer and assumption and
take such further action as may be required to assign, transfer
and assume the Assigned Rights and Obligations.

3. Applicable Law. This Assignment and Assumption shall be
governed by the laws of the State of Illinois.

4. Amendments. This Assignment and Assumption may only be
amended by the written agreement of the parties.

<PAGE> 2

IN WITNESS WHEREOF, the parties have each caused this
Assignment and Assumption to be executed on its behalf by a duly
authorized officer as of the date first written above.

KEMPER FINANCIAL SERVICES, INC.

By: /s/ Patrick H. Dudasik
----------------------------
Its: Senior Vice President

KEMPER DISTRIBUTORS, INC.

By: /s/ James L. Greenawalt
----------------------------
Its: Executive Vice President

The undersigned hereby acknowledges and consents to the foregoing
Assignment and Assumption as of February 1, 1995.

KEMPER INVESTORS FUND

By: /s/ John E. Peters
----------------------
Its: Vice President

<PAGE> 1
EXHIBIT 99.B8.(a)

CUSTODY AGREEMENT

AGREEMENT, made the 1st day of March, 1995 by and between
Kemper Investors Fund, a Massachusetts business trust having its
principal place of business at 120 South LaSalle Street, Chicago,
Illinois 60603 ("Fund") and Investors Fiduciary Trust Company, a
trust company organized and existing under the laws of Missouri,
having its principal place of business at Kansas City, Missouri
("Custodian").

WHEREAS, Fund wants to appoint Investors Fiduciary Trust
Company as Custodian to have custody of a portion of Fund's
portfolio securities and monies pursuant to this Agreement; and,
for purposes related to its foreign investments held outside the
United States, Fund wants another custodian to have custody of
the remainder of Fund's portfolio securities and monies pursuant
to a separate agreement; and

WHEREAS, Investors Fiduciary Trust Company wants to accept
such appointment;

NOW, THEREFORE, for and in consideration of the mutual
promises contained herein, the parties hereto, intending to be
legally bound, mutually covenant and agree as follows:

1. APPOINTMENT OF CUSTODIAN.

Fund hereby constitutes and appoints Investors Fiduciary
Trust Company as Custodian of Fund which is to include:

A. Custody of the securities and monies at any time
owned by Fund and received by Custodian; and

B. Performing certain accounting and record keeping
functions relating to its function as Custodian for Fund and
each of its Portfolios.

2. DELIVERY OF CORPORATE DOCUMENTS.

Fund has delivered or will deliver to Custodian prior to the
effective date of this Agreement, copies of the following
documents and all amendments or supplements thereto,
properly certified or authenticated:

A. Resolutions of the Board of Trustees of Fund
appointing Investors Fiduciary Trust Company as Custodian
hereunder and approving the form of this Agreement; and

<PAGE> 2

B. Resolutions of the Board of Trustees of Fund
authorizing certain persons to give instructions on behalf
of Fund to Custodian and authorizing Custodian to rely upon
written instructions over their signatures.

3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.

A. Delivery of Assets

All Fund's securities and monies, except as permitted
by the Investment Company Act of 1940 ("1940 Act"), will be
delivered either to Custodian or to The Chase Manhattan
Bank, N.A., pursuant to a separate custody agreement. Fund
will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, portfolio
securities acquired by it and monies then owned by it except
as permitted by the 1940 Act or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility
or liability whatsoever for or on account of securities or
monies not so delivered. All securities so delivered to
Custodian (other than bearer securities) shall be registered
in the name of Fund or its nominee, or of a nominee of
Custodian, or shall be properly endorsed and in form for
transfer satisfactory to Custodian.

B. Safekeeping

Custodian will receive delivery of and keep safely the
assets of Fund delivered to it from time to time. Custodian
will not deliver any such assets to any person except as
permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of this
Agreement. Custodian shall be responsible only for the
monies and securities of Fund held directly by it or its
nominees or sub-custodian under this Agreement; provided
that Custodian's responsibility for any sub-custodian
appointed at the Fund's direction for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a
common custodian or sub-custodian; or (ii) providing
depository and clearing agency services with respect to
certain variable rate demand note securities ("special sub-
custodian") shall be further limited as set forth in this
Agreement. Custodian may participate directly or
indirectly through a sub-custodian in the Depository Trust
Company, the Treasury/Federal Reserve Book Entry System,
the Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund,
subject to compliance with the provisions of Rule 17f-4
under the 1940 Act including, without limitation, the

<PAGE> 3

specific provisions of subsections (a) (1) through (d) (4)
thereof.

C. Registration of Securities

Custodian will hold stocks and other registerable
portfolio securities of Fund registered in the name of Fund
or in the name of any nominee of Custodian for whose
fidelity and liabilities Custodian shall be fully
responsible, or in street certificate form, so-called, with
or without any indication of fiduciary capacity. Unless
otherwise instructed, Custodian will register all such
portfolio securities in the name of its authorized nominee.

D. Exchange of Securities

Upon receipt of instructions, Custodian will exchange,
or cause to be exchanged, portfolio securities held by it
for the account of Fund for other securities or cash issued
or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares,
change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without
instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive
form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefore,
to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.

E. Purchases or Sales of Investments of Fund

Fund shall, on each business day on which a purchase or
sale of a portfolio security shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such transaction:

(1) The name of the issuer and description of the security;

(2) The number of shares or the principal amount purchased
or sold, and accrued interest, if any;

(3) The trade date;

(4) The settlement date;

(5) The date when the securities sold were purchased by
Fund or other information identifying the securities
sold and to be delivered;

<PAGE> 4

(6) The price per unit and the brokerage commission, taxes
and other expenses in connection with the transaction;

(7) The total amount payable or receivable upon such
transaction; and

(8) The name of the person from whom or the broker or
dealer through whom the transaction was made.

In accordance with such purchase instructions, Custodian
shall pay for out of monies held for the account of Fund,
but only insofar as monies are available therein for such
purpose, and receive the portfolio securities so purchased
by or for the account of Fund. Such payment shall be made
only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.

In accordance with such sales instructions, Custodian will
deliver or cause to be delivered the securities thus
designated as sold for the account of Fund to the broker or
other person specified in the instructions relating to such
sale, such delivery to be made only upon receipt of payment
therefor in such form as shall be satisfactory to Custodian,
with the understanding that Custodian may deliver or cause
to be delivered securities for payment in accordance with
the customs prevailing among dealers in securities.

F. Purchases or Sales of Options and Futures
Transactions

Fund will, on each business day on which a purchase or
sale of the following options and/or futures shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase or sale:

(1) Securities Options

(a) The underlying security;
(b) The price at which purchased or sold;
(c) The expiration date;
(d) The number of contracts;
(e) The exercise price;
(f) Whether opening, exercising, expiring or closing
the transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased;
(i) Market on which option traded; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.

<PAGE> 5

(2) Options on Indices

(a) The index;
(b) The price at which purchased or sold;
(c) The exercise price;
(d) The premium;
(e) The multiple;
(f) The expiration date;
(g) Whether the transaction is an opening, exercising,
expiring or closing transaction;
(h) Whether the transaction involves a put or call;
(i) Whether the option is written or purchased; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.

(3) Securities Index Futures Transactions

(a) The last trading date specified in the contract
and, when available, the closing level, thereof;
(b) The index level on the date the contract is
entered into;
(c) The multiple;
(d) Any margin requirements;
(e) The need for a segregated margin account (in
addition to instructions; and, if not already in
the possession of Custodian, Fund shall deliver a
substantially complete and executed custodial
safekeeping account and procedural agreement which
shall be incorporated into this Custody
Agreement); and
(f) The name and address of the futures commission
merchant through whom the sale or purchase was
made.

(4) Options on Index Futures Contracts

(a) The underlying index futures contract;
(b) The premium;
(c) The expiration date;
(d) The number of options;
(e) The exercise price;
(f) Whether the transaction involves an opening,
exercising, expiring or closing transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased; and
(i) The market on which the option is traded.

G. Securities Pledged to Secure Loans

(1) Upon receipt of instructions, Custodian will
release or cause to be released securities held in custody
to the pledgee designated in such instructions by way of

<PAGE> 6

pledge or hypothecation to cure any loan incurred by Fund;
provided, however, that the securities shall be released
only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is required
to secure a borrowing already made, further securities may
be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions,
Custodian will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.

(2) Upon receipt of instructions, Custodian will
release securities held in custody to the borrower
designated in such instructions; provided, however, that the
securities shall be released only upon deposit with
Custodian of full cash collateral as specified in such
instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned
securities. Upon receipt of instructions and the loaned
securities, Custodian will release the cash collateral to
the borrower.

H. Routine Matters

Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time
to time by the Board of Trustees of Fund.

I. Demand Deposit Account

Custodian will open and maintain a demand deposit
account or accounts in the name of Custodian, subject only
to draft or order by Custodian upon receipt of instructions.
All monies received by Custodian from or for the account of
Fund shall be deposited in said account or accounts.

When properly authorized by a resolution of the Board
of Trustees of Fund, Custodian may open and maintain an
additional demand deposit account or accounts in such other
banks or trust companies as may be designated in such
resolution, such accounts, however, to be in the name of
Custodian and subject only to its draft or order.

<PAGE> 7

J. Income and Other Payments to Fund

Custodian will:

(1) collect, claim and receive and deposit for the
account of Fund all income and other payments which become
due and payable on or after the effective date of this
Agreement with respect to the securities deposited under
this Agreement, and credit the account of Fund with such
income on the payable date;

(2) execute ownership and other certificates and
affidavits for all federal, state and local tax purposes in
connection with the collection of bond and note coupons; and

(3) take such other action as may be necessary or
proper in connection with:

(a) the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of:

(1) all coupons and other income items requiring
presentation;

(2) all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or notice of which is contained
in publications of the type to which it normally
subscribes for such purpose; and

(b) the endorsement for collection, in the name of
Fund, of all checks, drafts or other negotiable
instruments.

Custodian, however, shall not be required to institute
suit or take other extraordinary action to enforce
collection except upon receipt of instructions and upon
being indemnified to its satisfaction against the costs and
expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and
other similar items and deal with the same pursuant to
instructions. Unless prior instructions have been received
to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund
on the last trade date prior to the date of expiration of
such rights.

<PAGE> 8

K. Payment of Dividends and Other Distributions

On the declaration of any dividend or other
distribution on the shares of beneficial interest of any
Portfolio ("Portfolio Shares") by the Board of Trustees of
Fund, Fund shall deliver to Custodian instructions with
respect thereto, including a copy of the Resolution of said
Board of Trustees certified by the Secretary or an Assistant
Secretary of Fund wherein there shall be set forth the
record date as of which shareholders are entitled to receive
such dividend or distribution, and the amount payable per
share on such dividend or distribution.

On the date specified in such Resolution for the
payment of such dividend or other distribution, Custodian
shall pay out of the monies held for the account of Fund,
insofar as the same shall be available for such purposes,
and credit to the account of the Dividend Disbursing Agent
for Fund, such amount as may be necessary to pay the amount
per share payable in cash on Portfolio Shares issued and
outstanding on the record date established by such
Resolution.

L. Portfolio Shares Purchased by Fund

Whenever any Portfolio Shares are purchased by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice,
Custodian shall charge such aggregate dollar amount to the
custody account of Fund and either deposit the same in the
account maintained for the purpose of paying for the
purchase of Portfolio Shares or deliver the same in
accordance with such advice.

M. Portfolio Shares Purchased from Fund

Whenever Portfolio Shares are purchased from Fund, Fund
will deposit or cause to be deposited with Custodian the
amount received for such shares. Custodian shall not have
any duty or responsibility to determine that Fund Shares
purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.

N. Proxies and Notices

Custodian will promptly deliver or mail to Fund all
proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for
Fund and will, upon receipt of instructions, execute and

<PAGE> 9

deliver or cause its nominee to execute and deliver such
proxies or other authorizations as may be required. Except
as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee
shall exercise any power inherent in any such securities,
including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver
with respect thereto, or take any other similar action.

O. Disbursements

Custodian will pay or cause to be paid insofar as funds
are available for the purpose, bills, statements and other
obligations of Fund (including but not limited to
obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges,
variation margin, dividend disbursements, taxes, management
fees, administration-distribution fees, custodian fees,
legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.

P. Books, Records and Accounts

Custodian acknowledges that all the records it shall
prepare and maintain pursuant to this Agreement shall be the
property of Fund and that upon request of Fund it shall make
Fund's records available to it, along with such other
information and data as are reasonably requested by Fund,
for inspection, audit or copying, or turn said records over
to Fund.

Custodian shall, within a reasonable time, render to
Fund as of the close of business on each day, a detailed
statement of the amounts received or paid and of securities
received or delivered for the account of Fund during said
day. Custodian shall, from time to time, upon request by
Fund, render a detailed statement of the securities and
monies held for Fund under this Agreement, and Custodian
shall maintain such books and records as are necessary to
enable it do so and shall permit such persons as are
authorized by Fund, including Fund's independent public
accountants, to examine such records or to confirm the
contents of such records; and, if demanded, shall permit
federal and state regulatory agencies to examine said
securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state
regulatory agencies, Custodian shall instruct any sub-
custodian to permit such persons as are authorized by Fund

<PAGE> 10

to examine the books, records and securities held by such
sub-custodian which relate to Fund.

Q. Appointment of Sub-Custodian

Notwithstanding any other provisions of this Agreement,
all or any of the monies or securities of Fund may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as sub-custodians as
may be approved by resolutions of Fund's Board of Trustees,
evidenced by a copy thereof certified by the Secretary or
Assistant Secretary of Fund. Any sub-custodian must have
the qualifications required for custodians under the 1940
Act unless exempted therefrom. Any sub-custodian may
participate directly or indirectly in the Depository Trust
Company, the Treasury/Reserve Book Entry System, the
Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund to
the same extent and subject to the same conditions as
provided hereunder. Neither Custodian nor sub-custodian
shall be entitled to reimbursement by Fund for any fees or
expenses of any sub-custodian; provided that Custodian shall
not be liable for, and Fund shall hold Custodian harmless
from, the expenses of any special sub-custodian. The
appointment of a sub-custodian shall not relieve Custodian
of any of its obligations hereunder; provided that Custodian
shall be responsible to Fund for any loss, damage, or
expense suffered or incurred by Fund resulting from the
actions or omissions of a special sub-custodian only to the
extent the special sub-custodian is liable to Custodian.

R. Multiple Portfolios

If Fund shall issue shares of more than one Portfolio
during the term hereof, Custodian agrees that all securities
and other assets of Fund shall be segregated by Portfolio
and all books and records, account values or actions shall
be maintained, held, made or taken, as the case may be,
separately for each Portfolio.

S. Other Custodian

Pursuant to instructions, Custodian will transmit
securities and moneys of Fund to The Chase Manhattan Bank,
N.A., as custodian for Fund.

4. INSTRUCTIONS.

A. The term "instructions", as used herein, means
written or oral instructions to Custodian from an authorized
person of Fund. Certified copies of resolutions of the
Board of Trustees of Fund naming one or more persons

<PAGE> 11

authorized to give instructions in the name and on behalf of
Fund may be received and accepted by Custodian as conclusive
evidence of the authority of any person so to act and may be
considered to be in full force and effect (and Custodian
shall be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary.
Unless the resolution authorizing any person to give
instructions specifically requires that the approval of
anyone else shall first have been obtained, Custodian shall
be under no obligation to inquire into the right of the
person giving such instructions to do so. Notwithstanding
any of the foregoing provisions of this Section 4, no
authorizations or instructions received by Custodian from
Fund shall be deemed to authorize or permit any trustee,
officer, employee, or agent of Fund to withdraw any of the
securities or monies of Fund upon the mere receipt of
instructions from such trustee, officer, employee or agent.

B. No later than the next business day immediately
following each oral instruction referred to herein, Fund
shall give Custodian written confirmation of each such oral
instruction. Either party may electronically record any
oral instruction whether given in person or via telephone.

5. LIMITATION OF LIABILITY OF CUSTODIAN

A. Custodian shall hold harmless and indemnify Fund
from and against any loss or liability arising out of
Custodian's failure to comply with the terms of this
Agreement or arising out of Custodian's negligence, willful
misconduct, or bad faith. Custodian may request and obtain
the advice and opinion of counsel for Fund or of its own
counsel with respect to questions or matters of law, and it
shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice
or opinion.

B. If Fund requires Custodian in any capacity to
take, with respect to any securities, any action which
involves the payment of money by it, or which in Custodian's
opinion might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be and be kept
indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.

C. Custodian shall be entitled to receive, and Fund
agrees to pay to Custodian, on demand, reimbursement for
such cash disbursements, costs and expenses as may be agreed
upon from time to time by Custodian and Fund.

D. Custodian shall be protected in acting as
custodian hereunder upon any instructions, advice, notice,

<PAGE> 12

request, consent, certificate or other instrument or paper
reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof
of any fact or matter required to be ascertained from Fund
hereunder, a certificate signed by Fund's President, or
other officer specifically authorized for such purpose.

E. Without limiting the generality of the foregoing,
Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:

(1) The validity of the issue of any securities
purchased by or for Fund, the legality of the purchase
thereof or evidence of ownership required by Fund to be
received by Custodian, or the propriety of the decision
to purchase or amount paid therefor;

(2) The legality of the sales of any securities
by or for Fund, or the propriety of the amount paid
therefor;

(3) The legality of the issue or sale of any
shares of Fund, or the sufficiency of the amount to be
received therefor;

(4) The legality of the purchase of any shares of
Fund, or the propriety of the amount to be paid
therefor; or

(5) The legality of the declaration of any
dividend by Fund, or the legality of the issue of any
shares of Fund in payment of any share dividend.

F. Custodian shall not be liable for, or considered
to be the custodian of, any money represented by any check,
draft, wire transfer, clearing house funds, uncollected
funds, or instrument for the payment of money received by it
on behalf of Fund, until Custodian actually receives such
money, provided only that it shall advise Fund promptly if
it fails to receive any such money in the ordinary course of
business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.

G. Subject to the obligations of Custodian under
Section 3.B. hereof, Custodian shall not be responsible for
loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom Custodian may deal in the absence of negli-
gence, misconduct or bad faith on the part of Custodian.

<PAGE> 13

H. Custodian or any sub-custodian shall provide Fund
for its approval by its Board of Trustees agreements with
banks or trust companies which will act as sub-custodian for
Fund pursuant to this Agreement; and, as set forth in
Section 3.B hereof, Custodian shall be responsible for the
monies and securities of the Fund held by it or its nominees
or sub-custodians under this Agreement, but not for monies
and securities of the Fund held by any special sub-custodian
except to the extent the special sub-custodian is liable to
Custodian.

6. COMPENSATION.

Fund shall pay to Custodian such compensation at such times
as may from time to time be agreed upon in writing by Custodian
and Fund. Custodian may charge such compensation against monies
held by it for the account of Fund. Custodian shall also be
entitled, notwithstanding the provisions of Sections 5B or 5C
hereof, to charge against any monies held by it for the account
of Fund the amount of any loss, damage, liability or expense for
which it shall be entitled to reimbursement under the provisions
of this Agreement. Custodian shall not be entitled to
reimbursement by Fund for any loss or expenses of any sub-
custodian; provided that Custodian shall not be liable for, and
Fund shall hold Custodian harmless from, the expenses of any
special sub-custodian.

7. TERMINATION.

Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than sixty (60) days
prior to the date upon which such termination shall take effect.
Upon termination of this Agreement, Fund shall pay to Custodian
such compensation for its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall use its
best efforts to obtain a successor custodian. Unless the holders
of a majority of the outstanding shares of Fund vote to have the
securities, funds and other properties held under this Agreement
delivered and paid over to some other person, firm or corporation
specified in the vote, having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund,
the Board of Trustees of Fund shall, forthwith upon giving or
receiving notice of termination of this Agreement, appoint as
successor custodian a bank or trust company having such
qualifications. Custodian shall, upon termination of this
Agreement, deliver to the successor custodian so specified or
appointed, at custodian's office, all securities then held by
Custodian hereunder, duly endorsed and in form for transfer, and
all funds and other properties of Fund deposited with or held by

<PAGE> 14

Custodian hereunder, and shall cooperate in effecting changes in
book-entries at the Depository Trust Company, the
Treasury/Federal Reserve Book-Entry System, the Participants
Trust Company and any other securities depository holding assets
of the Fund. In the event no such vote has been adopted by the
shareholders of Fund and no written order designating a successor
custodian shall have been delivered to Custodian on or before the
date when such termination shall become effective, then Custodian
shall deliver the securities, funds and properties of Fund to a
bank or trust company at the selection of Custodian and meeting
the qualifications for custodian, if any, set forth in the Bylaws
of Fund and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its
last published report. Upon either such delivery to a successor
custodian, Custodian shall have no further obligations or
liabilities under this Agreement. Thereafter such bank or trust
company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services.
In the event that no such successor custodian can be found, Fund
will submit to its shareholders, before permitting delivery of
the cash and securities owned by Fund to anyone other than a
successor custodian, the question of whether Fund shall be
liquidated or shall function without a custodian. Not-
withstanding the foregoing requirement as to delivery upon
termination of this Agreement, Custodian may make any other
delivery of the securities, funds and property of Fund which
shall be permitted by the 1940 Act and Fund's Agreement and
Declaration of Trust and Bylaws then in effect. Except as
otherwise provided herein, neither this Agreement nor any portion
thereof may be assigned by Custodian without the consent of Fund,
authorized or approved by a resolution of its Board of Trustees.

8. NOTICES.

Notices, requests, instructions and other writings received
by Fund at 120 South LaSalle Street, Chicago, Illinois 60603 or
at such other address as Fund may have designated by certified
resolution of the Board of Trustees to Custodian and notices,
requests, instructions and other writings received by Custodian
at its offices at 21 West 10th Street, Kansas City, Missouri
64105, or to such other address as it may have designated to Fund
in writing, shall be deemed to have been properly given
hereunder.

9. MISCELLANEOUS.

A. This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of the
State of Missouri (except as to Section 9.H. hereof which
shall be governed in accordance with the laws of The
Commonwealth of Massachusetts).

<PAGE> 15

B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and assigns of the
parties hereto.

C. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties hereto.

D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.

E. This Agreement shall become effective at the close
of business on the date hereof.

F. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.

G. If any part, term or provision of this Agreement
is by the courts held to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.

H. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust, which is on file
with the Secretary of The Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and
on behalf of Fund by its representatives as such
representatives and not individually, and the obligations of
Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of Fund individually but are
binding upon only the assets and property of Fund. With
respect to any claim by Custodian for recovery of that
portion of the compensation (or any other liability of Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, Custodian shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall
have no recourse against the assets of any other Portfolio
for such purpose.

I. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements.

<PAGE> 16

IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective authorized officers.

KEMPER INVESTORS FUND

By: /s/ John E. Peters
-----------------------------

Title: Vice President
--------------------------

Attest: /s/ Philip J. Collora
-------------------------

Title: Assistant Secretary
--------------------------

INVESTORS FIDUCIARY TRUST COMPANY

By:
------------------------------

Title:
---------------------------

Attest:
----------------------

Title:
-----------------------

<PAGE> 1
EXHIBIT 99.B8.(b)

FOREIGN CUSTODY AGREEMENT

AGREEMENT dated January 2, 1990 between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and KEMPER INVESTORS FUND
(the "Fund").

1. Custody Account. The Bank agrees to establish and
maintain (a) a custody account in the name of the Fund
("Custody Account") for any and all stocks, shares, bonds,
debentures, notes, mortgages or other obligations for the
payment of money and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or
subscribe for the same or evidencing or representing any
other rights or interests therein and other similar property
(hereinafter called "Securities") and from time to time
received by the Bank or its subcustodian (as defined in the
last sentence of Section 3) for the account of the Fund, and
(b) a deposit account in the name of the Fund ("Deposit
Account") for any and all cash in any currency received by
the Bank or its subcustodian for the account of the Fund,
which cash shall not be subject to withdrawal by draft or
check.

2. Maintenance of Securities Abroad. Securities in the
Custody Account shall be held in the country or other
jurisdiction as shall be specified from time to time in
Instructions, provided that such country or other
jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or other
jurisdiction in which such Securities are to be presented for
payment or are acquired for the Custody Account and cash in
the Deposit Account shall be credited to an account in such
amounts and in the country or other jurisdiction as shall be
specified from time to time in Instructions, provided that
such country or other jurisdiction shall be one in which such
cash is the legal currency for the payment of public or
private debts.

3. Eligible Foreign Custodians and Securities
Depositories. The Fund's Board of Trustees authorizes the
Bank to hold the Securities in the Custody Account and the
cash in the Deposit Account in custody and deposit accounts,
respectively, which have been established by the Bank with
one of its branches, a branch of a qualified U.S. bank, an
eligible foreign custodian or an eligible foreign securities
depository; provided, however, that the Bank has recommended
and the Board has approved the use of, and the Bank's
contract with, such eligible foreign custodian or eligible

<PAGE> 2

foreign securities depository by resolution, and a certified
copy of such resolution has been provided to the Bank.
Furthermore, if one of its branches, a branch of a qualified
U.S. bank or an eligible foreign custodian is selected to act
as the Bank's subcustodian to hold any of the Securities or
cash, such entity is authorized to hold such Securities or
cash in its account with any eligible foreign securities
depository in which it participates. For purposes of this
Agreement (a) "qualified U.S. bank" shall mean a qualified
U.S. bank as defined in Rule 17f-5 under the Investment
Company Act of 1940 ("Investment Company Act"); (b) "eligible
foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a
country other than the United States that is regulated as
such by that country's government or an agency thereof and
that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof),
(ii) a majority owned direct or indirect subsidiary of a
qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other
than the United States and that has shareholders' equity in
excess of $100 million in U.S. currency (or a foreign
currency equivalent thereof) or (iii) a banking institution
or trust company incorporated or organized under the laws of
a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank or
bank holding company that is incorporated or organized under
the laws of a country other than the United States which has
such other qualifications as shall be authorized or permitted
by a rule, regulation, interpretation or exemptive order
promulgated by or under the authority of the Securities and
Exchange Commission, specified in Instructions and approved
by the Bank; and (c) "eligible foreign securities depository"
shall mean a securities depository or clearing agency,
incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system
for handling of securities or equivalent book-entries in that
country or (ii) a transnational system for the central
handling of securities or equivalent book entries.

Hereinafter the term "subcustodian" will refer to any
branch of a qualified U.S. bank, any eligible foreign
custodian or any eligible foreign securities depository with
which the Bank has entered an agreement of the type
contemplated hereunder regarding Securities and/or cash held
in or to be acquired for the Custody Account or the Deposit
Account.

4. Use of Subcustodian. With respect to Securities and
other assets which are maintained by the Bank in the physical
custody of a subcustodian pursuant to Section 3 (as used in

<PAGE> 3

this Section 4, the term "Securities" means such Securities
and other assets):

(a) The Bank will identify on its books as
belonging to the Fund any Securities held by such
subcustodian.

(b) In the event that a subcustodian permits any of
the Securities placed in its care to be held in an
eligible foreign securities depository, such
subcustodian will be required by its agreement with the
Bank to identify on its books such Securities as being
held for the account of the Bank as a custodian for its
customers.

(c) Any Securities in the Custody Account held by a
subcustodian of the Bank will be subject only to the
instructions of the Bank or its agents; and any
Securities held in an eligible foreign securities
depository for the account of a subcustodian will be
subject only to the instructions of such subcustodian.

(d) The Bank will only deposit Securities in an
account with a subcustodian which includes exclusively
the assets held by the Bank for its customers, and the
Bank will cause such account to be designated by such
subcustodian as a special custody account for the
exclusive benefit of customers of the Bank.

(e) Any agreement the Bank shall enter into with a
subcustodian with respect to the holding of Securities
shall require that (i) the Securities are not subject to
any right, charge, security interest, lien or claim of
any kind in favor of such subcustodian except for their
safe custody or administration and (ii) beneficial
ownership of such Securities is freely transferable
without the payment of money or value other than for
safe custody or administration; provided, however, that
the foregoing shall not apply to the extent that any of
the above-mentioned rights, charges, etc. result from
any compensation or other expenses arising with respect
to the safekeeping of Securities pursuant to such
agreement or from any arrangements made by the Fund with
any such subcustodian.

(f) The Bank shall allow independent public
accountants of the Fund such reasonable access to the
records of the Bank relating to the Securities held in
the Custody Account as is required by such accountants
in connection with their examination of the books and
records pertaining to the affairs of the Fund. The Bank
shall, subject to restrictions under applicable law,

<PAGE> 4

also obtain from any subcustodian with which the Bank
maintains the physical possession of any Securities in
the Custody Account an undertaking to permit independent
public accountants of the Fund such reasonable access to
the records of such subcustodian as may be required in
connection with their examination of the books and
records pertaining to the affairs of the Fund. The Bank
shall furnish to the Fund such reports (or portions
thereof) of the Bank's external auditors as relate
directly to the Bank's system of internal accounting
controls applicable to the Bank's duties under this
Agreement. The Bank shall use its best efforts to
obtain and furnish the Fund with similar reports with
respect to each eligible foreign custodian and eligible
foreign securities depository holding Securities of the
Fund.

(g) The Bank will supply to the Fund from time to
time as mutually agreed upon a statement in respect to
any Securities in the Custody Account held by a
subcustodian, including an identification of the entity
having possession of the Securities, and the Bank will
send to the Fund an advice or notification of any
transfers of Securities to or from the Custody Account,
indicating, as to Securities acquired for the Fund, the
identity of the entity having physical possession of
such Securities. In the absence of the filing in
writing with the Bank by the Fund of exceptions or
objections to any such statement within sixty (60) days
following receipt of the statement, the Fund shall be
deemed to have approved such statement; and in such case
or upon written approval of the Fund of any such
statement the Bank shall, to the extent permitted by
law, be released, relieved and discharged with respect
to all matters and things set forth in such statement as
though such statement had been settled by the decree of
a court of competent jurisdiction in an action in which
the Fund and all person having any equity interest in
the Fund were parties.

(h) The Bank hereby warrants to the Fund that in
its opinion, after due inquiry, the established
procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities
depository holding the Fund's Securities pursuant to
this Agreement afford protection for such Securities at
least equal to that afforded by the Bank's established
procedures with respect to similar securities held by
the Bank (and its securities depositories) in New York.

<PAGE> 5

5. Deposit Account Payments. Subject to the provisions
of Section 7, the Bank shall make, or cause its subcustodians
to make, payments of cash credited to the Deposit Account
only

(a) in connection with the purchase of Securities
for the Fund and the delivery of such Securities to, or
the crediting of such Securities to the account of, the
Bank or its subcustodian, each such payment to be made
at prices as confirmed by Instructions (as defined in
Section 9 hereof) from Authorized Persons (as defined in
Section 10 hereof);

(b) for the purchase or redemption of shares of the
capital stock of the Fund and the delivery to, or
crediting to the account of, the Bank or its subcustodian
of such shares to be so purchased or redeemed;

(c) for the payment for the account of the Fund of
dividends, interest, taxes, management or supervisory
fees, capital distributions or operating expenses;

(d) for the payments to be made in connection with
the conversion, exchange or surrender of Securities held
in the Custody Account;

(e) for transmittal either to United Missouri Bank
of Kansas City, National Association, or to Investors
Fiduciary Trust Company, Custodian for the Fund;

(f) for other proper corporate purposes of the
Fund; or

(g) upon the termination of this Custody Agreement
as hereinafter set forth.

All payments of cash for a purpose permitted by subsection
(a), (b), (c), (d) or (e) of this Section 5 will be made only
upon receipt by the Bank of Instructions from Authorized
Persons which shall specify the purpose for which the payment
is to be made and the applicable subsection of this Section
5. In the case of any payment to be made for the purpose
permitted by subsection (f) of this Section 5, the Bank must
first receive a certified copy of a resolution of the Board
adequately describing such payment, declaring such purpose to
be a proper purpose, and naming the person or persons to whom
such payment is to be made. Any payment pursuant to
subsection (g) of this Section 5 will be made in accordance
with Section 17.

In the event that any payment made under this Section 5
exceeds the funds available in the Deposit Account, the Bank

<PAGE> 6

may, in its discretion, advance the Fund an amount equal to
such excess and such advance shall be deemed a loan from the
Bank to the Fund, payable on demand, bearing interest at the
rate of interest customarily charged by the Bank on similar
loans.

If the Bank causes the Deposit Account to be credited on
the payable date for interest, dividends or redemptions, the
Fund will promptly return to the Bank any such amount or
property so credited upon oral or written notification that
neither the Bank nor its subcustodian can collect such amount
or property in the ordinary course of business. The Bank or
its subcustodian, as the case may be, shall have no duty or
obligation to institute legal proceedings, file a claim or
proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount or
property beyond its ordinary collection procedures.

6. Custody Account Transactions. Subject to the
provisions of Section 7, Securities in the Custody Account
will be transferred, exchanged or delivered by the Bank or
its subcustodians only

(a) upon sale of such Securities for the Fund and
receipt by the Bank or its subcustodian only of payment
therefor, each such payment to be in the amount
confirmed by Instructions from Authorized Persons;

(b) when such Securities are called, redeemed or
retired, or otherwise become payable;

(c) in exchange for or upon conversion into other
Securities along or other Securities and cash pursuant
to any plan or merger, consolidation, reorganization,
recapitalization or readjustment;

(d) upon conversion of such Securities pursuant to
their terms into other Securities;

(e) upon exercise of subscription, purchase or
other similar rights represented by such Securities;

(f) for the purpose of exchanging interim receipts
or temporary Securities for definitive Securities;

(g) for the purpose of delivery either to United
Missouri Bank of Kansas City, National Association, or
to Investors Fiduciary Trust Company, as Custodian for
the Fund;

(h) for the purpose of redeeming in kind shares of
the Fund against delivery to the Bank or its

<PAGE> 7

subcustodian of such shares to be so redeemed;

(i) for other proper trust purposes of the Fund;

(j) upon the termination of this Custody Agreement
as hereinafter set forth.

All transfers, exchanges or deliveries of Securities in the
Custody Account for a purpose permitted by either subsection
(a), (b), (c), (d), (e), (f) or (g) of this Section 6 will be
made, except as provided in Section 8, only upon receipt by
the Bank of Instructions from Authorized Persons which shall
specify the purpose of the transfer, exchange or delivery to
be made and the applicable subsection of this Section 6. In
the case of any transfer or delivery to be made for the
purpose permitted by subsection (h) of this Section 6, the
Bank must first receive Instructions from Authorized Persons
specifying the shares held by the Bank or its subcustodian to
be so transferred or delivered and naming the person or
persons to whom transfers or delivery of such shares shall be
made. In the case of any transfer, exchange or delivery to
be made for the purpose permitted by subsection (i) of this
Section 6, the Bank must first receive a certified copy of a
resolution of the Board adequately describing such transfer,
exchange or delivery, declaring such purpose to be a proper
trust purpose, and naming the person or persons to whom
delivery of such Securities shall be made. Any transfer or
delivery pursuant to subsection (j) of this Section 6 will be
made in accordance with Section 17.

7. Custody Account Procedures. With respect to any
transaction involving Securities held in or to be acquired
for the Custody Account, the Bank in its discretion may cause
the Deposit Account to be credited on the contractual
settlement date with the proceeds of any sale or exchange of
Securities from the Custody Account and to be debited on the
contractual settlement date for the cost of Securities
purchased or acquired for the Custody Account. The Bank may
reverse any such credit or debit if the transaction with
respect to which such credit or debit were made fails to
settle within a reasonable period, determined by the Bank in
its discretion, after the contractual settlement date, except
that if any Securities delivered pursuant to this Section 7
are returned by the recipient thereof, the Bank may cause any
such credits and debits to be reversed at any time. With
respect to any transactions as to which the Bank does not
determine so to credit or debit the Deposit Account, the
proceeds from the sale or exchange of Securities will be
credited and the cost of such Securities purchased or
acquired will be debited to the Deposit Account on the date
such proceeds or Securities are received by the Bank.

<PAGE> 8

Notwithstanding the preceding paragraph, settlement and
payment for Securities received for, and delivery of
Securities out of, the Custody Account may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such Securities
from such purchaser or dealer.

8. Actions of the Bank. Until the Bank receives
instructions from Authorized Persons to the contrary, the
Bank will, or will instruct its subcustodian to:

(a) present for payment any Securities in the
Custody Account which are called, redeemed or retired or
otherwise become payable and all coupons and other
income items which call for payment upon presentation to
the extent that the Bank or subcustodian is aware of
such opportunities for payment, and hold cash received
upon presentation of such Securities in accordance with
the provisions of Sections 2, 3 and 4 of this Agreement;

(b) in respect of Securities in the Custody
Account, execute in the name of the Fund such ownership
and other certificates as may be required to obtain
payments in respect thereof;

(d) convert moneys received with respect to
Securities of foreign issue into United States dollars
or any other currency necessary to effect any
transaction involving the Securities whenever it is
practicable to do so through customary banking channels,
using any method or agency available, including, but not
limited to, the facilities of the Bank, its
subsidiaries, affiliates or subcustodians; and

(e) in the event of any loss of Securities or Cash,
use its best efforts to ascertain the circumstances
relating to such loss and promptly report the same to
the Fund.

9. Instructions. As used in this Agreement, the term
"Instructions" means instructions of the Fund received by the
Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction system

<PAGE> 9

acceptable to the Bank which the Bank reasonably believes in
good faith to have been given by Authorized Persons or which
are transmitted with proper testing or authentication
pursuant to terms and conditions which the Bank may specify.

Any Instructions delivered to the Bank by telephone
shall promptly thereafter be confirmed in writing by an
Authorized Person (which confirmation may bear the facsimile
signature of such Person), but the Fund will hold the Bank
harmless for its failure to send such confirmation in
writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time provided
that the Bank has timely advised the Fund of its failure to
send such confirmation in writing or the failure of such
confirmation to conform to the telephone instructions
received. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until
cancelled or superceded. If the Bank requires test
arrangements, authentication methods or other security
devices to be used with respect to instructions, any
Instructions given by the Fund thereafter shall be given and
processed in accordance with such terms and conditions for
the use of such arrangements, methods or devices as the Bank
may put into effect and modify from time to time. The Fund
shall safeguard any testkeys, identification codes or other
security devices which the Bank shall make available to it.
The Bank may electronically record any Instructions given by
telephone, and any other telephone discussions, with respect
to the Custody Account.

10. Authorized Persons. As used in this Agreement, the
term "Authorized Persons" means such officers or such agents
of the Fund as have been designated by a resolution of the
Board, a certified copy of which has been provided to the
Bank, to act on behalf of the Fund in the performance of any
acts which Authorized Persons may do under this Agreement.
Such persons shall continue to be Authorized Persons until
such time as the Bank receives instructions from Authorized
Persons that any such officer or agent is no longer an
Authorized Person.

11. Nominees. Securities in the Custody Account which
are ordinarily held in registered form may be registered in
the name of the Bank's nominee or, as to any Securities in
the possession of an entity other than the Bank, in the name
of such entity's nominee. The Fund agrees to hold any such
nominee harmless from any liability as a holder of record of
such Securities. The Bank may without notice to the Fund
cause any such Securities to cease to be registered in the
name of any such nominee and to be registered in the name of
the Fund. In the event that any Securities registered in the

<PAGE> 10

name of the Bank's nominee or held by one of its
subcustodians and registered in the name of such
subcustodian's nominee are called for partial redemption by
the issuer of such Security, the Bank may allot, or cause to
be allotted, the called portion to the respective beneficial
holders of such class of security in any manner the Bank
deems to be fair and equitable.

12. Standard of Care. The Bank shall be responsible for
the performance of only such duties as are set forth herein
or contained in Instructions given to the Bank by Authorized
Persons which are not contrary to the provisions of this
Agreement. The Bank will use reasonable care with respect to
the safekeeping of Securities in the Custody Account. The
Bank shall be liable to the Fund for any loss which shall
occur as the result of the failure of a subcustodian or an
eligible foreign securities depository engaged by such
subcustodian to exercise reasonable care with respect to the
safekeeping of such Securities and other assets to the same
extent that the Bank would be liable to the Fund if the Bank
were holding such Securities and other assets in New York.
In the event of any loss to the Fund by reason of the failure
of the Bank or its subcustodian or an eligible foreign
securities depository engaged by such subcustodian to utilize
reasonable care, the Bank shall be liable to the Fund to the
extent of the Fund's damages, to be determined based on the
market value of the property which is the subject of the loss
at the date of discovery of such loss and without reference
to any special conditions or circumstances. The Bank shall
be held to the exercise of reasonable care in carrying out
this Agreement but shall be indemnified by, and shall be
without liability to, the Fund for any action taken or
omitted by the Bank in good faith without negligence. The
Bank shall be entitled to rely, and may act, on advice of
counsel (who may be counsel for the Fund) on all matters and
shall be without liability for any action reasonably taken or
omitted pursuant to such advice.

The Bank need not maintain any insurance for the benefit
of the Fund. However, the Bank represents and warrants that
it presently maintains a bankers' blanket bond ("Bond") which
provides standard fidelity and non-negligent loss coverage
with respect to securities which may be held by the Bank and
securities which may be held in the offices of foreign banks
and foreign securities depositories which may be utilized by
the Bank pursuant to this Agreement. The Bank agrees that if
at any time the Bank for any reason discontinues such
coverage, it shall immediately notify the Fund in writing.
The Bank represents that only the named insured on the Bond,
which includes the Bank but not any of the Bank's customers,
is directly protected against loss. The Bank represents that
while it might resist a claim of one of its customers to

<PAGE> 11

recover for a loss not covered by the Bond, as a practical
matter, where a claim is brought and loss is possibly covered
by the Bond, the Bank would give notice of the claim to its
insurer, and the insurer would normally determine whether to
defend the claim against the Bank or to pay the claim on
behalf of the Bank.

All collections of funds or other property paid or
distributed in respect of Securities in the Custody Account
shall be made at the risk of the Fund. The Bank shall have
no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its subcustodian of any
payment, redemption or other transaction regarding Securities
in the Custody Account in respect of which the Bank has
agreed to take action as provided in Section 8 hereof. The
Bank shall not be liable for any action taken in good faith
upon Instructions or upon any certified copy of any
resolution of the Board and may rely on the genuineness of
any such documents which it may in good faith believe to be
validly executed. The Bank shall not be liable for any loss
resulting from, or caused by, the direction of the Fund to
maintain custody of any Securities or cash in a foreign
country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, acts
of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.

13. Compliance with Securities and Exchange Commission
Rules and Orders. To the extent that a condition of a rule,
regulation, interpretation or exemptive order promulgated by
or under the authority of the Securities and Exchange
Commission applies to the Bank or the Fund each shall be
solely responsible to assure that this Agreement and the
maintenance of Securities and cash under this Agreement
complies with any such rule, regulation, interpretation or
exemptive order.

14. Corporate Action. The Bank or its subcustodian is
to forward promptly to the Fund all communications relative
to the Securities in the Custody Account. Such
communications as call for voting or the exercise of rights
or other specific action (including material relative to
legal proceedings intended to be transmitted to security
holders) shall be transmitted to the Fund by means which will
permit the Fund to take timely action. The Bank or its
subcustodian will cause its nominee to execute and deliver to
the Fund proxies relating to Securities in the Custody
Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted.
Proxies relating to bearer Securities will be delivered in
accordance with written instructions from Authorized Persons.

<PAGE> 12

Bank hereby agrees that Bank shall create, maintain, and
retain all records relating to its activities and obligations
under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act,
particularly Section 31 thereof and Rules 31a-1, 31a-2 and
31a-3 thereunder, and applicable Federal, state and foreign
tax laws and other laws or administrative rules or
procedures, in each case as currently in effect, which may be
applicable to the Fund. All records so maintained in
connection with the performance of its duties under this
Agreement shall be preserved and maintained as required by
regulation and, in the event of termination of the Agreement,
shall be available to the Fund or its agent upon request.

15. Fees and Expenses. The Fund agrees to pay to the
Bank from time to time such compensation for its services
pursuant to this Agreement as may be mutually agreed upon in
writing from time to time including reimbursement of the
Bank's reasonable out-of-pocket or incidental expenses,
including legal fees. The Fund hereby agrees to hold the
Bank harmless from any liability or loss resulting from any
taxes or other governmental charges, and any expenses related
thereto, which may be imposed, or assessed with respect to
the Custody Account or any Securities in the Custody Account
and also agrees to hold the Bank, its subcustodians, and
their respective nominees harmless from any liability as a
record holder of Securities in the Custody Account. The Bank
is authorized to charge any account of the Fund for such
items and the Bank shall have a lien on Securities in the
Custody Account and on cash in the Deposit Account for any
amount owing to the Bank from time to time under this
Agreement.

16. Effectiveness. This Agreement shall be effective on
the date first noted above; provided, however, that the Board
has provided the Bank a certified copy of a resolution that
(i) approves each of the subcustodians listed in Appendix A
hereto and the terms of the custody agreements between the
Bank and each such subcustodian attached as Exhibit I through
hereof, and (ii) states that the Board has determined that
the use of each such subcustodian and the terms of each such
subcustody agreement are consistent with the best interests
of the Fund and its shareholders.

17. Termination. This Agreement may be terminated by
the Fund or the Bank by 60 days written notice to the other,
sent by registered mail, provided that any termination by the
Fund shall be authorized by a resolution of its Board, a
certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall
specify the names of the persons to whom the Bank shall
deliver the Securities in the Custody Account and to whom the

<PAGE> 13

cash in the Deposit Account shall be paid. If notice of
termination is given by the Bank, the Fund shall, within 60
days following the giving of such notice, deliver to the Bank
a certified copy of a resolution of its Board specifying the
names of the persons to whom the Bank shall deliver the
Securities in the Custody Account and to whom the cash in the
Deposit Account shall be paid. In either case the Bank will
deliver such Securities and cash to the persons so specified,
after deducting therefrom any amounts which the Bank
determines to be owed to it under Section 15. If within 60
days following the giving of a notice of termination by the
Bank, the Bank does not receive from the Fund a certified
copy of a resolution of the Board specifying the names of the
persons to whom the Bank shall deliver the Securities in the
Custody Account and to whom the cash in the Deposit Account
shall be paid, the Bank, at its election, may deliver such
Securities and pay such cash to a bank or trust company doing
business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold such Securities
and cash until a certified copy of one or more resolutions as
aforesaid is delivered to the Bank. Concurrently with the
delivery of such Securities, the Bank shall deliver to the
Company, or such other person as the Company shall instruct,
the records referred to in Section 14 hereof which are in the
possession or control of the Bank. The obligations of the
parties hereto regarding the use of reasonable care,
indemnities and payment of fees and expenses shall survive
the termination of this Agreement.

18. Notices. Any notice or other communication from the
Fund to the Bank is to be sent to the office of the Bank at
1211 Avenue of the Americas (33rd floor), New York, New York,
10036, Attention Global Custody Division, or such other
address as may hereafter be given to the Company in
accordance with the notice provisions hereunder, and any
notice from the Bank to the Fund is to be mailed postage
prepaid, addressed to the Fund at the address appearing
below, or as it may hereafter be changed on the Bank's
records in accordance with notice hereunder from the Fund.

19. Governing Law and Successors and Assigns. This
Agreement shall be governed by the law of the State of New
York and shall not be assignable by either party, but shall
bind the successors and assigns of the Fund and the Bank.

20. Headings. The headings of the paragraphs hereof are
included for convenience of reference only and do not form a
part of this Agreement.

21. Additional Portfolios. If the Fund shall issue
shares of more than one portfolio during the term hereof, the

<PAGE> 14

Bank agrees that all securities and other assets of the Fund
shall be segregated by portfolio and all books and records,
account values or actions shall be maintained, held, made or
taken, as the case may be, separately for each portfolio.
Other than as encompassed by the preceding sentence,
references in this Agreement to "the Fund" are applicable
either to the entire trust or to a particular portfolio or
portfolios, as the context may make reasonable and
appropriate. If the Fund has more than one portfolio,
instructions shall designate the portfolio or portfolios to
which they apply.

22. Disclaimer. All parties hereto are expressly put on
notice of the Fund's Agreement and Declaration of Trust and
all amendments thereto, all of which are on file with the
Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained
therein. This Agreement has been executed by and on behalf
of the Fund by its representatives as such representatives
and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers
or shareholders of the Fund individually but are binding upon
only the assets and property of the Fund. With respect to
any claim by Bank for recovery of that portion of the
compensation (or any other liability of the Fund arising
hereunder) allocated to a particular portfolio, whether in
accordance with the express terms hereof or otherwise, the
Bank shall have recourse solely against the assets of that
portfolio to satisfy such claim and shall have no recourse
against the assets of any other portfolio for such purpose.

KEMPER INVESTORS FUND

By: /s/ Charles M. Kierscht, Pres.
-------------------------------
Title(s)

Address for Record 120 South LaSalle Street
----------------------------------
Chicago, Illinois 60603
----------------------------------

THE CHASE MANHATTAN BANK, N. A.

By: /s/ Mary Kay Orr
-------------------------------
Title Vice President

<PAGE> 1
EXHIBIT 99.B9

AGENCY AGREEMENT

AGREEMENT dated the 24th day of March, 1987, by and between
KEMPER INVESTORS FUND, a Massachusetts business trust having its
principal place of business at 120 South LaSalle Street, Chicago,
IL 60603 ("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state
chartered trust company organized and existing under the laws of
the State of Missouri, having its principal place of business at
21 West 10th Street, Kansas City, Missouri 64105 ("IFTC").

WITNESSETH:

WHEREAS, Fund desires to appoint IFTC as Transfer Agent and
Dividend Disbursing Agent, and IFTC desires to accept such
appointment;

NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:

1. Documents to be Filed with Appointment.

In connection with the appointment of IFTC as Transfer Agent
and Dividend Disbursing Agent for Fund, there will be filed
with IFTC the following documents:

A. A certified copy of the resolutions of the Board of
Trustees of Fund appointing IFTC as Transfer Agent and
Dividend Disbursing Agent, approving the form of this
Agreement, and designating certain persons to sign
share certificates, if any, and give written
instructions and requests on behalf of Fund;

B. A certified copy of the Agreement and Declaration of
Trust of Fund and all amendments thereto;

C. A certified copy of the Bylaws of Fund;

D. Copies of Registration Statements filed with the
Securities and Exchange Commission.

E. Specimens of all forms of outstanding share
certificates, in the forms approved by the Board of
Trustees of Fund, with a certificate of the Secretary
of Fund as to such approval.

F. Specimens of the signatures of the officers of the
Fund authorized to sign share certificates and

<PAGE> 2

individuals authorized to sign written instructions and
requests;

G. An opinion of counsel for Fund with respect to:

(1) Fund's organization and existence under the laws
of The Commonwealth of Massachusetts,

(2) Status of all shares of Fund covered by this
appointment under the Securities Act of 1933, as
amended, and any other applicable federal or state
statute, and

(3) That all issued shares are, and all unissued
shares will be, when issued, validly issued, fully
paid and non-assessable.

2. Certain Representations and Warranties of IFTC.

IFTC represents and warrants to Fund that:

A. It is a trust company duly organized and existing
and in good standing under the laws of Missouri.

B. It is duly qualified to carry on its business in the
State of Missouri.

C. It is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter into and
perform the services contemplated in this Agreement.

D. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.

E. It has and will continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.

3. Certain Representations and Warranties of Fund.

Fund represents and warrants to IFTC that:

A. It is a business trust duly organized and existing and
in good standing under the laws of The Commonwealth of
Massachusetts.

B. It is an open-end diversified management investment
company registered under the Investment Company Act of
1940; as amended.

C. A registration statement under the Securities Act of
1933 has been filed and will be effective with respect
to all shares of Fund being offered for sale.

<PAGE> 3

D. All requisite steps have been or will be taken to
register Fund's shares for sale in all applicable
states. A list of such states will be attached hereto
as Exhibit A.

E. Fund is empowered under applicable laws and its
Agreement and Declaration of Trust and Bylaws to enter
into and perform this Agreement.

4. Scope of Appointment.

A. Subject to the conditions set forth in this Agreement,
Fund hereby employs and appoints IFTC as Transfer Agent
and Dividend Disbursing Agent effective the date
hereof.

B. IFTC hereby accepts such employment and appointment and
agrees that it will act as Fund's Transfer Agent and
Dividend Disbursing Agent. IFTC agrees that it will
also act as agent in connection with Fund's periodic
withdrawal payment accounts and other open-account or
similar plans for shareholders any.

C. IFTC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and
obligations hereunder in accordance with industry
practice.

D. Fund agrees to use its best efforts to deliver to IFTC
in Kansas City, Missouri, as soon as they are
available, all of its shareholder account records.

E. Subject to the provisions of Sections 19. and 20.
hereof, IFTC agrees that it will perform all the usual
and ordinary services of Transfer Agent and Dividend
Disbursing Agent and as Agent for the various
shareholder accounts, including, without limitation,
the following: issuing, transferring and cancelling
share certificates, maintaining all shareholder
accounts, preparing shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses, withholding
federal income taxes, preparing and mailing checks for
disbursement of income and capital gains distribution,
preparing and filing all required U.S. Treasury
Department information returns for all shareholders,
preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases
and liquidations of Fund shares and other transactions
in shareholder accounts for which confirmations are
required, recording reinvestments of dividends and
distributions in Fund shares, recording redemptions of
Fund shares and preparing and mailing checks for

<PAGE> 4

payments upon redemption and for disbursements to
systematic withdrawal plan shareholders.

5. Compensation and Expenses.

A. In consideration for the services hereunder as Transfer
Agent and Dividend Disbursing Agent, Fund will pay to
IFTC from time to time reasonable compensation for all
services rendered as Agent, and also, all its
reasonable out-of-pocket expenses, charges, counsel
fees, and other disbursements incurred in connection
with the agency. Such compensation will be set forth
in a separate schedule to be agreed to by Fund and
IFTC.

B. Fund agrees to promptly reimburse IFTC for all
reasonable out-of-pocket expenses or advances incurred
by IFTC in connection with the performance of services
under this Agreement, for postage (and first class mail
insurance in connection with mailing share
certificates), envelopes, check forms, continuous
forms, forms for reports and statements, stationery,
and other similar items, telephone and telegraph
charges incurred in answering inquiries from dealers or
shareholders, microfilm used each year to record the
previous year's transactions in shareholder accounts
and computer tapes used for permanent storage of
records and cost of insertion of materials in mailing
envelopes by outside firms.

6. Efficient Operation of IFTC System.

A. In connection with the performance of its services
under this Agreement, IFTC is responsible for the
accurate and efficient functioning of its system at all
times, including:

(1) The accuracy of the entries in IFTC's records
reflecting orders and instructions received by
IFTC from dealers, shareholders, Fund or its
principal underwriter;

(2) The continuous availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmation and other shareholder
account information to be produced from its
records or data;

(3) The accurate and timely issuance of dividend and
distribution checks in accordance with
instructions received from Fund;

(4) The accuracy of redemption transactions and
payments in accordance with redemption

<PAGE> 5

instructions received from dealers, shareholders
or Fund;

(5) The deposit daily in Fund's appropriate special
bank account of all checks and payments received
from dealers or shareholders for investment in
shares;

(6) The requiring of proper forms of instructions,
signatures and signature guarantees and any
necessary documents supporting the legality of
transfers, redemptions and other shareholder
account transactions, all in conformance with
IFTC's present procedures with such changes as may
be required or approved by Fund; and

(7) The maintenance of a current duplicate set of
Fund's essential records at a secure distant
location, in form available and usable forthwith
in the event of any breakdown or disaster
disrupting its main operation.

7. Indemnification.

A. Except to the extent that IFTC is covered by and
receives payment from any insurance required hereunder,
IFTC will not be responsible for, and Fund will hold
harmless and indemnify IFTC from and against any loss
by or liability to the Fund or a third party, including
attorney's fees, in connection with any claim or suit
asserting any such liability arising out of or
attributable to actions taken by IFTC pursuant to this
Agreement, unless IFTC has acted negligently or in bad
faith. The matters covered by this indemnification
include but are not limited to those of Section 13
hereof. Fund will be responsible for, and will have
the right to conduct or control the defense of any
litigation asserting liability against which IFTC is
indemnified hereunder, IFTC will not be under any
obligation to prosecute or defend any action or suit
in respect of the agency relationship hereunder, which,
in its opinion, may involve it in expense or liability,
unless Fund will, as often as requested, furnish IFTC
with reasonable, satisfactory security and indemnity
against such expense or liability.

B. IFTC will hold harmless and indemnify Fund from and
against any loss or liability arising out of IFTC's
failure to comply with the terms of this Agreement or
arising out of IFTC's negligence, misconduct, or bad
faith.

<PAGE> 6

8. Certain Covenants of IFTC and Fund.

A. All requisite steps will be taken by Fund from time to
time when and as necessary to register the Fund's
shares for sale in all states in which Fund's shares
shall at the time be offered for sale and require
registration. If at any time Fund will receive notice
of any stop order or other proceeding in any such state
affecting such registration or the sale of Fund's
shares, or of any stop order or other proceeding under
the Federal securities laws affecting the sale of
Fund's shares, Fund will give prompt notice thereof to
IFTC.

B. IFTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to
Fund for safekeeping of share certificates, check
forms, and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices, and
to carry insurance, as specified in Exhibit B hereto,
with insurers reasonably acceptable to Fund and in
minimum amounts specified in Exhibit B which will not
be changed without the consent of Fund and which will
be expanded in coverage or increased in amounts from
time to time if and when reasonably requested by Fund.

C. To the extent required by Section 31 of the Investment
Company Act of 1940 as amended and Rules thereunder,
IFTC agrees that all records maintained by IFTC
relating to the services to be performed by IFTC under
this Agreement are the property of Fund and will be
preserved and will be surrendered promptly to Fund on
request.

D. IFTC agrees to furnish Fund semi-annual reports of its
financial condition, consisting of a balance sheet,
earnings statement and any other reasonably available
financial information reasonably requested by Fund.
The annual financial statements will be certified by
IFTC's certified public accountants.

E. IFTC represents and agrees that it will use its best
efforts to keep current on the trends of the investment
company industry relating to shareholder services and
will use its best efforts to continue to modernize and
improve its system without additional cost to Fund.

F. IFTC will permit Fund and its authorized
representatives to make periodic inspections of its
operations at reasonable times during business hours.

<PAGE> 7

9. Adjustment.

In case of any recapitalization, readjustment or other
change in the structure of Fund requiring a change in the
form of share certificates, IFTC will issue or register
certificates in the new form in exchange for, or in transfer
of, the outstanding certificates in the old form, upon
receiving the following:

A. Written instructions from an officer of Fund;

B. Certified copy of the amendment to the Agreement and
Declaration of Trust or other document effecting the
change;

C. Certified copy of the order or consent of each
governmental or regulatory authority, required by law
to the issuance of the shares in the new form, and an
opinion of counsel that the order or consent of no
other government or regulatory authority is required;

D. Specimens of the new certificates in the form approved
by the Board of Trustees of Fund, with a certificate of
the Secretary of Fund as to such approval;

E. Opinion of counsel for Fund stating:

(1) The status of the shares of Fund in the new form
under the Securities Act of 1933, as amended and
any other applicable federal or state statutes;
and

(2) That the issued shares in the new form are, and
all unissued shares will be, when issued, validly
issued, fully paid and non-assessable.

10. Share Certificates.

Fund will furnish IFTC with a sufficient supply of blank
share certificates and from time to time will renew such
supply upon the request of IFTC. Such certificates will be
signed manually or by facsimile signatures of the officers
of Fund authorized by law and by Bylaws to sign share
certificates and, if required, will bear the seal or
facsimile thereof.

11. Death, Resignation or Removal of Signing Officer.

Fund will file promptly with IFTC written notice of any
change in the officers authorized to sign share
certificates, written instructions or requests, together
with two signature cards bearing the specimen signature of
each newly authorized officer. In case any officer of Fund
who will have signed manually or whose facsimile signature

<PAGE> 8

will have been affixed to blank share certificates will die,
resign, or be removed prior to the issuance of such
certificates, IFTC may issue or register such share
certificates as the share certificates of Fund
notwithstanding such death, resignation, or removal, until
specifically directed to the contrary by Fund in writing.
In the absence of such direction, Fund will file promptly
with IFTC such approval, adoption, or ratification as may be
required by law.

12. Future Amendments of Agreement and Declaration of Trust
and Bylaws.

Fund will promptly file with IFTC copies of all material
amendments to its Agreement and Declaration of Trust Bylaws
made after the date of this Agreement.

13. Instructions, Opinion of Counsel and Signatures.

At any time IFTC may apply to any officer of Fund for
instructions, and may consult with legal counsel for Fund or
its own legal counsel at the expense of Fund, with respect
to any matter arising in connection with the agency; and it
will not be liable for any action taken or omitted by it in
good faith in reliance upon such instructions or upon the
opinion of such counsel. IFTC will be protected in acting
upon any paper or document reasonably believed by it to be
genuine and to have been signed by the proper person or
persons and will not be held to have notice of any change of
authority of any person, until receipt of written notice
thereof from Fund. It will also be protected in recognizing
share certificates which it reasonably believes to bear the
proper manual or facsimile signatures of the officers of
Fund, and the proper countersignature of any former Transfer
Agent or Registrar, or of a Co-Transfer Agent or
Co-Registrar.

14. Papers Subject to Approval of Counsel.

The acceptance by IFTC of its appointment as Transfer Agent
and Dividend Disbursing Agent, and all documents filed in
connection with such appointment and thereafter in
connection with the agencies, will be subject to the
approval of legal counsel for IFTC, (which approval will not
be unreasonably withheld).

15. Certification of Documents.

The required copy of the Agreement and Declaration of Trust
of Fund and copies of all amendments thereto will be
certified by the appropriate official of The Commonwealth of
Massachusetts, and if such Agreement and Declaration of
Trust and amendments are required by law to be also filed

<PAGE> 9

with a county, city or other officer or official body, a
certificate of such filing will appear on the certified copy
submitted to IFTC. A copy of the order or consent of each
governmental or regulatory authority required by law for the
issuance of the shares will be certified by the Secretary or
Clerk of such governmental or regulatory authority, under
proper seal of such authority. The copy of the Bylaws and
copies of all amendments thereto, and copies of resolutions
of the Board of Trustees of Fund, will be certified by the
Secretary or an Assistant Secretary of Fund.

16. Records.

IFTC will maintain customary records in connection with its
agency, and particularly will maintain those records
required to be maintained pursuant to sub-paragraph (2)(iv)
of paragraph (b) of Rule 31a-1 under the Investment Company
Act of 1940, if any.

17. Disposition of Books, Records and Cancelled Certificates.

IFTC will send periodically to Fund, or to where designated
by the Secretary or an Assistant Secretary of Fund, all
books, documents, and all records no longer deemed needed
for current purposes and share certificates which have been
cancelled in transfer or in exchange, upon the understanding
that such books, documents, records, and share certificates
will not be destroyed by Fund without the consent of IFTC
(which consent will not be unreasonably withheld), but will
be safely stored for possible future reference.

18. Provisions Relating to IFTC as Transfer Agent.

A. IFTC will make original issues of share certificates
upon written request of an officer of Fund and upon
being furnished with a certified copy of a resolution
of the Board of Trustees authorizing such original
issue, an opinion of counsel as outlined in paragraphs
1.D. and G. of this Agreement, any documents required
by paragraphs 5. or 9. of this Agreement, and necessary
funds for the payment of any original issue tax.

B. Before making any original issue of certificates Fund
will furnish IFTC with sufficient funds to pay all
taxes required on the original issue of the share, Fund
will furnish IFTC such evidence as may be required by
IFTC to show the actual value of the shares. If no
taxes are payable, IFTC will be furnished with an
opinion of outside counsel to that effect.

C. Shares will be transferred and new certificates issued
in transfer, or shares accepted for redemption and
funds remitted therefor, upon surrender of the old
certificates in form deemed by IFTC properly endorsed

<PAGE> 10

for transfer or redemption accompanied by such
documents as IFTC may deem necessary to evidence that
authority of the person making the transfer or
redemption, and bearing satisfactory evidence of the
payment of any applicable share transfer taxes. IFTC
reserves the right to refuse to transfer or redeem
shares until it is satisfied that the endorsement or
signature on the certificate or any other document is
valid and genuine, and for that purpose it may require
a guaranty of signature by a firm having membership in
the New York Stock Exchange, Midwest Stock Exchange,
American Stock Exchange Securities Corporation, Pacific
Coast Stock Exchange, or any other exchange acceptable
to IFTC or by a bank or trust company approved by it,
IFTC also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it
will incur no liability for the refusal in good faith
to make transfers or redemptions which, in its
judgment, are improper or unauthorized. IFTC may, in
effecting transfers or redemptions, rely upon
Simplification Acts or other statutes which protect it
and Fund in not requiring complete fiduciary
documentation. In cases in which IFTC is not directed
or otherwise required to maintain the consolidated
records of shareholder's accounts, IFTC will not be
liable for any loss which may arise by reason of not
having such records, provided that such loss could not
have been prevented by the exercise of ordinary
diligence. IFTC will be under no duty to use a greater
degree of diligence by reason of not having such
records.

D. When mail is used for delivery of share certificates
IFTC will forward share certificates in "nonnegotiable"
form by first class mail all such mail deliveries to be
covered while in transit to the addressee by insurance
arranged for by IFTC.

E. IFTC will issue and mail subscription warrants,
certificates upon receiving written instructions from
any officer of Fund anc such other documents as IFTC
deems necessary.

F. IFTC will issue, transfer, and split up certificates
upon receiving written instructions from an officer of
Fund and such other documents as IFTC may deem
necessary.

G. IFTC may issue new certificates in place of
certificates represented to have been lost, destroyed,
stolen or otherwise wrongfully taken upon receiving
indemnity satisfactory to IFTC and Fund, and may issue
new certificates in exchange for, and upon surrender

<PAGE> 11

of, mutilated certificates. Such instructions from
Fund will be in such form as will be approved by the
Board of Trustees of Fund and will be in accordance
with the provisions of law and the Bylaws of Fund
governing such matter.

H. IFTC will supply a shareholder's list to Fund for any
shareholder meeting upon receiving a request from an
officer of Fund. It will also supply lists at such
other times as may be requested by an officer of Fund.

I. Upon receipt of written instructions of an officer of
Fund, IFTC will address and mail notices to
shareholders.

J. In case of any request or demand for the inspection of
the share books of Fund or any other books in the
possession of IFTC, IFTC will endeavor to notify Fund
and to secure instructions as to permitting or refusing
such inspection. IFTC reserves the right, however, to
exhibit the share books or other books to any person in
case it is advised by its counsel that it may be held
responsible for the failure to exhibit the share books
or other books to such person.

19. Provisions Relating to Dividend Disbursing Agency.

A. IFTC will, at the expense of Fund, provide a special
form of check containing the imprint of any device or
other matter desired by Fund. Said checks must,
however, be of a form and size convenient for use by
IFTC.

B. If Fund desires to include additional printed matter,
financial statements, etc., with the dividend checks,
the same will be furnished IFTC within a reasonable
time prior to the date of mailing of the dividend
checks, at the expense of Fund.

C. If Fund wants its distributions mailed in any special
form of envelopes, sufficient supply of the same will
be furnished to IFTC but the size and form of said
envelopes will be subject to the approval of IFTC. If
stamped envelopes are used, they must be furnished by
Fund; or if postage stamps are to be affixed to the
envelopes, the stamps or the cash necessary for such
stamps must be furnished by Fund.

D. IFTC will maintain one or more deposit accounts as
Agent for Fund, into which the funds for payment of
dividends, distributions, redemptions or other
disbursements provided for hereunder will be deposited,
and against which checks will be drawn.

<PAGE> 12

E. IFTC is authorized and directed to stop payment of
checks theretofore issued hereuner, but not presented
for payment, when the payees thereof allege either that
they have not received the checks or that such checks
have been mislaid, lost, stolen, destroyed or through
no fault of theirs, are otherwise beyond their control,
and cannot be produced by them for presentation and
collection, and, to issue and deliver duplicate checks
in replacement thereof.

20. Termination of Agreement.

A. This Agreement may be terminated by either party upon
receipt sixty (60) days prior written notice from the
other party.

B. Fund, in addition to any other rights and remedies,
shall have the right to terminate this Agreement
forthwith upon the occurrence at any time of any of the
following events:

(1) Any interruption or cessation of operations by
IFTC or its assigns which materially interferes
with the business operation of Fund;

(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its assigns;

(3) Any merger, consolidation or sale of substantially
all the assets of IFTC or its assigns;

(4) The acquisition of a controlling interest in IFTC
or its assigns, by any broker, dealer, investment
adviser or investment company except as may
presently exist; or

(5) Failure by IFTC or its assigns to perform its
duties in accordance with the Agreement, which
failure materially adversely affects the business
operations of Fund and which failure continues for
thirty (30) days after written notice from Fund.

C. If at any time this Agreement will be terminated by
Fund pursuant to clause (1), (2) or (5) of Section
20.B., Fund will have and is hereby granted the right,
at its option, to use or cause its agents, employees or
independent contractors to use, for as long as Fund
deems necessary for its own operations, and no other,
and without payment of any compensation or
reimbursement to IFTC, IFTC's system including all of
the programs, manuals and other materials and
information necessary to operate the system.

<PAGE> 13

D. In the event of termination, Fund will promptly pay
IFTC all amounts due to IFTC hereunder.

21. Assignment.

A. Except for the assignment of responsibilities, which
shall be on a form approved by Fund, neither this
Agreement nor any rights or obligations hereunder may
be assigned by IFTC without the written consent of
Funds provided, however, no assignment will receive
IFTC of any of its obligations hereunder.

B. This Agreement will inure to the benefit of and be
binding upon the parties and their respective
successors and assigns.

22. Confidentiality.

A. IFTC agrees that, except as provided in the last
sentence of Section 18.J hereof, or as otherwise
required by law, IFTC will keep confidential all
records of and information in its possession relating
to Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the
request or with the consent of Fund.

B. Fund agrees that subject to Section 20.C. and except
as otherwise required by law, Fund will keep
confidential all financial statements and other
financial records (other than statements and records
relating solely to Fund's business dealings with IFTC)
and all manuals, systems and other technical
information and data, not publicly disclosed, relating
to IFTC's operations and programs furnished to it by
IFTC pursuant to this Agreement and will not disclose
the same to any person except at the request or with
the consent of IFTC.

23. Survival of Representations and Warranties.

All representations and warranties by either party herein
contained will survive the execution and delivery of this
Agreement.

24. Miscellaneous.

A. This Agreement is executed and delivered in the State
of Missouri and shall be governed by the laws of said
state (except as to Section 24.I hereof which shall be
governed by the laws of The Commonwealth of
Massachusetts).

B. All the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of, and be

<PAGE> 14

enforceable by the respective successor and assigns of
of the parties hereto.

C. No provisions of this Agreement may be amended or
modified, in any manner except by a written agreement
properly authorized and executed by both parties
hereto.

D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
limit any of the provisions hereof or otherwise affect
their construction or effect.

E. This Agreement shall become effective at the close of
business on the date hereof.

F. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one
and the same instrument.

G. In any part, term or provision of this Agreement is
held by the courts to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be
affected, and the rights and obligations of the parties
shall be construed and enforced as if the Agreement did
not contain the particular part, term or provision held
to be illegal or invalid.

H. This Agreement may not be assigned by either party
without prior written consent of the other party.

I. All parties hereto are expressly put on notice of the
Kemper Investors Fund Trust Agreement and Declaration
of Trust dated and all amendments thereto, all of
which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein.
This Agreement has been executed by and on behalf of
Fund by its representatives as such representatives and
not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but
are binding upon only the assets and property of the
Fund. With respect to any claim by Investors Fiduciary
Trust Company for recovery of that portion of the
compensation and expenses (or any other liability of
Fund arising hereunder) allocated to a particular
Portfolio, whether in accordance with the express terms
hereof or otherwise, Investors Fiduciary Trust Company
shall have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no

<PAGE> 15

recourse against the assets of of any other Portfolio
for such purpose.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

KEMPER INVESTORS FUND

By /s/ Charles M. Kierscht
--------------------------------
Title: President

ATTEST:

/s/ David F. Dierenfeldt
- ------------------------------
Title: Assistant Secretary

INVESTORS FIDUCIARY TRUST COMPANY

By /s/ Larry W. Rinne
--------------------------------
Title: President

ATTEST:

/s/ Cheryl Naegler
- ------------------------------
Title: Asst. Secretary

<PAGE> 16

EXHIBIT A

The Fund will obtain requisite registration as necessary, to
offer its shares in all states, including the District of
Columbia.

<PAGE> 17

EXHIBIT B

IFTC INSURANCE COVERAGE

Insurance coverages maintained by IFTC effective the date of this
Agreement.

DESCRIPTION OF POLICY:

Brokers Blanket Bond, Standard Form 14

Covering losses caused by dishonesty of employees,
physical loss of securities on or outside of premises
while in possession of authorized person, loss caused
by forgery or alteration of checks or similar
instruments.

Coverage: $90,000,000

Errors and Omissions Insurance

Covering replacement of destroyed records and computer
errors and omissions.

Coverage: $10,000,000

Special Forgery Bond

Covering losses through forgery or alteration of checks
or drafts of customers processed by insured but drawn
on or against them.

Coverage: $500,000

Mail Insurance (applies to all full service operations)

Provides indemnity for securities lost in the mails

Coverage: $10,000,000 non-negotiable securities
mailed to domestic locations via
registered mail.
$100,000,000 non-negotiable securities
mailed to domestic locations via
first-class or certified mail.
$1,000,000 non-negotiable securities
mailed to foreign locations via
registered mail.
$1,000,000 negotiable securities mailed
to all locations via registered mail.

<PAGE> 1
EXHIBIT 99.B11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" and "Experts" and to the use of our report dated February 3, 1995
in the Registration Statement (Form N-1A) and its incorporation by reference in
the related prospectus of the Kemper Investors Fund, filed with the Securities
and Exchange Commission in this Post-Effective Amendment No. 14 to the
Registration Statement under the Securities Act of 1933 (File No. 33-11802) and
in this Amendment No. 15 to the Registration Statement under the Investment
Company Act of 1940 (File No. 811-5002).

/s/ ERNST & YOUNG LLP

Chicago, Illinois
April 25, 1995

<PAGE> 1
EXHIBIT 99.B16

KEMPER CORPORATION ORGANIZATION CHART 1-Jan-95
Percentages reflect direct common
Kemper Corporation stock ownership, except as noted.

96.85%

Kemper Financial Companies, Inc. *(1)

Kemper Financial Services, Inc. *(2) & *(3) 100% 100% Kemper Securities Holdings, Inc.

10% BSN Gestion S.A. (Spain) 100% Bateman Eichler, Hill Richards, Inc. (dormant)

10% BSN Gestion de Patrimonios, S.A. (Spain) 100% Blunt Ellis & Loewi, Inc. (dormant)

10% BSN Gestion de Pensiones, S.A. (Spain) 100% Boettcher & Company, Inc. (dormant)

15.6% Dimensional Fund Advisers, Inc. *(3) 100% Lovett Underwood Neuhaus & Webb, Inc.
(dormant)

50% LFTC Holdings, Inc. 100% Prescott, Ball & Turben, Inc. (dormant)

100% Investors Fiduciary Trust Company 100% Kemper Securities, Inc. *(2) & *(3)

95.9% INVEST Financial Corporation Holding Company *(5) 100% Kemper Clearing Corp. *(2) & *(5)

100% INVEST Financial Corporation *(2) & *(3) 100% Ross, Williams & Michaels, Inc.
(dormant)

100% INVEST Financial Corporation Insurance 100% Beta Systems, Inc.
Corporation of Delaware
100% Kemper Asset Leasing Corp.
98% INVEST Financial Corporation
Insurance Agency Inc. of Ohio 100% Kemper Mortgage Group, Inc.

100% INVEST Financial Corporation 100% Gateway Mortgage Acceptance Corporation
Insurance Agency Inc. *(7)

100% Kemper Advisors Inc. *(3) 100% KSI Fund Management, Inc.

100% Kemper Distributors, Inc. *(2) 100% KSGRE, Inc.

100% Kemper Investment Management Company 100% Bateman Eichler, Hill Richards Realty
Limited (England) *(3) & *(8) Services, Inc.

100% Bateman Eichler, Hill Richards Housing
Investors, Inc.

100% Kemper Sales Company *(2) 100% Bateman Eichler, Hill Richards Realty Co.,
Incorporated

100% Kemper Service Company 100% B&C Coolidge Municipal Leasing Corporation

100% Supervised Service Company, Inc. 100% Boettcher & Company of Nevada, Inc.

100% Kemper Asset Management Company *(3) 100% BPL Holdings, Inc.

10% Masterlink Securities Investment Trust Enterprises 100% Boettcher FTZ Building, Inc.

100% Selected Financial Services, Inc. 100% Seven Sisters Corp.

100% Federal Kemper Life Assurance Company *(6) 100% Loewi Financial Services, Inc.

Kemper Investors Life Insurance Company *(3) 100% 100% Prescott Acquisition Corp.

100% Investors Brokerage Services, Inc. *(2) 100% Carnegie Administration Corp.

100% Investors Brokerage Services Insurance Agency, Inc. 100% BJVC Real Estate Corporation

100% Investors Brokerage Services Insurance Agency, Inc. 100% Prescott Realty Services, Inc.
of Texas *(9)

85.8% Galaxy Offshore, Inc. *(6) 100% Prescott Polaris, Inc.

KFC Portfolio Corp. *(10) 100% 100% RVI Properties, Inc.

100% Kemper Asset Holdings, Inc. 100% Kemper Structured Municipal Assets, Inc.

100% Kemper International Management, Inc. *(3) 100% KSI Insurance Agency, Inc. *11

100% Kemper Portfolio Corp. *(10) 75% KSI Insurance Agency, Inc. of Ohio *(4)

50% Kemper Real Estate Management Company *(10) 100% KSI Insurance Agency, Inc. of Texas *(9)

100% Kemperco, Inc. (Dormant)

Mutual Company:

Fidelity Life Association,
A Mutual Legal Reserve Company *(10)

</TABLE>

*(1) Percentage shown on a fully converted basis. Kemper Corporation presently
owns approximately 99.9% of the common stock of Kemper Financial
Companies, Inc. ("KFC"). Certain employees of KFC and its subsidiaries
directly or beneficially own the remaining approximately 0.1% of the
common stock plus securities convertible into or exercisable for
approximately 3.15% of the common stock on a fully converted basis.
*(2) Registered broker-dealer.
*(3) Registered investment advisor.
*(4) Kemper Securities Holdings, Inc. also owns 100% of the preferred stock of
KSI Insurance Agency, Inc. of Ohio.
*(5) Kemper Clearing Corp. is 99.1% directly owned by Kemper Securities, Inc.
INVEST Financial Corporation Holding Company owns the remaining 0.9%.
*(6) Federal Kemper Life Assurance Company owns 14.2% of Galaxy Offshore, Inc.
*(7) There are 11 insurance agency corporate subsidiaries of the Delaware
INVEST subsidiary, namely: (1) of Alabama, (2) of Connecticut, (3) of
Georgia, (4) of Illinois, (5) of Maryland, (6) of Massachusetts, (7) of
Montana,, (8) of Nevada, (9) of New Mexico, (10) of South Carolina, and
(11) of Wyoming. Three additional INVEST insurance agency corporate
subsidiaries, INVEST Financial Corporation Insurance Inc. (1) PA of
Mississippi, (2) of Oklahoma, and (3) of Texas are owned by an employee
under contract with INVEST.
*(8) Kemper Sales Company owns 1 share of Kemper Investment Management Company
Limited (England).
*(9) 100% owned by a Texas resident under contract with the Kemper company
shown on this chart.
*(10) See Kemper Corporation Real Estate Companies Organization Chart for a
listing of real estate subsidiaries.
*(11) There are five additional insurance agency subsidiaries of Kemper
Securities Holdings, Inc., namely: (1) of Colorado, (2) of Hawaii,
(3) of Nevada, (4) of Utah, and (5) of Wyoming.

<PAGE> 2
<TABLE>
<S><C>
KEMPER CORPORATION 1-Jan-95
REAL ESTATE COMPANIES*(1) Percentages reflect direct common
ORGANIZATION CHART stock ownership, except as noted.

Lumbermens Mutual Casualty Company
3.9%
Kemper Corporation

Kemper Portfolio Corp. 100% 100% Federal Kemper Life Assurance Company

100% FKLA Realty Corporation 100% 100% FKLA Loire Court, Inc.

50% Kemper Real Estate Management Company 50% 96.85% Kemper Financial Companies, Inc. *(2)

50% KLMLP, L.P. *(6) 50% 100% Kemper Investors Life Insurance Company

100.0% Kemper/Lumbermens Properties, Inc. 100% KI Aaron Rents, Inc.

100% Ardenwood Financial Corporation 100% KI Arnold Industrial, Inc.

100% Camelot Financial Corporation 100% KI Canyon Park, Inc.

100% Crow Canyon, Inc. 100% KI Dublin Boulevard, Inc.

100% Hawaii Kai Development Company 100% KI LaFiesta Square, Inc.

100% East Honolulu Community 100% KI Monterey Research, Inc.
Services, Inc.
100% KI Olive Street, Inc.
100% Kacor Gateway, Inc.
100% KI Sutter Street Inc.
100% KRDC, Inc.
100% KI Thornton Boulevard, Inc.
100% Kacor Trust Deed
16.67% BBC Associates, Inc. *(3) 66.67%
100% Rancho and Industrial Property
Brokerage, Inc. (Dormant) 16.67% KAAL PGA Sales, Inc. *(3) 66.67%

100% Margarita Village Retirement 100% KFC Portfolio Corp.
Community, Inc.
100% Kemper Real Estate, Inc.
100% Mesa Homes
100% Kemper/Cymrot, Inc. *(4)
100% Mesa Homes Brokerage Co.
100% Kemper/Cymrot Management, Inc.
100% One Corporate Centre, Inc.
100% KILICO Realty Corporation
100% Pacific Homes, Inc.
50% KR Palm Plaza, Inc. *(4)
100% Palomar Triad, Inc.
50% Kemper/Prime Acquisition Fund, Inc.
100% Pine/Battery Properties, Inc.
50% K-P Enterprise Centers, Inc.
100% Rancho California, Inc.
100% KR Avondale Redmond, Inc.
100% Rancho Regional Shopping
Center, Inc. 100% KR Black Mountain, Inc.

100% Seattle Gateway, Inc. 100% KR Brannan Resources, Inc.

100% Sutter Street, Inc. 100% KR Clay Capital, Inc.

100% Time DC, Inc. 100% KR Cranbury, Inc.

100% Two Corporate Centre, Inc. 100% KR Delta Wetlands, Inc.

100% KR Gainesville, Inc.
Fidelity Life Association,
A Mutual Legal Reserve Company *(1) 100% KR Hotels, Inc.

100% FLA Realty Corporation *(5) 100% KR Lafayette Apartments, Inc.

100% FLA First Nationwide, Inc. 100% KR Lafeyette Bart, Inc.

100% FLA Plate Building, Inc. 100% KR Red Hill Associates, Inc.

100% KR Seagate/Gateway North, Inc.

100% KR Venture Way, Inc.

100% KR Walnut Creek, Inc.

100% KR 77 Fitness Center, Inc.

</TABLE>

*(1) Except as noted in *6 below, non-corporate (i.e. partnership) joint
venture real estate investments by subsidiaries of Kemper Corporation
and Fidelity Life Association are not shown, and other corporate and
partnership investments by Lumbermens Mutual Casualty Company and
its affiliates are not shown.
*(2) Percentage shown on a fully converted basis. Kemper Corporation
presently owns approximately 99.9% of the common stock of Kemper
Financial Companies, Inc. (KFC). Certain employees of KFC and its
subsidiaries directly or beneficially own the remaining approximately
0.1% of the common stock plus securities convertible into or exercisable
for approximately 3.15% of the common stock on a fully converted basis.
*(3) Lumbermens Mutual Casualty Company directly owns 16.67%; American
Motorists Insurance Company, a wholly owned subsidiary of Lumbermens,
owns 50%, and the remaining 16.67% is owned by American Manufacturers
Mutual Insurance Company.
*(4) KFC also owns 100% of the preferred stock of Kemper/Cymrot, Inc.
*(5) FLA Realty Corporation owns the remaining 50% of KR Palm Plaza, Inc.
*(6) KLMLP, L.P. is a Delaware limited partnership. Kemper Corporation's
indirect ownership of KLMLP, L.P. is as follows: 19.8% KILICO Realty
Corporation; 13.9% FKLA Realty Corporation; 1% Kemper Portfolio Corp.;
15% KFC Portfolio Corp.; 0.2% Kemper Investors Life Insurance Company;
and 0.1% Federal Kemper Life Assurance Company.

<PAGE> 1
EXHIBIT 99.B17

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

April 25, 1995

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Kemper Investors Fund

To The Commission:

We are counsel to the above-referenced investment company (the "Fund")
and as such have participated in the preparation and review of Post-Effective
Amendment No. 14 to the Fund's registration statement being filed pursuant to
Rule 485(b) under the Securities Act of 1933. In accordance with paragraph
(b)(4) of Rule 485, we hereby represent that such amendment does not contain
disclosures which would render it ineligible to become effective pursuant to
paragraph (b) thereof.

Very truly yours,

/s/ Vedder, Price, Kaufman & Kammholz

VEDDER, PRICE, KAUFMAN & KAMMHOLZ

COK:dfd

<PAGE> 1
EXHIBIT 99.B18

POWER OF ATTORNEY

The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as his attorney-in-fact to sign and file on his
behalf individually and in the capacity stated below such
registration statements, amendments, post-effective
amendments, exhibits, applications and other documents with
the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary in
connection with the public offering of shares of Kemper
Investors Fund.

Signature Title Date
--------- ----- ----

/s/ Stephen B. Timbers Trustee March 2, 1995
---------------------------

<PAGE> 2

POWER OF ATTORNEY

Signature Title Date
--------- ----- ----

/s/ Arthur R. Gottschalk Trustee March 2, 1995
---------------------------

<PAGE> 3

POWER OF ATTORNEY

Signature Title Date
--------- ----- ----

/s/ Frederick T. Kelsey Trustee March 2, 1995
--------------------------

<PAGE> 4

POWER OF ATTORNEY

Signature Title Date
--------- ----- ----

/s/ David B. Mathis Trustee March 2, 1995
--------------------------

<PAGE> 5

POWER OF ATTORNEY

Signature Title Date
--------- ----- ----

/s/ John B. Tingleff Trustee March 2, 1995
--------------------------

<PAGE> 6

POWER OF ATTORNEY

Signature Title Date
--------- ----- ----

/s/ John G. Weithers Trustee March 2, 1995
--------------------------

<ARTICLE> 6
<CIK> 0000810573
<NAME> KEMPER INVESTORS FUND
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 83,638
<INVESTMENTS-AT-VALUE> 83,638
<RECEIVABLES> 755
<ASSETS-OTHER> 49
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,442
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 621
<TOTAL-LIABILITIES> 621
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,821
<SHARES-COMMON-STOCK> 83,821
<SHARES-COMMON-PRIOR> 68,177
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 83,821
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,596
<OTHER-INCOME> 0
<EXPENSES-NET> (547)
<NET-INVESTMENT-INCOME> 4,049
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,049)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 218,865
<NUMBER-OF-SHARES-REDEEMED> (207,144)
<SHARES-REINVESTED> 3,923
<NET-CHANGE-IN-ASSETS> 15,644
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (512)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (547)
<AVERAGE-NET-ASSETS> 102,525
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .039
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.039)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000810573
<NAME> KEMPER INVESTORS FUND
<SERIES>
<NUMBER> 2
<NAME> TOTAL RETURN PORTFOLIO
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 573,416
<INVESTMENTS-AT-VALUE> 585,575
<RECEIVABLES> 10,195
<ASSETS-OTHER> 1,823
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 597,593
<PAYABLE-FOR-SECURITIES> 9,306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,693
<TOTAL-LIABILITIES> 10,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 580,149
<SHARES-COMMON-STOCK> 277,690
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21,265
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (26,979)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,159
<NET-ASSETS> 586,594
<DIVIDEND-INCOME> 6,307
<INTEREST-INCOME> 16,837
<OTHER-INCOME> 0
<EXPENSES-NET> (3,792)
<NET-INVESTMENT-INCOME> 19,352
<REALIZED-GAINS-CURRENT> (26,384)
<APPREC-INCREASE-CURRENT> (55,621)
<NET-CHANGE-FROM-OPS> (82,005)
<EQUALIZATION> 721
<DISTRIBUTIONS-OF-INCOME> (15,302)
<DISTRIBUTIONS-OF-GAINS> (43,357)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,759
<NUMBER-OF-SHARES-REDEEMED> (54,564)
<SHARES-REINVESTED> 27,538
<NET-CHANGE-IN-ASSETS> (7,093)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3,403)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (3,792)
<AVERAGE-NET-ASSETS> 619,418
<PER-SHARE-NAV-BEGIN> 2.586
<PER-SHARE-NII> .069
<PER-SHARE-GAIN-APPREC> (.313)
<PER-SHARE-DIVIDEND> (.060)
<PER-SHARE-DISTRIBUTIONS> (.170)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.112
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000810573
<NAME> KEMPER INVESTORS FUND-HIGH YIELD
<SERIES>
<NUMBER> 3
<NAME> HIGH YIELD
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 240,184
<INVESTMENTS-AT-VALUE> 224,046
<RECEIVABLES> 5,563
<ASSETS-OTHER> 541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 230,150
<PAYABLE-FOR-SECURITIES> 10,224
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 511
<TOTAL-LIABILITIES> 10,735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 237,402
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 18,280
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,130)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,138)
<NET-ASSETS> 219,415
<DIVIDEND-INCOME> 26
<INTEREST-INCOME> 22,444
<OTHER-INCOME> 0
<EXPENSES-NET> (1,448)
<NET-INVESTMENT-INCOME> 21,022
<REALIZED-GAINS-CURRENT> (6,998)
<APPREC-INCREASE-CURRENT> (19,015)
<NET-CHANGE-FROM-OPS> (4,991)
<EQUALIZATION> (1,390)
<DISTRIBUTIONS-OF-INCOME> (19,251)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14,549)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (1,329)
<INTEREST-EXPENSE> 0
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