<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1997
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
INVESTORS FUND SERIES
[KEMPER ANNUITIES LOGO]
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INVESTORS FUND SERIES
KEMPER MONEY MARKET PORTFOLIO
KEMPER TOTAL RETURN PORTFOLIO
KEMPER HIGH YIELD PORTFOLIO
KEMPER GROWTH PORTFOLIO
KEMPER GOVERNMENT SECURITIES PORTFOLIO
KEMPER INTERNATIONAL PORTFOLIO
KEMPER SMALL CAP GROWTH PORTFOLIO
KEMPER INVESTMENT GRADE BOND PORTFOLIO
KEMPER VALUE PORTFOLIO
KEMPER SMALL CAP VALUE PORTFOLIO
KEMPER VALUE+GROWTH PORTFOLIO
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER BLUE CHIP PORTFOLIO
KEMPER GLOBAL INCOME PORTFOLIO
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT, AS
STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT
ANY TIME, BASED ON MARKET AND OTHER CONDITIONS.
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ECONOMIC OVERVIEW
[ALLYN PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER
ANNUITIES. IT IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT
ORGANIZATIONS WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR
MUTUAL FUND INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND
CORPORATE CLIENTS, INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL
ACCOUNTS. IT IS ONE OF THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED
STATES.
DEAR CONTRACT HOLDER,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy relatively
low interest rates and low inflation. But the new year will be different in at
least two ways, both of which can be expected to have direct bearing on
investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even
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ECONOMIC OVERVIEW
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ECONOMIC GUIDEPOSTS
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Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (1/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.54 6.3 6.42 5.81
PRIME RATE(2) 8.5 8.5 8.25 8.25
INFLATION RATE(3)* 1.7 2.23 3.04 2.72
THE U.S. DOLLAR(4)* 10.43 7.32 4.59 -0.57
CAPITAL GOODS ORDERS(5)* 14.6 11.13 3.61 3.73
INDUSTRIAL PRODUCTION(5)* 5.95 4.69 5.19 1.58
EMPLOYMENT GROWTH(6) 2.74 2.09 2.2 1.74
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of December 31, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
deflation and pricing pressures change the U.S. economic climate. The only real
antidote is growth, and from now on growth is more likely to be found outside
the United States. Today to participate in the growth from global business you'd
need to be exposed to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
With that as an economic backdrop, we encourage you to read the following
detailed report of your Portfolio; including an interview with your Portfolio's
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ Maureen Allyn
MAUREEN ALLYN
CHIEF ECONOMIST, SCUDDER KEMPER INVESTMENTS, INC.
January 29, 1998
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MANAGEMENT SUMMARY
KEMPER MONEY MARKET PORTFOLIO
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During the past 12 months, we had an economy which showed continued, robust
growth but with minimal inflationary pressures. In fact, the Federal Reserve
Board (the "Fed") acted on their concern about the pace of growth in the economy
by eventually raising interest rates in March of 1997. Since it is extremely
rare that you get an isolated movement in Fed policy, for example, just a one
time tightening or easing, the expectation was that it would be followed with
incremental interest rate increases. This did not occur because the principal
measures of inflation, the consumer and producer price indices, were measuring
benign levels of inflation. Additionally, in late October several financial
markets in the Far East took a downturn which diminished the U.S. economy's
prospects for 1998. Furthermore, investors flocked to the safety of U.S.
Treasuries which meant lower long-term interest rates.
Based on our outlook for much of the past year, we expected that short-term
interest rates were going to remain flat or rise. Because of this we kept a
conservatively shorter maturity policy throughout a large portion of the year.
Overall, we had excellent performance. We were correct in our judgment about
interest rates early in the year and by keeping short average maturities
generally throughout the year, we were able to capitalize on market
opportunities as they arose. In the fourth quarter of 1997, we favored longer
maturities in order to take advantage of the upward bias in short-term rates
which occurred at year end.
Looking forward to the first quarter 1998, we feel the Fed will remain on the
sidelines with rate stability similar to that of what we've seen recently. The
developing impact of Asian financial conditions on the continuing pace of U.S.
economic growth and tight domestic labor markets are the issues to watch in
early 1998.
Frank Rachwalski
Portfolio Manager
December 31, 1997
KEMPER TOTAL RETURN PORTFOLIO
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Overall, it was a good period for equity markets, although it was more
volatile than in recent years. In broad terms, large company stocks performed
the best early in the year and in the fourth quarter, while smaller stocks
performed the best during the middle of the year. We've gotten used to kinder,
gentler markets over the past 36 months or so, with steep moves only occurring
in an upward direction. That changed in 1997, but despite bouts of panicky
selling and "the party's over" rhetoric, the market finished ahead. The market
set a record with three consecutive years of 20 percent gains. If investors
didn't get spooked, they ended up with solid gains, which highlights the
importance of maintaining a long-term focus.
We are "growth at the right price" investors. We look at price-to-earnings
ratios versus historical norms for given stocks or groups of stocks, make a
judgment as to how well they can grow earnings in the future, and then determine
if the stock's current price represents a good value. Ideally, we seek companies
that have good long-term prospects, but whose prices are down for a short-term
reason.
The uncertainty created by the Asian currency problems in October prompted
many investors to move to high quality growth stocks, particularly in the health
care area, and pay just about any price to do so. We, on the other hand, buy
those types of stocks only when we believe the price is right. Consequently, we
had only core positions in some of the big-name growth stocks that continued to
gain regardless of the fundamentals. Additionally, our aggressive positioning,
which had worked for us for most of the fiscal year, worked against us in
October.
We had a large weighting in financial stocks, and they had a strong run this
year despite a difficult October. We reduced our position in the financials
prior to the difficulties in the money center banks, but are waiting for a
point to re-enter. Another area where we saw value was the telecommunication
sector, specifically in the fourth quarter as AT&T had a major resurgence.
Overall, we moved aggressively in and out of the technology sector as
valuations dictated. After they corrected in April, we increased our weighting
and enjoyed good performance as a result. We only had a neutral weighting in
tech stocks going into October when they were dumped across the board. We used
the opportunity to boost our weighting again given the good values we're seeing
for solid companies.
Bonds have consistently made up about 35 percent of the portfolio during the
fiscal year. Around October, we boosted our weighting in government bonds, as a
percentage of the total, so that they are about 65 percent of the bond position,
up from 50 percent. That was to help increase liquidity as well as dampen
volatility. The majority of our bond assets not invested in governments has been
in high yield bonds to help provide some income.
We're confident that we'll break into new highs in 1998. Of course there will
be bouts of uncertainty and turbulence, and future market conditions can not be
predicted with certainty, but we continue to enjoy relatively little upward
pressure on interest rates, plus modest economic expansion, solid earnings
growth and no inflation to speak of. With these factors in place, the
environment remains very positive for both stocks and bonds. We think that
investors who can maintain a long-term focus should continue to benefit.
Gary Langbaum
Maureen Lentz
Portfolio Co-Managers
December 31, 1997
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MANAGEMENT SUMMARY
KEMPER HIGH YIELD PORTFOLIO
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It was another strong year for high yield bonds, but we began to see some
intermittent bouts of volatility enter the market. High yield supply grew
phenomenally, reaching record levels, and was met with strong demand. Much of
the new supply, however, was lower quality issues (B- or lower). Since yield
spreads in the market remained very tight, investors looked to these lower
quality issues for higher rates of return.
Strong corporate earnings, a strong economy with benign levels of inflation,
and a low level of high yield defaults created a strong high yield market and
fueled demand for lower quality, high yield bonds, in particular. For the most
part, lower-quality issues outperformed B and BB-rated high yield bonds during
the year. However, as economic and market events impacted the high yield market,
these lower-rated issues were hurt more than the higher quality bonds.
In March, the Fed increased short-term rates, which in-turn initiated a sharp
sell-off in the securities markets and a widening of high yield spreads. The
high yield market was hit harder than it might have been if Federal Reserve
Board Chairman Alan Greenspan had not expressed his concern about the market's
bull run. The high yield bonds that experienced the greatest losses were the
riskier issues--those C-rated and lower. However, the impact of Greenspan's
remarks and the subsequent rate increase were short-lived and relatively
minimal. The high yield market, along with the other securities markets, were
well into recovery as quickly as April.
We managed the Portfolio defensively early in 1997 because we believed that
the economy was gaining momentum and that the Fed would most likely tighten
interest rates. We reduced the level of BB-rated bonds (the highest quality
securities that are still considered to be high yield) and maintained a similar
composition for the remainder of the year.
In addition to altering the credit quality of the portfolio, we were
underweighted in deferred interest bonds. These securities have a longer
duration and tend to perform poorly in a rising interest rate environment. The
shorter duration that resulted from the sale of these deferred interest bonds
helped the Portfolio's performance as interest rates increased in March.
The Portfolio is still overweighted in cyclical holdings because of their
long-term earnings potential. However, we continued to move away from issues of
companies that we considered to be deeply cyclical and focused on adding issues
from companies that are less cyclical, or have some degree of independence from
changes in the overall U.S. economy.
We're quite optimistic about the long-term outlook for the high yield market.
We anticipate a pick-up in defaults as some of the lower-quality new issues
begin to age. However, we believe that the current economic environment combined
with the low rate of defaults are both positive indicators. We will continue to
focus on adding issues from what we believe are stable, fundamentally strong
companies.
Michael McNamara
Harry Resis
Portfolio Co-Managers
December 31, 1997
KEMPER GROWTH PORTFOLIO
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Overall, it was a great period for stocks, particularly large company stocks.
Through most of the year, stocks benefited from a near idyllic
environment--solid economic growth, rising corporate profits, low interest rates
and virtually non-existent inflation. You couldn't ask for a much better climate
for business.
In absolute terms, the Portfolio did well. In comparison to the market,
however, our performance was disappointing. An overweighting in mid-cap stocks
in the first quarter was largely responsible for a slow start for the Portfolio
when compared to the S&P 500, and we weren't fully able to make up the
difference by the end of the year. However, we're encouraged because the changes
we made early in the year contributed to much-improved performance later.
These changes were almost entirely the result of our investment philosophy of
"growth at the right price," or "GARP." As GARP investors, we look for high
quality, solidly-managed companies with projected growth rates that are greater
than the overall market, and we try to buy them as cheaply as possible. Ideally,
we seek stocks that are mispriced due to very short-term fundamental problems or
negative market psychology. In short, we try to identify stocks of high quality
companies that are down for the wrong reasons.
We reduced our mid-cap stock exposure in favor of large cap stocks, which are
generally higher-quality companies and offer more predictable earnings growth.
At the same time, in an effort to diversify, we concentrated on three major
areas: health care, finance and technology. Health care purchases were
concentrated in pharmaceutical companies, and in finance we diversified into
banks, insurance companies and financial firms.
In April, technology stocks came under tremendous pressure because of concern
over earnings outlooks.
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MANAGEMENT SUMMARY
We believed a lot of this was overdone, so we took a major position in
high-quality technology companies. Our technology weighting helped the Portfolio
perform very well through the summer as these stocks rebounded.
Currently, there are a number of reasons for continued optimism regarding
stocks. Our economy is solid, we've got good income and employment growth,
consumer sentiment is good and there seems little evidence that interest rates
will increase dramatically. So all the things you need for good consumption are
there. We've therefore been focusing on retailers.
American businesses are experiencing good corporate growth and profitability.
Also, it seems that every Board of Directors in the U.S. is concerned with
adding shareholder value. They're increasing dividends, buying back shares,
spinning off divisions . . . even the politicians are getting into the act with
a balanced budget agreement and tax reform. It's a very compelling environment
for investors.
The only sticky point is valuations. They are relatively high taken as a
whole, and that may lead to increased volatility as investors look to get the
most potential bang from their investment buck. We believe volatility helps
provide us with opportunities to buy good companies at good values and help
control risk by buying high quality companies when their prices are low.
Therefore, while volatility is unsettling, and while no management strategy can
be guaranteed, our approach is designed to make volatility pay off for
investors.
Steven H. Reynolds
Portfolio Manager
December 31, 1997
KEMPER GOVERNMENT SECURITIES PORTFOLIO
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Government bonds, and in particular mortgage securities, performed well during
the year. The Fed raised interest rates but the impact of the tightening on the
market was brief and relatively minimal.
Early in 1997, strong economic reports surfaced and Federal Reserve Board
Chairman Alan Greenspan reiterated his concern about the values of securities
and about the potential for a rise in wage inflation. We began preparing for a
possible rate hike in January, by shortening the Portfolio's duration to below
that of its peer group average, sold Treasury notes and purchased GNMA
mortgages. We believe our shortened duration and increase in mortgage holdings
supported the Portfolio's performance through the Fed's tightening.
While economic growth remained somewhat strong, even after the Fed tightening
in March, inflation remained uncharacteristically low. The government market
along with the broader fixed-income market began recouping losses experienced
with the Fed's interest rate increase as inflation fears continued to be
unconfirmed. As economic growth slowed and the need for further Fed tightening
diminished, the market and the Portfolio rebounded very quickly and the
Portfolio enjoyed positive returns.
By April the markets were in recovery from the Fed's tightening and inflation
remained relatively benign despite continuing growth in the economy. To take
advantage of this environment, we began adding Treasuries back into the
portfolio. For the remainder of the year, market yields fluctuated with the
release of varying economic data but generally trended lower. Inflation never
became problematic and bonds performed positively.
We are cautious about the prospects for the market and have reduced the
duration of the Portfolio to reflect this caution. The current economic
environment--benign inflation and moderate growth--is a particularly good one
for bonds, but low bond yields currently reflect these conditions, warranting a
more neutral market posture. We also believe that within a global context, U.S.
Government bonds and mortgage securities are a reasonably priced asset class and
may do well on a relative basis.
Richard Vandenberg
Portfolio Manager
December 31, 1997
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MANAGEMENT SUMMARY
KEMPER INTERNATIONAL PORTFOLIO
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In Europe, we saw the continuation of modest, but consistent economic
expansion while Japan saw little forward progress and in Southeast Asia,
economic growth was stalled as most countries experienced currency depreciation
on higher interest rates. Latin American economies were generally positive
however, as domestic markets continued to recover from the downturn of two years
ago.
Within the economic environment that I described, we emphasized those markets
and market segments that had the highest growth potential and the least amount
of economic, political or valuation risk. With this criteria in mind, the
Portfolio was consistently overweighted in Europe, increasingly underweighted in
Japan and, especially during the second half of the fiscal year, meaningfully
underweighted in Southeast Asia. Where we did continue to invest in Asia, we
stayed focused on high-quality companies that had some ability to weather the
storms which started in those markets during the summer months and came to a
head in late October.
In Europe, our focus on economies and sectors benefiting from the lower
interest rates was an important theme. The Spanish and Italian markets offered
very good value as those economies restructured to meet the European Monetary
Union (EMU) requirements. The Netherlands, where we found companies that
combined strong management and consistent earnings, was also an attractive
market. In Latin America we focused primarily on Mexico where we selected
companies with broad exposure to the domestic market that are playing a strong
role in the country's economic recovery. In general, we have emphasized
companies that have demonstrated an ability to compete globally and that
generate high relative returns on equity and capital in their industries. We
have also worked to identify mid-cap companies that have strong local
franchises. Utilizing a proprietary market valuation model we detected an above
average level of risk in the Asian markets early in the new year. As a result,
we were consistently underweighted in the Asian markets that saw such large
drops and plan to be very conservative with our investments in the region.
Our hedging during the period was a net positive, but more so during the first
half of the fiscal year. We had a larger hedge during the first half when the
dollar was exerting most of its strength. We began cutting down the size of the
hedge during the second half of the year and finally eliminated the hedge in
October.
We continue to think that growth in the western economies will be good,
although there may be some modest trimming as a result of the problems in Asia.
We think that monetary policies will continue to support economic expansion and
that interest rates in a low inflationary environment will continue to underpin
above average equity valuations. Companies should be able to generate consistent
growth in earnings and attractive returns on capital going forward due to this
positive economic environment.
We don't see any early solutions to the fundamental problems in Japan and
Southeast Asia but we do think combined world financial support and economic
growth elsewhere will eventually lead to a recovery in that region.
Dennis Ferro
Portfolio Manager
December 31, 1997
KEMPER SMALL CAP GROWTH PORTFOLIO
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After three excellent years of performance in the Kemper Small Cap Growth
Portfolio, we continue to maintain our disciplined focus on timeliness,
fundamentals, and valuation as we head into 1998. The current interest rate
environment combined with potential earnings problems related to the Asian
crisis have led us to maintain a focus on industries that exhibit predictable
earnings growth. We continue to find timely stocks with good fundamentals and
appreciation potential in the broadcasting, consumer, finance, and healthcare
sectors. These sectors should benefit from a moderate growth, low interest rate
economic scenario.
Changes to the Portfolio over the past couple months include trimming our
exposure to the technology sector, which helped performance in the fourth
quarter of 1997. Technology companies tend to do a considerable amount of
business in Asia, whereby downward earnings revisions may impede stock price
performance over the near term. However, we expect to find buying opportunities
in this group at somewhat lower prices later in the year.
Other noteworthy changes in the Portfolio include adding to our broadcast and
finance holdings. Broadcast holdings such as Jacor Communications, Hearst-Argyle
Television, and Outdoor Systems should benefit from the strong advertising
environment in the radio, television, and billboard industries. Financial
holdings, in particular savings and loans and REIT's, could do particularly well
in the current environment. Major holdings here include First Union Real Estate
Investments, People's Heritage Financial Group, Spieker Properties, and
Commercial Federal.
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MANAGEMENT SUMMARY
Small company stocks have trailed their large company counterparts over the
past couple years and while it is hard to predict if or when this trend will
reverse, we continue to find that small companies can offer greater earnings
growth at lower valuations. This combination has historically made for a good
investment climate for investors on a risk versus reward basis, and in this
pursuit, we intend to maintain our disciplined investment approach in the Kemper
Small Cap Growth Portfolio in 1998 and beyond.
David Burshtan
Kurt Stalzer
Portfolio Co-Managers
December 31, 1997
KEMPER INVESTMENT GRADE BOND PORTFOLIO
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The Portfolio performed relatively well given the significant market and
economic events that occurred during the year. Performance was temporarily
hindered by the Federal Reserve Board's increase in short-term interest rates
near the end of March, but from May through September, the Portfolio performed
well. In late October, there was a global equity market sell-off that impacted
the investment grade corporate market. The Portfolio struggled with the market,
and gave back some of its earlier gains. Despite the fact that the Fed raised
interest rates in late March and the economic crisis in Southeast Asia spawned a
global equity market sell-off on October 27th, on a year over year basis
corporate bonds gained.
Federal Reserve Board Chairman Alan Greenspan's implied threat in early
October that the Fed was prepared to raise interest rates before the end of 1997
was squashed in late October when several markets in the Far East took a
downturn. This sell-off was dramatic and initiated declines in the corporate
bond market as well. Investors flocked to U.S. Treasuries, which rallied through
the end of October.
As U.S. economic growth continued after the first quarter, and it was clear
that inflation was not becoming a problem, we extended the Portfolio's duration
by redirecting the higher levels of cash from earlier in the year back into
corporate bond and Treasury investments. Both of these asset classes performed
very well into October as market yields moved lower in response to the positive
economic environment.
In early October, we began to reduce our exposure to our most illiquid and
volatile corporate assets because some of these issues had significant foreign
exposure. This reduction in foreign exposure helped the Portfolio when the
global market decline occurred, while our larger allocation to Treasuries help
offset losses in the corporate sector.
Moving forward, we are optimistic about the prospects for investment-grade
bonds. The fundamentals of the market remain healthy: corporate earnings are
strong, the economy is robust and inflation is negligible. Corporate bonds
shrugged off the impact of the March rate hike and rallied for much of the year.
We anticipate that investment grade corporate bonds will be well into recovery
from the October decline by the end of the year, and we believe the Portfolio is
well positioned to benefit from such a recovery.
Robert Cessine
Portfolio Manager
December 31, 1997
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MANAGEMENT SUMMARY
KEMPER VALUE PORTFOLIO
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Overall in 1997, the Portfolio's holdings of financial stocks, particularly
regional banks, specialty financial services and insurance companies enhanced
performance this year, as did stocks in the energy area and selected cyclical
industries. In addition, the volatile nature of the market in the second half of
the Portfolio's fiscal year provided us excellent opportunities to sell a number
of stocks at profits while buying others at attractive prices. We were well
positioned due to our diversification and were prepared so that a correction in
one sector or stock would not have a tremendous impact on the Portfolio. Also,
we believe low Price/Earnings ratio (P/E) stocks provide the opportunity to
perform better than higher P/E stocks in volatile markets.
The market was led in 1997 by the Blue Chip "Nifty Fifty" stocks. Most of the
"Nifty Fifty" stocks, which are the most favored by institutions at this time,
have high P/Es. Because we are value investors, we don't own them and therefore
haven't participated in their performance. The upside to a "Nifty Fifty" market
is in essence that most stocks are not as high as the averages might suggest.
Therefore, there are values available to patient investors. As contrarian value
investors, we continue to focus our research efforts on laggard stocks and
groups currently down in price due to short-term fundamentals or other problems
perceived by the market where our research suggests that over time fundamentals
will improve.
The market has become increasingly intolerant of fundamental disappointments,
such as lower-than-expected earnings, which is a marked change from a year ago.
Investors have become a little more risk-averse in this environment. That's good
for us because it increases our opportunities to buy good stocks at value
prices. Moreover, we have been fortunate in that the portfolio has not held
securities that have suffered serious price declines.
Although the securities held have changed, the characteristics of the
Portfolio have not. The stocks we own have dividend yields greater than the
market, P/Es lower than the market and earnings growing faster than the market.
The last half of the year, with its volatility, provided us an excellent
opportunity to sell stocks at advantageous prices. What we sold during the time
were stocks that we thought had realized their potential or where valuation
and/or fundamental risks had increased.
I mentioned earlier that financial stocks, particularly regional money center
banks and specialty financial services stocks, did very well for the Portfolio
this year. General Re Corp. is one that performed well. General Electric,
Bristol-Meyers Squibb, and Ford Motor Co. also had fundamentals that came
through better than expected and have performed better than the market. Exxon
Corp. is one of our favorite energy stocks that did well for the Portfolio this
year. We prepared this Portfolio for the volatility we expected in '97, and
while some stocks underperformed, the Portfolio did not experience substantial
losses in any of its holdings.
During the year, we increased the Portfolio's interest in stocks we
particularly liked, such as Aluminum Company of America (ALCOA), Xerox, AMP
Inc., Chase Manhattan Bank and American Home Products. Additionally, Texaco was
added as a new position during 1997. The combination we look for is companies
whose earnings and dividends are rising faster than the market, but whose prices
are at a discount.
We like the diversification of the Portfolio and the changes that were made in
recent months. We'll continue to seek out excellent value opportunities,
adhering to the discipline of conservative, risk-adverse, value-oriented,
contrarian investing. To this end we have developed a long watch list.
Tom Sassi
Portfolio Manager
December 31, 1997
10
<PAGE> 11
MANAGEMENT SUMMARY
KEMPER SMALL CAP VALUE PORTFOLIO
- ------------------------------------
Overall, 1997 turned out to be more volatile than recent years. On several
days the Dow Jones Industrial Average gained or declined more than 100 points.
However, the market's volatility helped the Portfolio in the sense that it
created opportunities for value investors like us. We look for stocks that are
out of favor with investors because the market underestimates their value or
overlooks their potential. When the market declines, that simply broadens the
pool of undervalued stocks we can choose from. In addition, the prices of
underappreciated stocks tend to be lower than those of in-demand stocks.
Therefore, when the market declines, although there are no guarantees, our
stocks are apt to fall less because their prices are already depressed.
From a strategic standpoint, we made a number of moves to capitalize on
opportunities in undervalued sectors. For example, we increased our holdings in
financial stocks, where valuations remain attractive. We bought several
sub-prime mortgage companies--companies that provide mortgages to people with
less than perfect credit ratings. As always, we sought companies with solid
fundamentals, good growth potential and attractive valuations.
Technology was another sector that presented opportunities. Technology stocks
declined due to earnings concerns in the spring, rallied strongly throughout the
summer, and sold off again in October when economic problems in Asia came to the
fore. They hindered performance at the end of the year even though we were
underweighted in the sector, but we are looking at them as an opportunity longer
term. We believe we're in good stocks and the market is simply not realizing
their potential right now, which fits right into our value philosophy. If they
continue to decline, we should be able to increase our holdings in strong,
competitive technology companies at value prices.
As for 1998, we'll continue to apply our value strategy in our selection of
stocks. We don't foresee huge changes to our sector allocations. Rather, we'll
use volatility within each sector as an opportunity to execute our strategy of
buying inexpensive stocks and selling them when they become fairly valued. As
usual, valuations will play a bigger part in our stock selection than will
economic forecasts or interest rate trends.
There are a couple of reasons why we believe small caps will be the place to
be in 1998. First, although a lot of money is currently pouring into the S&P 500
as investors emphasize the relative safety of big cap stocks, small caps tend to
have far less exposure to the Far East than large caps. Also, large cap stocks
have led the market for most of the last three years. Valuations on small
company stocks are compelling in comparison. At some point, investors should
recognize this value and begin focusing on small company stocks as a way to seek
higher returns. If so, we believe the Portfolio should be well positioned to
provide strong potential performance. And in the meantime, our value strategy
should also present less risk to shareholders' money than an emphasis on
high-flying growth stocks.
Tom Forester
Steven Stokes
Portfolio Co-Managers
December 31, 1997
KEMPER VALUE+GROWTH PORTFOLIO
- ------------------------------------
The 1997 market didn't seem very concerned about value for much of the year -
investors just continued to bid up the prices of big, brand-name companies.
There were two reasons for this. First, uncertainty about the direction of
interest rates during the first part of the year prompted investors to favor big
companies whose bottom lines tend to be less affected by interest rate changes.
Second, concern over the impact of Asia's problems during the last months of the
year prompted a "flight to safety," and again large cap, brand-name companies
benefited.
The year began with two quarters of strong growth, and with a parallel run-up
in interest rates. This increase in rates was caused by fears of a major Federal
Reserve Board ("the Fed") rate action. As a result, the financial services
sector was an outstanding performer for the Portfolio.
We found growth at reasonable prices in the second quarter of 1997 in
technology, the largest sector in the Portfolio at 22.9 percent on December 31,
1997. The entire sector was under pressure at the end of the first quarter due
to fears of inventory overhang and intense competition. We believed these
concerns to be largely unwarranted, and added to our technology stock positions.
Technology stocks, along with the rest of the market, rallied strongly during
the second and third quarter of 1997, as data positive for the U.S. economy
reassured investors. Indications of sustainable growth, low inflation, and
declining interest rates created a favorable environment for stocks, a climate
which continued through October.
11
<PAGE> 12
MANAGEMENT SUMMARY
Believing the health care sector to be overvalued by the market, we took the
opportunity to sell some of the particularly high-flying issues and established
new positions in more value-oriented issues in the sector, which should enhance
long-term Portfolio results.
In October, the market's powerful rally was suddenly reversed by emerging
problems in Asia, which, as we mentioned earlier caused a "flight to safety."
The Portfolio was particularly hurt by its large exposure to technology, which
took the worst of the market's fear. However, we believe that tactic may in the
end reverse itself as many of these companies are multi-nationals with heavy
exposure to Asia. We prefer to look for growth without paying exorbitant prices.
The market hasn't rewarded this approach yet, but we believe it will in the long
term.
Toward the end of the year, we increased the growth percentage of the
Portfolio from 60 percent to 65 percent. This action relates to our outlook for
the economy and interest rates.
Favorable to growth stocks is that earnings growth is expected to slow in 1998
resulting from concerns regarding the impact of the problems in Asia; reduced
opportunities to increase industrial productivity (since many companies have
already made a lot of improvements); and diminished tax incentives as a stimulus
to industry. Slower earnings growth tends to be good for growth stocks, as
economically sensitive types of stocks typically take the brunt of earnings
declines. If earnings slow, the market will be willing to pay a premium for what
growth it can find, making growth stocks more attractive. Regardless of whether
the higher returns will be in growth stocks or value stocks in 1998, the
Portfolio should be positioned to benefit from opportunities in both worlds.
William Knapp
Portfolio Manager
December 31, 1997
KEMPER HORIZON 20+, HORIZON 10+ AND HORIZON 5 PORTFOLIOS
- --------------------------------------------------------
The 1997 market didn't seem very concerned about value for much of the
year-investors just continued to bid up the prices of big, brand-name companies.
There were two reasons for this. First, uncertainty about the direction of
interest rates during the first part of the year prompted investors to favor big
companies whose bottom lines tend to be less affected by interest rate changes.
Second, concern over the impact of Asia's problems during the last months of the
year prompted a "flight to safety," and large cap, brand name companies
benefited.
The year began with two quarters of strong growth, and with a parallel run-up
in interest rates. This increase in rates was caused by fears of a major Federal
Reserve Board ("the Fed") rate action. As a result, the financial services
sector was an outstanding performer for the Portfolio.
Technology stocks, along with the rest of the market, rallied strongly during
the second and third quarter of 1997, as some positive data for the U.S. economy
reassured investors. Indications of sustainable growth, low inflation, and
declining interest rates created a favorable environment for stocks, a climate
which continued through October.
In October, the market's powerful rally was suddenly reversed by emerging
problems in Asia. The Portfolio was particularly hurt by its large exposure to
technology, which took the worst of the market's fear. However, we believe that
tactic may in the end reverse itself as many of these companies are
multi-nationals with heavy exposure to Asia. We prefer to look for growth
without paying exorbitant prices. The market hasn't rewarded that approach
12
<PAGE> 13
MANAGEMENT SUMMARY
yet, but we believe it will in the long term.
Prior to November, the portfolio reduced exposure to Asian markets, resulting
in a relatively light international weighting. However, we feel a ripple effect
also impacted Latin America and Europe as well and we intend to monitor
international markets closely, looking for good values and signs of a continued
downturn. In addition, we will likely allocate more to small companies. They
have been left behind in favor of large, richly priced companies and there may
be some fast-growers being ignored by overly cautious investors.
On the fixed-income side, we have maintained a conservative structure with
approximately a 2.5 year duration comprised mostly of treasuries. This helped
dampen the volatility of the Horizon Portfolios, as intended when they were
formed. Unfortunately the short duration did not allow us to benefit from the
appreciation in price of the long end of the fixed market (i.e., the decline in
interest rates), since the yield curve flattened and didn't benefit the short
end of the curve where we are positioned.
William Knapp
Portfolio Manager
December 31, 1997
KEMPER BLUE CHIP PORTFOLIO
- --------------------------
Our philosophy has always been "bottom up" stock selection. Rather than
focusing on economic conditions or entire sectors, we tend to choose stocks
based on their individual merits, and seek those that offer above-average growth
prospects, but are selling at what we believe to be attractive prices.
When the market is volatile, that usually gives us opportunities to buy good
stocks on a dip. Unfortunately, our disciplined approach to valuations worked
against us over a period of months in the third quarter. The expensive stocks
just got more expensive, and the less expensive stocks got less expensive. This
was due to the market's volatility, particularly in light of the problems
experienced by Pacific Rim economies, which made many investors nervous. The
response was a flight to big, brand-name stocks that people believed were safer,
and they would pay any price to do so. The lofty valuations that resulted made
us hesitant to buy companies like Coke, Merck or Pfizer. There's not a lot of
upside in stocks priced that highly, and they are susceptible to a big plunge on
any bad news. Regardless, the market continued to bid them up, and we didn't
participate as fully as we would have liked.
In light of the earlier turbulence in the Pacific Rim and as a function of
emphasizing domestic stocks, we've reduced our exposure to cyclical companies,
reducing our capital goods stocks and cutting our basic industry exposure in
half.
Financial stocks were an area of solid performance. We traded around them
efficiently and were proactive when they reached our targets. Our overweighting
in retail also helped provide a good boost for the portfolio.
Although railroad companies were a bit disappointing during the year,
transportation stocks as a whole are now even cheaper with solid, good quality
companies available for very attractive prices. So we're maintaining an
overweight in transportation.
We continue to like consumer cyclicals and the radio area as well as
healthcare. We've been moving into service areas and have eliminated big names
because they look hugely expensive and don't appear to have much upside left. As
we've gotten somewhat defensive we've built food and staples positions.
The economy's growth, coupled with an environment of low inflation and low
interest rates, offers many individual companies the potential to experience
gains. We intend to maintain strict attention to valuations and try to find
these kinds of companies when they are priced attractively. At some point, the
market is going to realize that there are a number of bargains on solid growth
companies out there, and that's when we believe this Portfolio will benefit the
most.
Tracy McCormick-Chester
Portfolio Manager
December 31, 1997
13
<PAGE> 14
MANAGEMENT SUMMARY
KEMPER GLOBAL INCOME PORTFOLIO
- ------------------------------
In the second half of the year, global bonds performed well in their local
currency terms. For example, the third quarter return for the Solomon Brothers
World Bond index was 3.01 percent, while in the fourth quarter it was 2.46
percent. The same index in U.S. dollar terms was 1.27 percent and 0.21 percent
for the third and fourth quarters, respectively. These returns were due to the
strength of the U.S. dollar as a flight to quality from the Asian currency
crisis boosted the existing uptrend.
The Global Income Portfolio started operations on May 1, 1997 and began
investing first in the U.S., Canada, UK, New Zealand and the Netherlands. Next,
we added the German and Swedish markets and reduced our positions in the U.S.
and UK. The German and Canadian exposures were increased in August while in
September, we again reduced the Canadian and U.S. markets and added Australian
and Japanese markets.
After an increase in October, our U.S. exposure was once again reduced in
November and Canadian was sold in order to increase Australian, New Zealand and
the Netherlands markets. In December, some changes were made in Europe and the
U.S. was further reduced to buy Canada. At the end of the year, we were
overweighted in Australian, New Zealand and UK markets, and underweighted in
U.S., Japan and peripheral European markets.
We maintained our long-term approach and remained committed to government and
supranational bonds with a very high credit quality. The Portfolio was 83
percent in AAA bonds and the rest in AA. The average duration was just under 5
years through the period.
The bond markets of most developed nations benefited from the flight to
quality due to the Asian crisis. Some markets such as Australia and New Zealand
did suffer due to their currency weakness.
While bond yields have decreased, growth and inflation expectations have also
decreased. This, combined with the likelihood that the Asian countries will
recover at a slower pace than Mexico in 1995 due to the private sector debt
problem, means that bonds are not overpriced and the disinflationary forces will
continue in the medium term. Central banks are unlikely to raise rates in the
next quarter with the Bundesbank most likely to be the first, in the run up to
the EMU.
Gordon Johns
Portfolio Manager
December 31, 1997
14
<PAGE> 15
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTORS FUND
SERIES KEMPER TOTAL
RETURN PORTFOLIO 19.96% 12.36% 13.87% 13.74% (Since 4/6/82)
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Total Return Portfolio
from 4/30/82 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/30/82 12/31/85 12/31/90 12/31/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Fund Series Kemper Total Return Portfolio 10000 17821 30153 75694
Russell 1000 Growth Index++ 10000 19574 35870 123791
Lehman Brothers Government/Corporate Bond Index+++ 10000 21229 35098 52682
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTORS FUND
SERIES KEMPER HIGH
YIELD PORTFOLIO 11.61% 11.88% 11.71% 13.49% (Since 4/6/82)
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper High Yield Portfolio
from 4/30/82 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/30/82 12/31/85 12/31/90 12/31/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Fund Series Kemper High Yield Portfolio 10000 19485 23428 73436
Salomon Brothers Long Term High Yield Bond Index** 10000 21311 27168 87936
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTORS FUND
SERIES KEMPER
GROWTH PORTFOLIO 21.34% 16.64% 16.50% 15.14% (Since 12/9/83)
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Growth Portfolio
from 12/31/83 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/83 12/31/85 12/31/90 12/31/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Fund Series Kemper Growth Portfolio 10000 13866 19859 70825
Russell 1000 Growth Index++ 10000 13159 24114 83218
Standard & Poor's 500 Stock Index+ 10000 13999 25993 91701
</TABLE>
(1) Returns measure change in the value of an investment in the underlying
Portfolio assuming reinvestment of all dividends. Average annual returns
reflect annualized results. Performance is net of the Portfolio's management
fee and other operating expenses but does not include any deduction at the
separate account or contract level for any charges that may be incurred
under a contract.
15
<PAGE> 16
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR 10-YEAR PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTORS FUND
SERIES KEMPER
GOVERNMENT
SECURITIES
PORTFOLIO 8.96% 6.61% 7.98% 7.79% (Since 9/3/87)
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Government Securities Portfolio
from 9/30/87 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9/30/87 12/31/90 12/31/93 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Fund Series Kemper Government Securities Portfolio 10000 12858 16713 21613
Salomon Brothers 30-Year GNMA Index* 10000 14434 19208 24998
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR 5-YEAR PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
INTERNATIONAL PORTFOLIO 9.46% 13.00% 10.61% (Since 1/6/92)
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper International Portfolio
from 1/31/92 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1/31/92 12/31/94 12/31/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper International Portfolio 10000 12713 15665
Europe, Australasia, Far East Index (EAFE Index)++ 10000 12936 18291
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER SMALL
CAP GROWTH PORTFOLIO 34.20% 25.83% (Since 5/2/94)
- -------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Small Cap Growth
portfolio from 5/31/94 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/31/94 12/31/94 12/31/95 12/31/97
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investors Fund Series Kemper Small Cap Growth Portfolio 10000 10366 13484 23171
Russell 2000 Index+++ 10000 10141 13026 18568
</TABLE>
(1) Returns measure change in the value of an investment in the underlying
Portfolio assuming reinvestment of all dividends. Average annual returns
reflect annualized results. Performance is net of the Portfolio's management
fee and other operating expenses but does not include any deduction at the
separate account or contract level for any charges that may be incurred
under a contract.
16
<PAGE> 17
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
INVESTMENT GRADE BOND PORTFOLIO 9.04% 7.55% (Since 5/1/96)
- -----------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Investment Grade Bond
portfolio from 5/1/96 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Investment Grade Bond Portfolio 10000 10350 11293
Lehman Brothers Government Corporate Bond Index+++ 10000 10625 11645
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER VALUE
PORTFOLIO 30.38% 29.01% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Value Portfolio
from 5/1/96 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Value Portfolio 10000 11736 15302
Standand & Poor's 500 Stock Index+ 10000 11499 15334
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
SMALL CAP VALUE PORTFOLIO 21.73% 13.74% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Small Cap Value
portfolio from 5/1/96 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Small Cap Value Portfolio 10000 10186 12400
Russell 2000 Index+++ 10000 10521 12874
</TABLE>
(1) Returns measure change in the value of an investment in the underlying
Portfolio assuming reinvestment of all dividends. Average annual returns
reflect annualized results. Performance is net of the Portfolio's management
fee and other operating expenses but does not include any deduction at the
separate account or contract level for any charges that may be incurred
under a contract.
17
<PAGE> 18
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
VALUE+GROWTH PORTFOLIO 25.47% 24.29% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Value+Growth Portfolio
from 5/1/96 through 12/31/97
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Value+Growth Portfolio 10000 11460 14379
Russell 1000 Index+ 10000 11431 15186
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
HORIZON 20+ PORTFOLIO 20.48% 21.79% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- -------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Horizon 20+ Portfolio
from 5/1/96 through 12/31/97
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Horizon 20+ Portfolio 10000 11537 13899
Lehman Brothers Government/Corporate Bond Index+++ 10000 10610 11645
Standard & Poor's 500 Stock Index+ 10000 11499 15334
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
HORIZON 10+ PORTFOLIO 16.77% 17.04% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Horizon 10+ Portfolio
from 5/1/96 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Horizon 10+ Portfolio 10000 11137 13005
Lehman Brothers Government/Corporate Bond Index+++ 10000 10610 11645
Standard & Poor's 500 Stock Index+ 10000 11499 15334
</TABLE>
(1) Returns measure change in the value of an investment in the underlying
Portfolio assuming reinvestment of all dividends. Average annual returns
reflect annualized results. Performance is net of the Portfolio's management
fee and other operating expenses but does not include any deduction at the
separate account or contract level for any charges that may be incurred
under a contract.
18
<PAGE> 19
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
1-YEAR PORTFOLIO
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTORS FUND SERIES KEMPER
HORIZON 5 PORTFOLIO 12.70% 13.48% (Since 5/1/96)
- ------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Horizon 5 Portfolio
from 5/1/96 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/96 12/31/96 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investors Fund Series Kemper Horizon 5 Portfolio 10000 10959 12351
Lehman Brothers Government/Corporate Bond Index+++ 10000 10610 11645
Standard & Poor's 500 Stock Index+ 10000 11499 15334
</TABLE>
- --------------------------------------------------------------------------------
TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
PORTFOLIO
- ----------------------------------------------------------------------------
<S> <C> <C>
INVESTORS FUND SERIES KEMPER
BLUE CHIP PORTFOLIO 11.54% (Since 5/1/97)
- ----------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Blue Chip Portfolio
from 5/1/97 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/97 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C>
Investors Fund Series Kemper Blue Chip Portfolio 10000 11154
Russell 1000 Index+ 10000 12411
</TABLE>
- --------------------------------------------------------------------------------
TOTAL RETURNS(1)
- --------------------------------------------------------------------------------
FOR PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIFE OF
PORTFOLIO
- ----------------------------------------------------------------------------
<S> <C> <C>
INVESTORS FUND SERIES KEMPER
GLOBAL INCOME PORTFOLIO 2.87% (Since 5/1/97)
- ----------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance. Returns and principal
values fluctuate so that shares, when redeemed, may be worth more or less than
original cost.
[LINE GRAPH]
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Investors Fund Series Kemper Global Income Portfolio
from 5/1/97 through 12/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5/1/97 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C>
Investors Fund Series Kemper Global Income Portfolio 10000 10287
Salomon Brothers World Government Bond Index*** 10000 10548
</TABLE>
+ The Russell 1000 Index is an unmanaged capitalization weighted price only
index comprised of the largest capitalized U.S. companies whose common
stocks are traded in the United States. This large capitalization market
oriented index is highly correlated with the S&P 500 Stock Index.
++ The Russell 1000 Growth Index is an unmanaged index comprised of common
stock of larger U.S. companies with greater than average growth orientation
and represents the universe of stocks from which "earnings/growth" money
managers typically select.
19
<PAGE> 20
PERFORMANCE UPDATE
+ The Russell 1000 Index is an unmanaged capitalization weighted price only
index comprised of the largest capitalized United States companies whose
common stocks are traded in the U.S. This larger capitalization, market
oriented index is highly correlated with the S&P 500 stock index.
++ The Russell 1000 Growth Index is an unmanaged index comprised of common
stock of larger U.S. companies with greater than average growth orientation
and represents the universe of stocks from which "earnings/growth" money
managers typically select.
+++ The Russell 2000 Index is a capitalization weighted price only index which
is comprised of 2000 of the smallest stocks (on the basis of capitalization)
in the Russell 3000 Index. The largest company in the index has an
approximate market cap of $591 million.
+ The Standard & Poor's 500 Stock Index is an unmanaged index generally
+ representative of the U.S. stock market.
++ The EAFE Index (Morgan Stanley Capital International Europe, Australasia,
++ Far East Index) is an unmanaged index generally accepted as a benchmark
for major overseas markets.
+++ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
+++ comprised of intermediate and long-term government and investment grade
corporate debt securities.
* The Salomon Brothers 30-Year GNMA Index is unmanaged, is on a total return
basis with all dividends reinvested and is comprised of GNMA 30-year pass
throughs of single family and graduated payment mortgages. In order for a
GNMA coupon to be included in the index, it must have at least $200 million
of outstanding coupon product.
** The Salomon Brothers Long-Term High Yield Bond Index is on a total return
basis with all dividends reinvested and is comprised of high yield bonds
with a par value of $50 million or higher and a remaining maturity of ten
years or longer rated BB+ or lower by Standard & Poor's Corporation or Ba1
or lower by Moody's Investors Service, Inc. This index is unmanaged.
*** The Salomon Brothers World Government Bond Index is an unmanaged index on a
US dollar total return basis with all dividends reinvested and is comprised
of government bonds from 14 countries. The maximum maturity is one year.
Source: Lipper Analytical Services, Inc.
20
<PAGE> 21
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
INVESTORS FUND SERIES
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the Kemper Money Market, Kemper
Total Return, Kemper High Yield, Kemper Growth, Kemper Government Securities,
Kemper International, Kemper Small Cap Growth, Kemper Investment Grade Bond,
Kemper Value, Kemper Small Cap Value, Kemper Value+Growth, Kemper Horizon 20+,
Kemper Horizon 10+, Kemper Horizon 5, Kemper Blue Chip and Kemper Global Income
Portfolios, comprising the Investors Fund Series as of December 31, 1997, and
the related statements of operations and changes in net assets for the periods
indicated therein and the financial highlights for each of the fiscal periods
since 1993. 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, 1997, by correspondence with the custodian. 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 the Investors Fund Series at December 31, 1997, the results
of their operations, the changes in their net assets and the financial
highlights for the periods indicated therein in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 17, 1998
21
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER
MONEY TOTAL HIGH KEMPER GOVERNMENT KEMPER
MARKET RETURN YIELD GROWTH SECURITIES INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $99,159,
$708,931, $372,411, $514,828, $89,195,
$163,149, $124,874, $14,891, $149,666,
$69,524, $65,716, $15,755, $21,117, $13,533,
$19,791 and $2,062, respectively) $ 99,159 787,904 384,800 553,908 91,593 199,414
- ------------------------------------------------------------------------------------------------------------------------------------
Cash 2,577 770 837 1,134 1,421 86
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold -- 6,955 -- 12,958 7 777
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio shares sold -- 64 144 85 108 --
- ------------------------------------------------------------------------------------------------------------------------------------
Interest and dividends 204 6,180 6,892 398 783 284
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 101,940 801,873 392,673 568,483 93,912 200,561
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased -- 13,986 784 4,880 7,140 118
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio shares redeemed 1,459 461 -- 276 31 156
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends 243 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Management fee 41 359 194 278 39 125
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and
related expenses 3 43 14 11 11 43
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 51 28 17 22 9 73
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,797 14,877 1,009 5,467 7,230 515
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $100,143 786,996 391,664 563,016 86,682 200,046
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $100,143 573,376 374,467 427,851 75,198 154,007
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on
investments and foreign currency transactions -- 110,353 (19,220) 90,779 (5,177) 6,511
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on
investments and assets and liabilities in
foreign currencies -- 78,973 12,389 39,066 2,398 36,247
- ------------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income -- 24,294 24,028 5,320 14,263 3,281
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $100,143 786,996 391,664 563,016 86,682 200,046
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding 100,143 278,859 302,191 187,617 71,799 123,869
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE (net assets / shares outstanding) $1.00 2.822 1.296 3.001 1.207 1.615
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE> 23
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
SMALL INVESTMENT SMALL KEMPER KEMPER KEMPER
CAP GRADE KEMPER CAP VALUE+ KEMPER KEMPER KEMPER BLUE GLOBAL
GROWTH BOND VALUE VALUE GROWTH HORIZON 20+ HORIZON 10+ HORIZON 5 CHIP INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
135,629 15,044 164,658 75,583 69,939 16,886 22,276 14,002 20,327 2,002
- ------------------------------------------------------------------------------------------------------------------------------
2,562 205 1 517 390 200 100 211 635 71
- ------------------------------------------------------------------------------------------------------------------------------
-- -- -- 16 -- -- -- -- -- 40
- ------------------------------------------------------------------------------------------------------------------------------
149 89 341 101 149 -- 106 102 64 --
- ------------------------------------------------------------------------------------------------------------------------------
78 180 256 63 86 65 166 104 21 35
- ------------------------------------------------------------------------------------------------------------------------------
138,418 15,518 165,256 76,280 70,564 17,151 22,648 14,419 21,047 2,148
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
917 -- 2,648 -- 1,353 439 -- 145 2,612 --
- ------------------------------------------------------------------------------------------------------------------------------
2 -- 114 111 68 36 74 1 -- --
- ------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
71 7 91 46 42 8 11 7 8 1
- ------------------------------------------------------------------------------------------------------------------------------
8 -- 1 -- -- -- 1 -- 6 --
- ------------------------------------------------------------------------------------------------------------------------------
5 7 22 15 7 9 9 8 -- 2
- ------------------------------------------------------------------------------------------------------------------------------
1,003 14 2,876 172 1,470 492 95 161 2,626 3
- ------------------------------------------------------------------------------------------------------------------------------
137,415 15,504 162,380 76,108 69,094 16,659 22,553 14,258 18,421 2,145
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
101,213 14,003 139,101 68,517 62,295 14,671 20,138 12,920 17,745 2,076
- ------------------------------------------------------------------------------------------------------------------------------
24,803 141 4,245 605 2,052 578 519 214 (134) 22
- ------------------------------------------------------------------------------------------------------------------------------
10,755 153 14,992 6,059 4,223 1,131 1,159 469 536 (24)
- ------------------------------------------------------------------------------------------------------------------------------
644 1,207 4,042 927 524 279 737 655 274 71
- ------------------------------------------------------------------------------------------------------------------------------
137,415 15,504 162,380 76,108 69,094 16,659 22,553 14,258 18,421 2,145
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
69,790 13,863 107,003 62,003 48,483 12,093 17,502 11,652 16,515 2,085
- ------------------------------------------------------------------------------------------------------------------------------
1.969 1.118 1.518 1.227 1.425 1.378 1.289 1.224 1.115 1.029
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER
MONEY TOTAL HIGH KEMPER GOVERNMENT KEMPER
MARKET RETURN YIELD GROWTH SECURITIES INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Interest $5,678 21,441 32,534 724 6,484 612
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends(b) -- 7,613 155 4,868 -- 2,432
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 5,678 29,054 32,689 5,592 6,484 3,044
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 497 4,072 1,991 3,142 460 1,419
- ----------------------------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related
expenses 22 129 65 83 47 239
- ----------------------------------------------------------------------------------------------------------------------------------
Professional fees 9 99 41 66 12 24
- ----------------------------------------------------------------------------------------------------------------------------------
Trustees' fees and other 24 141 55 97 15 32
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 552 4,441 2,152 3,388 534 1,714
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 5,126 24,613 30,537 2,204 5,950 1,330
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investments
and foreign currency transactions -- 112,547 2,260 91,317 3 8,474
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from futures transactions -- (68) (34) -- (184) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) -- 112,479 2,226 91,317 (181) 8,474
- ----------------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on
investments and assets and liabilities in
foreign currencies -- (3,457) 3,576 6,100 1,376 6,353
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments -- 109,022 5,802 97,417 1,195 14,827
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,126 133,635 36,339 99,621 7,145 16,157
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from May 1, 1997 (commencement of operations) to December 31,
1997.
(b) Less foreign taxes withheld of $267 in the Kemper International Portfolio.
See accompanying Notes to Financial Statements.
24
<PAGE> 25
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
SMALL INVESTMENT SMALL KEMPER KEMPER
CAP GRADE KEMPER CAP VALUE+ KEMPER KEMPER KEMPER KEMPER GLOBAL
GROWTH BOND VALUE VALUE GROWTH HORIZON 20+ HORIZON 10+ HORIZON 5 BLUE CHIP INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(a) PORTFOLIO(a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
532 535 703 464 69 134 355 297 72 71
- --------------------------------------------------------------------------------------------------------------------------------
357 -- 1,865 364 547 101 107 41 63 --
- --------------------------------------------------------------------------------------------------------------------------------
889 535 2,568 828 616 235 462 338 135 71
- --------------------------------------------------------------------------------------------------------------------------------
633 46 604 307 257 56 77 44 27 9
- --------------------------------------------------------------------------------------------------------------------------------
38 15 26 27 24 29 27 26 15 2
- --------------------------------------------------------------------------------------------------------------------------------
10 -- 5 3 2 1 1 1 -- --
- --------------------------------------------------------------------------------------------------------------------------------
11 -- 15 7 6 1 2 1 -- 1
- --------------------------------------------------------------------------------------------------------------------------------
692 61 650 344 289 87 107 72 42 12
- --------------------------------------------------------------------------------------------------------------------------------
197 474 1,918 484 327 148 355 266 93 59
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
25,239 141 4,262 436 1,903 538 530 225 (134) 19
- ---------------------------------------------------------------------------------------------------------------------------------
-- -- -- 323 148 40 (11) (11) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
25,239 141 4,262 759 2,051 578 519 214 (134) 19
- ---------------------------------------------------------------------------------------------------------------------------------
2,506 152 13,595 5,315 3,585 885 840 375 536 (24)
- ---------------------------------------------------------------------------------------------------------------------------------
27,745 293 17,857 6,074 5,636 1,463 1,359 589 402 (5)
- ---------------------------------------------------------------------------------------------------------------------------------
27,942 767 19,775 6,558 5,963 1,611 1,714 855 495 54
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER
MONEY MARKET TOTAL RETURN
PORTFOLIO PORTFOLIO
------------------ -------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
Net investment income $ 5,126 3,688 24,613 21,518
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) -- (850) 112,479 86,334
- ---------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) -- 850 (3,457) (4,464)
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,126 3,688 133,635 103,388
- ---------------------------------------------------------------------------------------------------------
Equalization credits (charges) -- -- (285) (891)
- ---------------------------------------------------------------------------------------------------------
Distribution from net investment income (5,126) (3,688) (21,303) (22,873)
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- (87,579) (20,332)
- ---------------------------------------------------------------------------------------------------------
Total dividends to shareholders (5,126) (3,688) (108,882) (43,205)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 29,542 9,523 65,426 (22,084)
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 29,542 9,523 89,894 37,208
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of year 70,601 61,078 697,102 659,894
- ---------------------------------------------------------------------------------------------------------
END OF YEAR $100,143 70,601 786,996 697,102
- ---------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF YEAR $ -- -- 24,294 21,298
- ---------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
INVESTMENT GRADE VALUE SMALL CAP
BOND PORTFOLIO PORTFOLIO VALUE PORTFOLIO
------------------- ------------------- -------------------
YEAR MAY 1 YEAR MAY 1 YEAR MAY 1
ENDED TO ENDED TO ENDED TO
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------------------------
Net investment income $ 474 30 1,918 143 484 102
- --------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 141 2 4,262 181 759 (154)
- --------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) 152 1 13,595 1,397 5,315 744
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 767 33 19,775 1,721 6,558 692
- --------------------------------------------------------------------------------------------------------------------
Equalization credits 713 29 2,045 127 505 70
- --------------------------------------------------------------------------------------------------------------------
Distribution from net investment income (41) -- (389) -- (234) --
- --------------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 12,067 1,836 119,644 19,357 55,972 12,445
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 13,506 1,898 141,075 21,205 62,801 13,207
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
Beginning of period 1,998 100 21,305 100 13,307 100
- --------------------------------------------------------------------------------------------------------------------
END OF PERIOD $15,504 1,998 162,380 21,305 76,108 13,307
- --------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT
INCOME AT END OF PERIOD $ 1,207 59 4,042 270 927 172
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
26
<PAGE> 27
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER KEMPER
HIGH YIELD GROWTH GOVERNMENT INTERNATIONAL SMALL CAP
PORTFOLIO PORTFOLIO SECURITIES PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
----------------- ------------------ -------------------- ----------------- ----------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
30,537 25,297 2,204 4,160 5,950 6,259 1,330 1,388 197 79
- --------------------------------------------------------------------------------------------------------
2,226 711 91,317 111,045 (181) (527) 8,474 7,804 25,239 8,533
- --------------------------------------------------------------------------------------------------------
3,576 9,092 6,100 (29,470) 1,376 (3,644) 6,353 14,086 2,506 3,586
- --------------------------------------------------------------------------------------------------------
36,339 35,100 99,621 85,735 7,145 2,088 16,157 23,278 27,942 12,198
- --------------------------------------------------------------------------------------------------------
633 (2,891) 1,028 409 17 (1,240) 101 (121) 100 138
- --------------------------------------------------------------------------------------------------------
(25,931) (24,806) (2,753) (5,021) (6,694) (6,507) (2,135) (2,012) (445) --
- --------------------------------------------------------------------------------------------------------
-- -- (111,508) (58,999) -- -- (7,472) (1,044) (8,458) (1,209)
- --------------------------------------------------------------------------------------------------------
(25,931) (24,806) (114,261) (64,020) (6,694) (6,507) (9,607) (3,056) (8,903) (1,209)
- --------------------------------------------------------------------------------------------------------
91,308 24,535 89,145 50,826 1,900 (5,212) 29,920 8,893 49,139 22,637
- --------------------------------------------------------------------------------------------------------
102,349 31,938 75,533 72,950 2,368 (10,871) 36,571 28,994 68,278 33,764
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
289,315 257,377 487,483 414,533 84,314 95,185 163,475 134,481 69,137 35,373
- --------------------------------------------------------------------------------------------------------
391,664 289,315 563,016 487,483 86,682 84,314 200,046 163,475 137,415 69,137
- --------------------------------------------------------------------------------------------------------
24,028 18,803 5,320 5,752 14,263 15,002 3,281 2,739 644 444
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER
KEMPER KEMPER KEMPER KEMPER KEMPER GLOBAL
VALUE+ HORIZON 20+ HORIZON 10+ HORIZON 5 BLUE CHIP INCOME
GROWTH PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------- ------------------- ------------------- ------------------- ---------- ---------
YEAR MAY 1 YEAR MAY 1 YEAR MAY 1 YEAR MAY 1 FOR THE PERIOD MAY 1
ENDED TO ENDED TO ENDED TO ENDED TO (COMMENCEMENT OF
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, OPERATIONS) TO
1997 1996 1997 1996 1997 1996 1997 1996 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
327 28 148 18 355 50 266 29 93 59
- ------------------------------------------------------------------------------------------------------------------
2,051 61 578 11 519 6 214 2 (134) 19
- ------------------------------------------------------------------------------------------------------------------
3,585 638 885 246 840 319 375 94 536 (24)
- ------------------------------------------------------------------------------------------------------------------
5,963 727 1,611 275 1,714 375 855 125 495 54
- ------------------------------------------------------------------------------------------------------------------
233 41 138 21 358 44 376 25 181 15
- ------------------------------------------------------------------------------------------------------------------
(165) -- (57) -- (76) -- (43) -- -- --
- ------------------------------------------------------------------------------------------------------------------
52,867 9,328 11,208 3,363 14,830 5,208 10,536 2,284 17,645 1,976
- ------------------------------------------------------------------------------------------------------------------
58,898 10,096 12,900 3,659 16,826 5,627 11,724 2,434 18,321 2,045
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
10,196 100 3,759 100 5,727 100 2,534 100 100 100
- ------------------------------------------------------------------------------------------------------------------
69,094 10,196 16,659 3,759 22,553 5,727 14,258 2,534 18,421 2,145
- ------------------------------------------------------------------------------------------------------------------
524 69 279 39 737 94 655 54 274 71
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Investors Fund Series (the "Fund") is an open-end,
diversified management investment company organized
as a business trust under the laws of
Massachusetts. The Fund offers sixteen Portfolios.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES INVESTMENT VALUATION. Investments are stated at
value. The securities of the Portfolios (excluding
the Kemper Money Market Portfolio) 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. All other securities not so traded or
listed are valued at the last current bid quotation
if market quotations are available. Fixed income
securities are valued by using market quotations,
or independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Over-the-
counter traded fixed income options are valued
based upon prices provided by market makers.
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 Kemper 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.
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 rates of exchange are
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
rates 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 the net
realized and unrealized gain (loss) on investments.
28
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
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 discount amortization on all fixed income
securities and premium amortization on
mortgage-backed securities and money market
instruments. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
Several of the 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 segregate cash or
other liquid assets equal to the value of the
securities purchased. At December 31, 1997, the
Kemper Government Securities Portfolio had
$7,140,000 of purchase commitments outstanding (8%
of net assets) with a corresponding amount of
assets segregated.
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 all Portfolios, and additionally
at 11:00 a.m. Chicago time for the Kemper 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. 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, 1997 amounted to
approximately $19,205,000 in the Kemper High Yield
Portfolio, $4,613,000 in the Kemper Government
Securities Portfolio and $134,000 in the Kemper
Blue Chip Portfolio. These losses are available to
offset future taxable gains in the respective
Portfolios and, if not applied, expire during the
period 1998 through 2006.
DIVIDENDS TO SHAREHOLDERS. All Portfolios, except
the Kemper Money Market Portfolio, declare and pay
dividends of net investment income and net realized
capital gains annually, which are recorded on the
ex-dividend date. The Kemper Money Market Portfolio
declares a daily dividend equal to its net
investment income for that day, payable monthly.
Shareholders receive dividends in additional
shares.
29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
Dividends are determined in accordance with income
tax principles which may treat certain transactions
differently from generally accepted accounting
principles. These differences are primarily due to
differing treatments for certain transactions such
as foreign currency transactions, if applicable.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Fund shares in all
Portfolios except the Kemper Money Market Portfolio
is credited or charged to undistributed net
investment income so that income per share
available for distribution is not affected by sales
or redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which is effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the name of the
Fund's principal underwriter was changed to Kemper
Distributors, Inc. (KDI).
MANAGEMENT AGREEMENT. Under the Fund's management
agreement with Scudder Kemper, the Fund pays a fee
based on average daily net assets of each Portfolio
at an annual rate of .50% for the Kemper Money
Market Portfolio, .55% for the Kemper Total Return
and Kemper Government Securities Portfolios, .60%
for the Kemper High Yield, Kemper Growth, Kemper
Investment Grade Bond, Kemper Horizon 20+, Kemper
Horizon 10+ and Kemper Horizon 5 Portfolios, .65%
for the Kemper Small Cap Growth and Kemper Blue
Chip Portfolios and .75% for the Kemper
International, Kemper Value, Kemper Small Cap
Value, Kemper Value+Growth, and Kemper Global
Income Portfolios. For the year ended December 31,
1997, the Fund incurred aggregate management fees
of $13,641,000.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended December 31,
1997, the Fund made no direct payments to its
officers and incurred trustees' fees of $270,000 to
independent trustees.
30
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended December 31, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<CAPTION>
PROCEEDS
PORTFOLIO PURCHASES FROM SALES
--------- --------- ----------
<S> <C> <C>
Kemper Total Return $924,037 $974,976
Kemper High Yield 433,435 366,542
Kemper Growth 889,985 880,277
Kemper Government Securities 167,936 175,356
Kemper International 142,813 141,889
Kemper Small Cap Growth 322,045 288,496
Kemper Investment Grade Bond 25,315 17,117
Kemper Value 132,750 35,490
Kemper Small Cap Value 46,681 8,195
Kemper Value+Growth 70,781 17,297
Kemper Horizon 20+ 18,709 7,316
Kemper Horizon 10+ 24,197 8,888
Kemper Horizon 5 17,553 6,555
</TABLE>
For the period from May 1, 1997 to December 31,
1997, investment transactions (excluding short-term
investments) are as follows (in thousands):
<TABLE>
<CAPTION>
PROCEEDS
PORTFOLIO PURCHASES FROM SALES
--------- --------- ----------
<S> <C> <C>
Kemper Blue Chip $ 18,803 $ 3,267
Kemper Global Income 4,847 2,804
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of each Portfolio of the Fund (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------
Shares sold 279,361 $ 279,361 149,223 $ 149,223
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 5,015 5,015 3,704 3,704
------------------------------------------------------------------------------
284,376 284,376 152,927 152,927
------------------------------------------------------------------------------
Shares redeemed (254,834) (254,834) (143,404) (143,404)
------------------------------------------------------------------------------
Net increase from capital
share transactions 29,542 $ 29,542 9,523 $ 9,523
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER TOTAL RETURN PORTFOLIO
------------------------------------------------------------------------------
Shares sold 20,361 $ 52,952 36,913 $ 94,083
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 46,559 108,883 17,682 43,205
------------------------------------------------------------------------------
66,920 161,835 54,595 137,288
------------------------------------------------------------------------------
Shares redeemed (35,664) (96,409) (62,870) (159,372)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions 31,256 $ 65,426 (8,275) $ (22,804)
------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
---------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HIGH YIELD PORTFOLIO
------------------------------------------------------------------------------
Shares sold 153,373 $ 184,650 101,227 $ 118,182
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 22,228 25,931 21,456 24,806
------------------------------------------------------------------------------
175,601 210,581 122,683 142,988
------------------------------------------------------------------------------
Shares redeemed (99,314) (119,273) (101,236) (118,453)
------------------------------------------------------------------------------
Net increase from capital
share transactions 76,287 $ 91,308 21,447 $ 24,535
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER GROWTH PORTFOLIO
------------------------------------------------------------------------------
Shares sold 17,325 $ 49,729 33,305 $ 104,951
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 49,988 114,261 22,196 64,020
------------------------------------------------------------------------------
67,313 163,990 55,501 168,971
------------------------------------------------------------------------------
Shares redeemed (24,302) (74,845) (37,981) (118,145)
------------------------------------------------------------------------------
Net increase from capital
share transactions 43,011 $ 89,145 17,520 $ 50,826
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER GOVERNMENT SECURITIES PORTFOLIO
------------------------------------------------------------------------------
Shares sold 17,121 $ 16,263 11,632 $ 10,799
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 5,997 6,694 5,657 6,507
------------------------------------------------------------------------------
23,118 22,957 17,289 17,306
------------------------------------------------------------------------------
Shares redeemed (21,158) (21,057) (22,442) (22,518)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions 1,960 $ 1,900 (5,153) $ (5,212)
------------------------------------------------------------------------------
KEMPER INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------
Shares sold 36,340 $ 58,360 41,003 $ 59,682
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 6,447 9,607 2,155 3,056
------------------------------------------------------------------------------
42,787 67,967 43,158 62,738
------------------------------------------------------------------------------
Shares redeemed (23,422) (38,047) (36,773) (53,845)
------------------------------------------------------------------------------
Net increase from capital
share transactions 19,365 $ 29,920 6,385 $ 8,893
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER SMALL CAP GROWTH PORTFOLIO
------------------------------------------------------------------------------
Shares sold 34,187 $ 62,047 28,558 $ 43,316
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 6,358 8,904 840 1,209
------------------------------------------------------------------------------
40,545 70,951 29,398 44,525
------------------------------------------------------------------------------
Shares redeemed (11,990) (21,812) (14,446) (21,888)
------------------------------------------------------------------------------
Net increase from capital
share transactions 28,555 $ 49,139 14,952 $ 22,637
------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 1 TO
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER INVESTMENT GRADE BOND PORTFOLIO
-----------------------------------------------------------------------------
Shares sold 13,271 $ 13,473 1,962 $ 1,970
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 40 41 -- --
-----------------------------------------------------------------------------
13,311 13,514 1,962 1,970
-----------------------------------------------------------------------------
Shares redeemed (1,377) (1,447) (133) (134)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 11,934 $ 12,067 1,829 $ 1,836
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
KEMPER VALUE PORTFOLIO
-----------------------------------------------------------------------------
Shares sold 100,098 $135,103 18,543 $19,897
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 324 389 -- --
-----------------------------------------------------------------------------
100,422 135,492 18,543 19,897
-----------------------------------------------------------------------------
Shares redeemed (11,573) (15,848) (489) (540)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 88,849 $119,644 18,054 $19,357
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
KEMPER SMALL CAP VALUE PORTFOLIO
-----------------------------------------------------------------------------
Shares sold 55,160 $ 63,180 13,865 $13,311
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 239 234 -- --
-----------------------------------------------------------------------------
55,399 63,414 13,865 13,311
-----------------------------------------------------------------------------
Shares redeemed (6,460) (7,442) (901) (866)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 48,939 $ 55,972 12,964 $12,445
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
KEMPER VALUE+GROWTH PORTFOLIO
-----------------------------------------------------------------------------
Shares sold 42,473 $ 56,712 9,367 $ 9,935
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 161 165 -- --
-----------------------------------------------------------------------------
42,634 56,877 9,367 9,935
-----------------------------------------------------------------------------
Shares redeemed (3,047) (4,010) (571) (607)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 39,587 $ 52,867 8,796 $ 9,328
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
-----------------------------------------------------------------------------
Shares sold 9,642 $ 12,277 3,249 $ 3,460
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 51 56 -- --
-----------------------------------------------------------------------------
9,693 12,333 3,249 3,460
-----------------------------------------------------------------------------
Shares redeemed (858) (1,125) (91) (97)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 8,835 $ 11,208 3,158 $ 3,363
-----------------------------------------------------------------------------
</TABLE>
33
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 1 TO
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO
----------------------------------------------------------------------------
Shares sold 13,389 $16,073 5,200 $ 5,375
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 70 75 -- --
-----------------------------------------------------------------------------
13,459 16,148 5,200 5,375
-----------------------------------------------------------------------------
Shares redeemed (1,099) (1,318) (158) (167)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 12,360 $14,830 5,042 $ 5,208
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
----------------------------------------------------------------------------
Shares sold 10,209 $11,525 2,326 $ 2,399
-----------------------------------------------------------------------------
Shares issued in reinvestment of
dividends 40 43 -- --
-----------------------------------------------------------------------------
10,249 11,568 2,326 2,399
-----------------------------------------------------------------------------
Shares redeemed (910) (1,032) (113) (115)
-----------------------------------------------------------------------------
Net increase from capital share
transactions 9,339 $10,536 2,213 $ 2,284
-----------------------------------------------------------------------------
<CAPTION>
MAY 1 TO
DECEMBER 31, 1997
------------------
SHARES AMOUNT
--------------------------------------------------------------------------
<S> <C> <C>
KEMPER BLUE CHIP PORTFOLIO
--------------------------------------------------------------------------
Shares sold 17,303 $18,608
---------------------------------------------------------------------------
Shares redeemed (888) (963)
---------------------------------------------------------------------------
Net increase from capital share transactions 16,415 $17,645
---------------------------------------------------------------------------
---------------------------------------------------------------------------
KEMPER GLOBAL INCOME PORTFOLIO
--------------------------------------------------------------------------
Shares sold 2,953 $ 2,947
---------------------------------------------------------------------------
Shares redeemed (968) (971)
---------------------------------------------------------------------------
Net increase from capital share transactions 1,985 $ 1,976
---------------------------------------------------------------------------
</TABLE>
34
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Kemper Small Cap Value and Kemper Government
Securities Portfolios have entered into exchange
traded financial futures contracts in order to take
advantage of anticipated market conditions and, as
such, bear the risk that arises from entering into
these contracts.
At the time a Portfolio enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Portfolios and the broker as the market
value of the futures contract fluctuates. At
December 31, 1997, the market value of assets
pledged by the Portfolios to cover margin
requirements for open futures positions were
$100,000 and $212,000 for the Kemper Small Cap
Value and Kemper Government Securities Portfolios,
respectively. The Portfolios also have liquid
assets in their portfolios in excess of the face
amount of open futures contracts. At December 31,
1997, the Portfolios had the following futures
contracts open, with expirations in March, 1998:
<TABLE>
<CAPTION>
FACE GAIN (LOSS)
PORTFOLIO TYPE AMOUNT POSITION AT 12/31/97
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Small Cap Value Russell 2000 $2,666,000 Long $(18,000)
-------------------------------------------------------------------------------
Kemper Government U.S. Treasury Note 2,490,000 Long 8,000
Securities U.S. Treasury Bond 479,000 Long 3,000
-------------------------------------------------------------------------------
$ 11,000
-------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7 FORWARD FOREIGN
CURRENCY CONTRACTS In order to protect itself against a decline in the
value of a particular foreign currency against the
U.S. Dollar, the Kemper Global Income Portfolio has
entered into forward contracts to deliver foreign
currency in exchange for U.S. Dollars as described
below. The Portfolio bears the market risk that
arises from changes in foreign exchange rates, and
accordingly, the net unrealized gain or loss
amounts on these contracts are reflected in the
accompanying financial statements. The Portfolio
also bears the credit risk (which is limited to the
unrealized gain, if any) if the counterparty fails
to perform under the contract. At December 31,
1997, the Portfolio had the following forward
currency contracts outstanding with settlement
dates in April and July, 1998:
<TABLE>
<CAPTION>
CONTRACT UNREALIZED
FOREIGN CURRENCY AMOUNT IN GAIN (LOSS) AT
TO BE DELIVERED U.S. DOLLARS 12/31/97
-------------------------------------------------------------------------------
<S> <C> <C> <C>
599,000 Australian Dollars $421,000 $29,000
-------------------------------------------------------------------------------
100,000 British Pounds 161,000 (4,000)
-------------------------------------------------------------------------------
215,000 New Zealand Dollars 135,000 12,000
-------------------------------------------------------------------------------
Net unrealized gain $37,000
-------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------
KEMPER MONEY MARKET PORTFOLIO
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<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 .05 .05 .06 .04 .03
- -------------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN 5.25% 5.03 5.66 3.96 2.83
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses .55% .60 .55 .53 .56
- -------------------------------------------------------------------------------------------------
Net investment income 5.14% 4.90 5.52 3.95 2.79
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $100,143 70,601 61,078 83,821 68,177
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER MONEY MARKET PORTFOLIO
The total returns for 1995 and 1994 include the effect of a capital contribution
from the investment manager. Without the capital contribution, the total returns
would have been 5.11% and 3.47%, respectively.
<TABLE>
<CAPTION>
------------------------------------------------
KEMPER TOTAL RETURN PORTFOLIO
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 2.815 2.579 2.112 2.586 2.473
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .090 .084 .084 .069 .069
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .377 .322 .453 (.313) .214
- -------------------------------------------------------------------------------------------------
Total from investment operations .467 .406 .537 (.244) .283
- -------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .090 .090 .070 .060 .050
- -------------------------------------------------------------------------------------------------
Distribution from net realized gain .370 .080 -- .170 .120
- -------------------------------------------------------------------------------------------------
Total dividends .460 .170 .070 .230 .170
- -------------------------------------------------------------------------------------------------
Net asset value, end of year $ 2.822 2.815 2.579 2.112 2.586
- -------------------------------------------------------------------------------------------------
TOTAL RETURN 19.96% 16.76 25.97 (9.50) 12.13
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses .60% .59 .60 .61 .59
- -------------------------------------------------------------------------------------------------
Net investment income 3.32% 3.21 3.52 3.13 3.19
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $786,996 697,102 659,894 586,594 643,830
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 122% 90 118 128 191
- -------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the years ended December 31,
1997 and 1996 were $.0586 and $.0574, respectively.
- -------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 37
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION> ----------------------------------------------------
KEMPER HIGH YIELD PORTFOLIO
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 1.281 1.259 1.185 1.338 1.209
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .116 .120 .125 .116 .120
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .019 .042 .069 (.149) .109
- -----------------------------------------------------------------------------------------------
Total from investment operations .135 .162 .194 (.033) .229
- -----------------------------------------------------------------------------------------------
Less distribution from net investment
income .120 .140 .120 .120 .100
- -----------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.296 1.281 1.259 1.185 1.338
- -----------------------------------------------------------------------------------------------
TOTAL RETURN 11.61% 14.06 17.40 (2.25) 20.00
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses .65% .65 .65 .65 .63
- -----------------------------------------------------------------------------------------------
Net investment income 9.20% 9.70 10.27 9.49 9.54
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $391,664 289,315 257,377 219,415 233,964
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 90% 98 90 98 84
- -----------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------
KEMPER GROWTH PORTFOLIO
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 3.371 3.262 2.665 2.935 2.631
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .012 .030 .034 .018 .004
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .448 .589 .793 (.138) .370
- -----------------------------------------------------------------------------------------------
Total from investment operations .460 .619 .827 (.120) .374
- -----------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .020 .040 .010 -- .010
- -----------------------------------------------------------------------------------------------
Distribution from net realized gain .810 .470 .220 .150 .060
- -----------------------------------------------------------------------------------------------
Total dividends .830 .510 .230 .150 .070
- -----------------------------------------------------------------------------------------------
Net asset value, end of year $ 3.001 3.371 3.262 2.665 2.935
- -----------------------------------------------------------------------------------------------
TOTAL RETURN 21.34% 21.63 32.97 (4.02) 14.63
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses .65% .64 .64 .66 .64
- -----------------------------------------------------------------------------------------------
Net investment income .42% .94 1.15 .69 .30
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $563,016 487,483 414,533 321,708 284,461
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 170% 175 88 106 78
- -----------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the years ended December 31,
1997 and 1996 were $.0590 and $.0558, respectively.
- -----------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION> ---------------------------------------------------
KEMPER GOVERNMENT SECURITIES PORTFOLIO
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 1.207 1.269 1.142 1.267 1.277
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .084 .085 .084 .067 .060
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .016 (.057) .123 (.102) .020
- ----------------------------------------------------------------------------------------------
Total from investment operations .100 .028 .207 (.035) .080
- ----------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .100 .090 .080 .060 .060
- ----------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- .030 .030
- ----------------------------------------------------------------------------------------------
Total dividends .100 .090 .080 .090 .090
- ----------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.207 1.207 1.269 1.142 1.267
- ----------------------------------------------------------------------------------------------
TOTAL RETURN 8.96% 2.56 18.98 (2.74) 6.48
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses .64% .66 .65 .63 .60
- ----------------------------------------------------------------------------------------------
Net investment income 7.12% 7.09 7.08 5.69 5.05
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $86,682 84,314 95,185 95,782 121,912
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 179% 325 275 606 534
- ----------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------
KEMPER INTERNATIONAL PORTFOLIO
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 1.564 1.371 1.244 1.306 .993
- ----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .011 .011 .018 .009 .010
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .130 .212 .139 (.056) .313
- ----------------------------------------------------------------------------------------------
Total from investment operations .141 .223 .157 (.047) .323
- ----------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .020 .020 .010 -- .009
- ----------------------------------------------------------------------------------------------
Distribution from net realized gain .070 .010 .020 .015 .001
- ----------------------------------------------------------------------------------------------
Total dividends .090 .030 .030 .015 .010
- ----------------------------------------------------------------------------------------------
Net asset value, end of year $ 1.615 1.564 1.371 1.244 1.306
- ----------------------------------------------------------------------------------------------
TOTAL RETURN 9.46% 16.49 12.83 (3.59) 32.83
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses .91% .96 .92 .93 .92
- ----------------------------------------------------------------------------------------------
Net investment income .71% .89 1.39 .74 .86
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets at end of year (in thousands) $200,046 163,475 134,481 122,710 88,880
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 79% 87 126 107 116
- ----------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the years ended December 31,
1997 and 1996 were $.0142 and $.0183, respectively. Foreign commissions usually are lower than
U.S. commissions where expressed as cents per share due to the lower per share price of many
non-U.S. securities.
- ----------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------
KEMPER SMALL CAP GROWTH PORTFOLIO
-----------------------------------------------
YEAR ENDED DECEMBER 31, MAY 2 TO
-------------------------- DECEMBER 31,
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.677 1.346 1.039 1.000
- ------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .004 .002 .005 .008
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain .488 .369 .307 .031
- ------------------------------------------------------------------------------------------
Total from investment operations .492 .371 .312 .039
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .010 -- .005 --
- ------------------------------------------------------------------------------------------
Distribution from net realized gain .190 .040 -- --
- ------------------------------------------------------------------------------------------
Total dividends .200 .040 .005 --
- ------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.969 1.677 1.346 1.039
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 34.20% 28.04 30.07 3.95
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses .71% .75 .87 1.25
- ------------------------------------------------------------------------------------------
Net investment income .20% .15 .42 .91
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $137,415 69,137 35,373 12,909
- ------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 330% 156 81 58
- ------------------------------------------------------------------------------------------
Average commission rates paid per share on stock transactions for the years ended December
31, 1997 and 1996 were $.0579 and $.0570, respectively.
- ------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER
INVESTMENT GRADE VALUE SMALL CAP VALUE+
BOND PORTFOLIO PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO
------------------- ------------------- ------------------- -------------------
YEAR MAY 1 YEAR MAY 1 YEAR MAY 1 YEAR MAY 1
ENDED TO ENDED TO ENDED TO ENDED TO
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.036 1.000 1.174 1.000 1.019 1.000 1.146 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .066 .031 .031 .015 .012 .013 .012 .008
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .026 .005 .323 .159 .206 .006 .277 .138
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .092 .036 .354 .174 .218 .019 .289 .146
- -------------------------------------------------------------------------------------------------------------------------------
Less distribution from net investment
income .010 -- .010 -- .010 -- .010 --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.118 1.036 1.518 1.174 1.227 1.019 1.425 1.146
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.04% 3.57 30.38 17.36 21.73 1.86 25.47 14.60
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------------------
Expenses .80% .87 .80 .90 .84 .90 .84 .90
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 6.23% 4.93 2.38 2.42 1.18 2.25 .95 .97
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------------------
Expenses .80% .87 .80 .92 .84 .92 .84 1.01
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 6.23% 4.93 2.38 2.40 1.18 2.23 .95 .86
- -------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $15,504 1,998 162,380 21,305 76,108 13,307 69,094 10,196
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 311% 75 46 57 22 61 50 25
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on
stock transactions NA NA $.0561 .0500 .0533 .0500 .0591 .0596
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 41
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5 BLUE CHIP GLOBAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------- ------------------- ------------------- -------------------------
YEAR MAY 1 YEAR MAY 1 YEAR MAY 1 FOR THE PERIOD MAY 1
ENDED TO ENDED TO ENDED TO (COMMENCEMENT OF
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, OPERATIONS) TO
1997 1996 1997 1996 1997 1996 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.154 1.000 1.114 1.000 1.096 1.000 1.000 1.000
- -----------------------------------------------------------------------------------------------
.020 .012 .034 .018 .043 .023 .017 .036
- -----------------------------------------------------------------------------------------------
.214 .142 .151 .096 .095 .073 .098 (.007)
- -----------------------------------------------------------------------------------------------
.234 .154 .185 .114 .138 .096 .115 .029
- -----------------------------------------------------------------------------------------------
.010 -- .010 -- .010 -- -- --
- -----------------------------------------------------------------------------------------------
1.378 1.154 1.289 1.114 1.224 1.096 1.115 1.029
- -----------------------------------------------------------------------------------------------
20.48 15.37 16.77 11.37 12.70 9.59 11.54 2.87
.93 .81 .83 .78 .97 .83 .95 1.10
- -----------------------------------------------------------------------------------------------
1.58 1.71 2.77 2.69 3.63 3.60 2.07 5.36
- -----------------------------------------------------------------------------------------------
.93 1.13 .83 1.01 .97 1.01 .95 1.10
- -----------------------------------------------------------------------------------------------
1.58 1.39 2.77 2.46 3.63 3.42 2.07 5.36
- -----------------------------------------------------------------------------------------------
16,659 3,759 22,553 5,727 14,258 2,534 18,421 2,145
- -----------------------------------------------------------------------------------------------
75 60 67 76 89 13 78 290
- -----------------------------------------------------------------------------------------------
.0517 .0458 .0501 .0455 .0525 .0490 .0597 NA
- -----------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKING--4.4%
- --------------------------------------------------------------------------------
Credit Lyonnais, N.A., Inc.
5.78%, 1/20/98 $ 1,994
Swiss Bank Corp.
5.75%, 2/20/98 2,500
--------------------------------------------------
4,494
- --------------------------------------------------------------------------------
BUSINESS LOANS--24.8%
- --------------------------------------------------------------------------------
Broadway Capital Corp.
5.78%, 1/26/98 2,988
Eureka Securitization, Inc.
5.86%, 2/24/98 2,974
First Brands Corp.
5.82%, 1/29/98 2,987
Jet Funding Corp.
5.84%, 2/2/98 1,990
Preferred Receivables Funding Corp.
5.90%, 1/23/98 2,989
Sheffield Receivables Corp.
5.89%, 2/6/98 2,983
Thunder Bay Funding, Inc.
5.93%, 2/13/98 2,979
Windmill Funding Corp.
5.84%, 3/26/98 2,960
Working Capital Management Co., L.P.
6.28%, 2/25/98 1,981
--------------------------------------------------
24,831
- --------------------------------------------------------------------------------
CAPITAL AND EQUIPMENT
LENDING--12.9%
- --------------------------------------------------------------------------------
BTM Capital Corp.
5.79%, 1/26/98 1,992
Eiger Capital Corp.
5.84%, 2/13/98 2,979
Golden Manager's Acceptance Corp.
5.90%, 1/23/98 2,989
IBM Credit Corp.
5.71%, 1/14/98 2,495
(a)Sanwa Business Credit Corp.
5.98%, 1/16/98 2,500
--------------------------------------------------
12,955
- --------------------------------------------------------------------------------
CAPTIVE BUSINESS
LENDING--7.0%
- --------------------------------------------------------------------------------
(a)FINOVA Capital Corp.
6.03%, 1/13/98 2,000
Girsa Funding Corp.
5.86%, 2/2/98 1,990
Sony Capital Corp.
5.89%, 1/7/98 2,997
--------------------------------------------------
6,987
- --------------------------------------------------------------------------------
CONSUMER LENDING--6.0%
- --------------------------------------------------------------------------------
(a)Countrywide Home Loans
6.16%, 1/23/98 $ 2,001
NS Finance, Inc.
6.07%, 1/29/98 995
Transamerica Finance Corp.
5.77%, 1/29/98 2,987
--------------------------------------------------
5,983
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCE--8.9%
- --------------------------------------------------------------------------------
Dynamic Funding Corp.
6.08%, 2/4/98 2,983
Old Line Funding Corp.
5.94%, 1/21/98 2,990
Xerox Credit Corp.
5.78%, 1/13/98 2,994
--------------------------------------------------
8,967
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--12.0%
- --------------------------------------------------------------------------------
(a)Bear Stearns Cos., Inc.
5.96%, 1/20/98 2,000
(a)Goldman Sachs Group, L.P.
5.85%, 1/12/98 2,000
(a)(b)Lehman Brothers Holdings, Inc.
5.95%, 1/21/98 2,000
(a)Merrill Lynch & Co., Inc.
5.96%, 1/5/98 2,000
(a)Morgan Stanley, Dean Witter,
Discover & Co.
5.93%, 1/20/98 2,000
Nomura Holding America, Inc.
5.78%, 1/20/98 1,994
--------------------------------------------------
11,994
- --------------------------------------------------------------------------------
HEALTH CARE--3.0%
- --------------------------------------------------------------------------------
A.H. Robins Co., Inc.
5.81%, 1/28/98 2,987
--------------------------------------------------
- --------------------------------------------------------------------------------
MANUFACTURING/
INDUSTRIAL--3.0%
- --------------------------------------------------------------------------------
Du Pont de Nemours and Co.
5.79%, 1/16/98 2,993
--------------------------------------------------
</TABLE>
42
<PAGE> 43
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES--6.0%
- --------------------------------------------------------------------------------
Frontier Corp.
6.16%, 1/14/98 $ 2,993
MCI Communications Corp.
5.84%, 2/17/98 2,977
--------------------------------------------------
5,970
--------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CORPORATE
OBLIGATIONS--88.0%
(AVERAGE MATURITY: 38 DAYS) 88,161
--------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT AND BANK NOTES
- --------------------------------------------------------------------------------
(a)Bank One
5.88%, 1/6/98 1,999
(a)Comerica Bank
5.67%, 1/2/98 2,000
(a)CoreStates Bank, N.A.
5.97%, 1/5/98 1,000
(a)Mellon Bank Corp.
5.68%, 2/9/98 1,999
(a)Morgan Guaranty Trust Co. of New York
5.63%, 1/2/98 2,000
(a)PNC Bank Corp.
5.62%, 1/2/98 2,000
--------------------------------------------------
TOTAL CERTIFICATES
OF DEPOSIT AND BANK NOTES--11.0%
(AVERAGE MATURITY: 18 DAYS) 10,998
--------------------------------------------------
TOTAL INVESTMENTS--99.0%
(AVERAGE MATURITY: 35 DAYS) 99,159
--------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--1.0% 984
--------------------------------------------------
NET ASSETS -- 100% $100,143
--------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER 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, 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, 1997. The dates shown represent the demand date or next interest rate
change date.
(b) Illiquid security representing 2.0% of net assets at December 31, 1997.
See accompanying Notes to Financial Statements.
43
<PAGE> 44
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF
GOVERNMENT OBLIGATIONS SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTES
- --------------------------------------------------------------------------------
7.75%, 2000 6,000 $ 6,242
6.375%, 2000 1,000 1,013
7.875%, 2001 7,000 7,486
7.75%, 2001 9,000 9,520
6.625%, 2002 3,340 3,450
6.25%, 2003 9,150 9,357
7.25%, 2004 1,750 1,888
5.875%, 2004 175 177
6.625%, 2007 275 291
6.125%, 2007 4,525 4,651
---------------------------------------------------------------------------
44,075
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS
- --------------------------------------------------------------------------------
10.75%, 2003 $ 4,265 5,215
10.75%, 2005 10,495 13,648
10.375%, 2009 4,865 6,081
9.125%, 2009 4,870 5,693
13.875%, 2011 16,180 24,616
12.00%, 2013 1,800 2,653
10.625%, 2015 23,300 35,015
8.75%, 2020 4,000 5,335
6.50%, 2026 3,100 3,310
6.00%, 2026 1,030 1,029
6.625%, 2027 1,900 2,063
6.375%, 2027 700 739
6.125%, 2027 9,100 9,353
---------------------------------------------------------------------------
114,750
- --------------------------------------------------------------------------------
PROVINCE OF QUEBEC, CANADA
- --------------------------------------------------------------------------------
8.625%, 2005 1,500 1,687
---------------------------------------------------------------------------
TOTAL GOVERNMENT
OBLIGATIONS--20.4%
(Cost: $156,012) 160,512
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS
- --------------------------------------------------------------------------------
BASIC INDUSTRIES--1.9%
- --------------------------------------------------------------------------------
Crown Cork & Seal Co. 100,000 shs. 5,012
Ferro Corp. 175,000 4,255
Rhone-Poulenc Rorer, ADS
and warrants 135,600 3,229
W.R. Grace & Co. 35,000 2,815
---------------------------------------------------------------------------
15,311
- --------------------------------------------------------------------------------
CAPITAL GOODS--5.5%
- --------------------------------------------------------------------------------
B.F. Goodrich Co. 250,000 10,359
Emerson Electric Co. 100,000 5,644
General Electric Co. 180,000 13,207
General Motors Corp. 80,000 2,955
Raytheon Co. 44,992 2,219
Sundstrand Corp. 75,000 3,778
Technip, S.A. 3,468 368
York International Corp. 120,000 4,748
---------------------------------------------------------------------------
43,278
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS--9.0%
- --------------------------------------------------------------------------------
Carnival Corp. 44,000 $ 2,437
(b) Consolidated Stores Corp. 117,500 5,163
CVS Corp. 70,000 4,484
(b) Federated Department Stores 90,000 3,876
Hilton Hotels Corp. 100,000 2,975
Honeywell, Inc. 50,000 3,425
Hudson's Bay Co. 10,200 227
J.C. Penney Co. 20,000 1,206
May Department Stores Co. 72,000 3,794
Philip Morris Cos. 180,000 8,156
PPG Industries 90,000 5,140
R. R. Donnelley & Sons Co. 200,000 7,450
Sears, Roebuck & Co. 160,000 7,240
Time Warner, Inc. 120,000 7,440
(b) Toys R Us 100,000 3,144
Tribune Co. 40,000 2,490
Wm. Wrigley Jr. Co. 28,900 2,299
---------------------------------------------------------------------------
70,946
- --------------------------------------------------------------------------------
CONSUMER DURABLES--2.1%
- --------------------------------------------------------------------------------
Federal-Mogul Corp. 80,000 3,240
Leggett & Platt, Inc. 120,000 5,025
Stanley Works 170,000 8,022
---------------------------------------------------------------------------
16,287
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.5%
- --------------------------------------------------------------------------------
CPC International 55,000 5,940
General Mills 50,000 3,581
H.J. Heinz Co. 60,000 3,049
International Flavors &
Fragrances 80,000 4,120
Kimberly-Clark Corp. 80,000 3,945
PepsiCo 145,000 5,283
RJR Nabisco Holdings Corp. 50,000 1,875
Sara Lee Corp. 90,000 5,068
Seagram Company, Ltd. 80,000 2,585
Unilever, N.V., ADR 120,000 7,493
---------------------------------------------------------------------------
42,939
- --------------------------------------------------------------------------------
ENERGY--2.8%
- --------------------------------------------------------------------------------
AMOCO Corp. 25,000 2,128
Baker Hughes, Inc. 60,000 2,618
Chevron Corp. 60,000 4,620
Exxon Corp. 83,200 5,091
Mobil Corp. 70,000 5,053
Petro-Canada 12,900 237
Royal Dutch Petroleum 40,000 2,168
---------------------------------------------------------------------------
21,915
- --------------------------------------------------------------------------------
FINANCE--8.1%
- --------------------------------------------------------------------------------
ADVANTA Corp. 101,700 2,581
Allstate Corp. 40,000 3,635
American Express Co. 45,000 4,016
American General Corp. 100,000 5,406
</TABLE>
44
<PAGE> 45
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
- ----------------------------------------------------------------------
AmSouth Bancorporation 50,000 $ 2,716
Beneficial Corp. 60,000 4,988
Compass Bancshares 20,000 875
First Union Corp. 45,900 2,352
H.F. Ahmanson & Co. 25,000 1,673
Hibernia Corp. 50,000 941
Household International 45,000 5,740
Jefferson-Pilot Corp. 98,600 7,678
Morgan Stanley, Dean Witter,
Discover & Co. 130,000 7,686
PNC Bank Corp. 90,000 5,136
Safeco Corp. 120,000 5,850
Summit Bancorp 54,000 2,876
-----------------------------------------------------------------
64,149
- ----------------------------------------------------------------------
HEALTH CARE--9.6%
- ----------------------------------------------------------------------
Abbott Laboratories 120,000 7,868
ALZA Corp. 100,000 3,181
American Home Products Corp. 80,000 6,120
Betz Laboratories, Inc. 55,000 3,358
Biomet, Inc. 190,000 4,869
Bristol-Myers Squibb Co. 54,000 5,110
(b) British Biotech, PLC 14,500 25
Crescendo Pharmaceutical 5,000 58
C.R. Bard 160,000 5,010
Glaxo Wellcome, PLC 140,000 6,703
(b) HealthCare COMPARE Corp. 70,000 3,579
(b) HEALTHSOUTH Corp. 140,000 3,885
Novartis 95,000 7,695
Perkin-Elmer Corp. 85,000 6,040
(b) Tenet Healthcare Corp. 160,000 5,300
United Healthcare Corp. 70,000 3,478
Vencor, Inc. 140,000 3,421
-----------------------------------------------------------------
75,700
- ----------------------------------------------------------------------
TECHNOLOGY--9.1%
- ----------------------------------------------------------------------
AMP, Inc. 50,000 2,100
(b) Analog Devices 200,000 5,538
(b) Cisco Systems 45,000 2,509
Computer Associates
International 105,000 5,552
(b) Computer Sciences Corp. 120,000 10,020
(b) Compuware Corp. 170,000 5,440
(b) Gartner Group 134,300 5,003
Harris Corp. 200,000 9,175
Hewlett-Packard Co. 65,000 4,063
International Business
Machines Corp. 70,000 7,319
Linear Technology Corp. 10,000 576
(b) National Semiconductor Corp. 60,000 1,556
(b) Oracle Corp. 135,000 3,012
Pitney Bowes 45,000 4,047
(b) Sun Microsystems 70,000 2,791
(b) VIASOFT, Inc. 70,000 2,958
-----------------------------------------------------------------
71,659
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION--1.5%
- ---------------------------------------------------------------------
CSX Corp. 90,000 $ 4,860
(b) Federal Express Corp. 40,000 2,442
Norfolk Southern Corp. 135,000 4,160
----------------------------------------------------------------
11,462
- ---------------------------------------------------------------------
UTILITIES--3.9%
- ---------------------------------------------------------------------
Ameritech Corp. 60,000 4,830
AT&T 120,000 7,350
Canadian Pacific, Ltd. 100,000 2,725
Cincinnati Bell, Inc. 75,300 2,334
Enron Corp. 80,000 3,325
GTE Corp. 60,000 3,135
SBC Communications, Inc. 100,000 7,325
----------------------------------------------------------------
31,024
- ---------------------------------------------------------------------
MISCELLANEOUS--.1%
- ---------------------------------------------------------------------
Femsa 5,100 40
Getronics 18,600 593
- ---------------------------------------------------------------------
633
- ---------------------------------------------------------------------
----------------------------------------------------------------
TOTAL COMMON STOCKS--59.1%
(Cost: $393,895) 465,303
- ---------------------------------------------------------------------
CORPORATE OBLIGATIONS
- ---------------------------------------------------------------------
ASSET BACKED SECURITIES--.1%
- ---------------------------------------------------------------------
Pacific Gas & Electric,
6.42%, 2008 $ 400 401
Southern California Edison Co.
6.22%, 2004 100 100
6.28%, 2005 50 50
----------------------------------------------------------------
551
- ---------------------------------------------------------------------
BASIC INDUSTRIES--1.0%
- ---------------------------------------------------------------------
Case Corp.,
6.75%, 2007 500 508
Euramax International,
11.25%, 2006 2,850 3,092
MMI Products, Inc.,
11.25%, 2007 400 436
Riverwood International,
10.25%, 2006 2,650 2,637
Stone Container Corp.,
11.875%, 2016 1,000 1,070
Stone Container Finance
Corp., 11.50%, 2006 500 520
----------------------------------------------------------------
8,263
- ---------------------------------------------------------------------
CAPITAL GOODS--.2%
- ---------------------------------------------------------------------
Neenah Corp.,
11.125%, 2007 1,000 1,098
Nortek,
9.875%, 2004 90 92
Raytheon Co.,
6.75%, 2007 650 662
----------------------------------------------------------------
1,852
- ---------------------------------------------------------------------
</TABLE>
45
<PAGE> 46
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS--6.5%
- -------------------------------------------------------
AFC Enterprise, Inc.,
10.25%, 2007 $ 700 $ 740
AMF Group
10.875%, 2006 2,100 2,308
(a) 12.20%, 2006 612 483
American Radio System,
9.00%, 2006 1,260 1,340
Cablevision Systems Corp.,
9.25%, 2005 1,800 1,908
Cinemark USA, Inc.,
9.625%, 2008 1,360 1,408
Cole National Group,
9.875%, 2006 2,640 2,825
Comcast Cable
Communications,
8.875%, 2017 300 355
Comcast Cablevision,
8.50%, 2027 325 382
Comcast Corp.,
9.375%, 2005 1,500 1,596
(a) Comcast UK Cable Partners,
Ltd., 11.20%, 2007 2,880 2,329
Dayton Hudson Corp.,
7.50%, 2006 600 638
Delco Remy International,
10.625%, 2006 1,000 1,080
Empress River Casino,
10.75%, 2002 2,000 2,150
Federated Department Stores,
10.00%, 2001 1,350 1,489
Granite Broadcasting Corp.,
9.375%, 2005 1,240 1,260
Harman International
Industries,
7.32%, 2007 600 617
Hilton Hotels Corp.
7.375%, 2002 500 510
7.20%, 2007 500 497
(a) International CableTel, Inc.
12.75%, 2005 330 276
11.50%, 2006 2,270 1,771
J.C. Penney Co.,
7.95%, 2017 600 668
K-III Communications Corp.,
8.50%, 2006 750 761
Kinder-Care Learning
Centers, 9.50%, 2009 500 498
News American Holdings,
9.25%, 2013 1,025 1,217
Pathmark Stores,
9.625%, 2003 2,545 2,341
Rogers Cantel Mobile, Inc.,
8.80%, 2007 2,100 2,084
Royal Caribbean Cruises,
Ltd., 8.25%, 2005 1,250 1,357
Simon DeBartolo Group, Inc.,
7.125%, 2007 800 814
Sinclair Broadcasting Group,
Inc., 8.75%, 2007 850 846
Staples, Inc.,
7.125%, 2007 750 764
Tele-Communications, Inc.,
9.80%, 2012 700 871
(a) TeleWest Communications, PLC,
11.00%, 2007 4,020 3,136
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS--6.5% (CONTINUED)
- -------------------------------------------------------
Time Warner Entertainment
Co., L.P.,
8.875%, 2012 $ 425 $ 496
Time Warner, Inc.
9.125%, 2013 425 506
9.150%, 2023 450 554
Trump Atlantic City,
11.25%, 2006 1,800 1,760
USA Mobile Communications,
Inc.,
9.50%, 2004 1,750 1,698
Viacom Inc.,
8.00%, 2006 2,500 2,506
Windy Hill Pet Food
Company, Inc.,
9.75%, 2007 1,300 1,352
--------------------------------------------------------------------
50,191
- -------------------------------------------------------------------------
CONSUMER DURABLES--.6%
- -------------------------------------------------------------------------
Del Webb Corp.,
9.75%, 2008 2,600 2,720
WestPoint Stevens,
9.375%, 2005 2,050 2,158
--------------------------------------------------------------------
4,878
- -------------------------------------------------------------------------
ENERGY--.4%
- -------------------------------------------------------------------------
Gulf Canada Resources, Ltd.,
9.25%, 2004 1,500 1,575
USX Corp.,
9.375%, 2012 750 921
Wiser Oil Co.,
9.50%, 2007 690 674
--------------------------------------------------------------------
3,170
- -------------------------------------------------------------------------
FINANCE--2.4%
- -------------------------------------------------------------------------
AB Spintab,
7.50%, 2049 800 823
Abbey National, PLC,
7.35%, 2049 725 750
ABN AMRO Bank,
8.25%, 2009 1,250 1,355
Aegon, N.V.,
8.00%, 2006 1,000 1,096
Banco Central Hispano
Americano,
7.50%, 2005 1,070 1,116
Continental Homes Holding
Corp.,
10.00%, 2006 1,000 1,080
Corporation Andina De
Formento,
7.79%, 2017 750 777
Crestar Financial Corp.,
8.25%, 2002 600 643
Den Danske Bank,
7.40%, 2010 1,250 1,299
FINOVA Capital Corp.,
6.50%, 2002 550 554
Fleet Financial Group, Inc.
8.125%, 2004 100 108
8.625%, 2007 625 710
Ford Motor Credit Corp.,
7.75%, 2005 600 645
</TABLE>
46
<PAGE> 47
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
-----------------------------------------------------
General Electric Capital
Corp.
8.75%, 2007 $ 350 $ 409
8.625, 2008 400 472
Lehman Brothers Holdings
7.25%, 2003 250 258
7.375%, 2007 1,000 1,038
Morgan Stanley, Dean Witter,
Discover & Co.,
6.875%, 2007 750 764
NationsBank Corp.,
9.50%, 2004 600 697
Peoples Bank Bridgeport,
7.20%, 2006 700 714
Repsol International
Finance,
7.00%, 2005 1,000 1,034
Scotland International
Finance Co.,
8.80%, 2004 250 278
Skandinaviska Enskilda
Banken,
6.625%, 2049 1,000 1,001
Svenska Handelsbanken,
7.125%, 2049 650 654
Wells Fargo & Co.,
6.875%, 2006 750 768
-----------------------------------------------------
19,043
HEALTH CARE--.5%
-----------------------------------------------------
MedPartners, Inc.,
7.375%, 2006 875 862
Tenet Healthcare Corp.
10.125%, 2005 1,600 1,744
8.625%, 2007 1,000 1,030
-----------------------------------------------------
3,636
TRANSPORTATION--.4%
-----------------------------------------------------
Continental Airlines
7.75%, 2014 486 524
6.90%, 2018 400 407
Hayes Wheels International,
Inc.,
11.00%, 2006 1,500 1,673
Norfolk Southern Corp.,
7.35%, 2007 600 638
-----------------------------------------------------
3,242
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
UTILITIES--.7%
- ----------------------------------------------------------
(a) Call-Net Enterprises, Inc.,
13.25%, 2004 $ 500 $ 458
Commonwealth Edison
7.375%, 2004 850 881
7.00%, 2005 250 257
(a) Diamond Cable Communication PLC,
10.75%, 2007 1,000 684
Hyder, PLC,
6.875%, 2007 550 553
(a) McLeod, Inc.,
10.50%, 2007 1,500 1,091
U.S. West Capital Funding,
Inc.,
7.90%, 2027 850 930
WorldCom, Inc.
7.75%, 2007 500 534
7.75%, 2027 450 494
-----------------------------------------------------
5,882
-----------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--12.8%
(Cost: $97,638) 100,708
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--5.88% to 6.50%
Due--January 1998
Merrill Lynch & Co. 15,000 14,971
Whirlpool Financial Corp. 15,000 14,989
Other 31,500 31,421
-----------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--7.8%
(Cost: $61,386) 61,381
-----------------------------------------------------
TOTAL INVESTMENTS--100.1%
(Cost: $708,931) 787,904
-----------------------------------------------------
LIABILITIES, LESS OTHER ASSETS--(.1)% (908)
-----------------------------------------------------
NET ASSETS--100% $786,996
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER TOTAL RETURN PORTFOLIO OF INVESTMENTS
(a) Deferred interest obligation; currently zero coupon under the terms of the
initial offering.
(b) Non-income producing security.
Based on the cost of investments of $708,931,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $90,360,000, the
gross unrealized depreciation was $11,387,000 and the net unrealized
appreciation on investments was $78,973,000.
See accompanying Notes to Financial Statements.
47
<PAGE> 48
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
PRINCIPAL
GOVERNMENT OBLIGATIONS AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTE
- ----------------------------------------------------------
9.125%, 1999 $ 1,000 $ 1,045
- ----------------------------------------------------------
REPUBLIC OF ARGENTINA
- ----------------------------------------------------------
9.50%, 2002 600 595
--------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--.4%
(Cost: $1,641) 1,640
--------------------------------------------------
CORPORATE OBLIGATIONS
- ----------------------------------------------------------
AEROSPACE AND DEFENSE--1.8%
- ----------------------------------------------------------
Airlines Pass Through Trust,
10.875%, 2019 2,290 2,588
Fairchild Corp.,
12.00%, 2001 2,220 2,231
L-3 Communication Corp.,
10.375%, 2007 450 488
Tracor,
8.50%, 2007 820 838
Valujet, Inc.,
10.25%, 2001 930 844
--------------------------------------------------
6,989
- ----------------------------------------------------------
BROADCASTING, CABLESYSTEMS AND PUBLISHING--13.4%
- ----------------------------------------------------------
Affinity Group, Inc.,
11.50%, 2003 1,590 1,693
American Banknote Corp.,
11.25%, 2007 800 802
American Lawyer
9.75%, 2007 475 482
(b) 12.25%, 2008 220 124
American Radio Systems,
9.00%, 2006 1,260 1,340
(b) Australis Holdings,
15.00%, with warrants,
2002 3,945 2,152
Big Flower Press, Inc.,
8.875%, 2007 2,390 2,402
Busse Broadcasting,
11.625%, 2000 680 731
Cablevision Systems Corp.
9.25%, 2005 620 657
8.125%, 2009 1,140 1,180
9.875%, 2013 1,145 1,270
10.50%, 2016 1,640 1,923
Capstar Broadcasting
9.25%, 2007 1,610 1,666
(b) 12.75%, 2009 1,020 745
CCA Holdings,
13.00%, 1999 1,000 1,430
Century Communications Corp.
9.50%, 2005 300 316
8.375%, 2007 550 551
Chancellor Media,
8.125%, 2007 600 587
(b) Charter Communications,
14.00%, 2007 1,870 1,482
Comcast Corp.,
9.125%, 2006 2,180 2,311
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
BROADCASTING, CABLESYSTEMS AND PUBLISHING--CONTINUED
- ----------------------------------------------------------
(b) Comcast UK Cable Partners, Ltd.,
11.20%, 2007 $ 4,630 $ 3,745
(b) Diamond Cable Communication, PLC
13.25%, 2004 1,990 1,791
11.75%, 2005 1,120 869
10.75%, 2007 890 609
EZ Communications,
9.75%, 2005 590 652
Foxkids Worldwide
(b) 10.25%, 2007 1,600 944
9.25%, 2007 1,350 1,313
Frontiervision
11.00%, 2006 1,260 1,402
(b) 11.875%, 2007 800 588
Granite Broadcasting Corp.,
10.375%, 2005 670 704
(b) International Cabletel,
Inc.,
12.75%, 2005 4,300 3,591
Newsquest Capital, PLC,
11.00%, 2006 960 1,077
NTL,
10.00%, 2007 550 579
Perry-Judd,
10.625%, 2007 450 468
Salem Communications Corp.,
9.50%, 2007 770 787
Sinclair Broadcasting Group, Inc.
9.00%, 2007 350 357
8.75%, 2007 940 935
Star Choice,
13.00%, 2005 750 774
Sullivan Broadcasting
10.25%, 2005 410 441
13.25%, 2006 810 1,079
(b) Telegroup, Inc.
10.50%, 2004 350 273
TeleWest Communications, PLC
9.625%, 2006 1,200 1,260
(b) 11.00%, 2007 3,715 2,898
(b) Transwestern Holdings,
11.875%, 2008 520 312
Transwestern Publishing,
9.625%, 2007 760 790
(b) UIH Australia Pacific, Inc.,
14.00%, with warrants, 2006 750 496
--------------------------------------------------
52,578
- ----------------------------------------------------------
BUSINESS SERVICES--1.5%
- ----------------------------------------------------------
Corporate Express, Inc.,
9.125%, 2004 1,300 1,326
Outdoor Systems
9.375%, 2006 1,785 1,901
8.875%, 2007 1,740 1,818
Universal Outdoor Holdings, Inc.,
9.75%, 2006 880 986
--------------------------------------------------
6,031
</TABLE>
48
<PAGE> 49
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
CHEMICALS AND AGRICULTURE--3.2%
- ----------------------------------------------------------
Agriculture, Mining and
Chemicals, Inc.,
10.75%, 2003 $ 940 $ 1,006
Atlantis Group, Inc.,
11.00%, 2003 1,735 1,761
Climachem,
10.75%, 2007 500 516
Hines Horticulture,
11.75%, 2005 610 674
Huntsman Polymer Corp.
11.75%, 2004 2,180 2,442
NL Industries, Inc.
11.75%, 2003 1,330 1,473
(b) 13.00%, 2005 1,350 1,350
Terra Industries, Inc.,
10.50%, 2005 840 902
Texas Petrochemicals,
11.125%, 2006 1,040 1,134
UCC Investors Holdings, Inc.
10.50%, 2002 840 952
11.00%, 2003 300 320
--------------------------------------------------
12,530
- ----------------------------------------------------------
COMMUNICATIONS--12.3%
- ----------------------------------------------------------
(b) Call-Net Enterprises, Inc.
13.25%, 2004 460 421
9.27%, 2007 1,050 715
(b) Cellular, Inc.,
11.75%, 2003 1,795 1,817
Comcast Cellular Holdings, Inc.,
9.50%, 2007 3,510 3,659
(b) Comcel,
13.125%, with warrants,
2003 2,200 1,799
CommNet Cellular,
11.25%, 2005 730 832
Dobson Communication Corp.,
11.75%, 2007 2,500 2,644
Econophone, Inc.,
13.50%, with warrants,
2007 1,260 1,443
Esprit Telecom,
11.50%, 2007 925 953
GCI General Communication,
9.75%, 2007 1,520 1,581
HighwayMaster
Communications, Inc.,
13.75%, with warrants,
2005 730 750
(b) ICG Holdings,
13.50%, 2005 2,820 2,284
Interamerica Communications,
14.00%, 2007 280 283
Intermedia Capital Partners,
11.25%, 2006 1,300 1,453
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS--CONTINUED
- ----------------------------------------------------------
Intermedia Communications of
Florida, Inc., with warrants
expiring 2000
(b) 12.50%, 2006 $ 660 $ 518
(b) 11.25%, 2007 2,700 1,924
8.875%, 2007 570 709
McLeod, Inc.
(b) 10.50%, 2007 2,320 1,688
9.25%, 2007 870 914
Metronet Communications
12.00%, 2007 550 632
(b) 10.75%, 2007 630 384
MGC Communications,
13.00%, 2004 1,290 1,293
(b) Millicom International
Cellular, S.A.,
13.50%, 2006 2,410 1,771
Netia Holdings
10.25%, 2007 225 215
11.25%, 2007 345 195
(b) Nextel Communications
10.65%, 2007 590 375
9.75%, 2007 2,630 1,611
Nextlink Communications,
12.50%, 2006 850 972
Primus Telecommunications Group,
11.75%, with warrants,
2004 1,000 1,080
(b) PTC International Finance, B.V.,
10.75%, 2007 1,810 1,177
RCN Corp.
(b) 11.125%, 2007 820 513
10.00%, 2007 1,080 1,118
Rogers Cantel
8.80%, 2007 630 625
9.375%, 2008 700 737
9.75%, 2016 1,830 1,958
Teligent,
11.50%, 2007 800 800
USA Mobile Communications,
Inc. II
14.00%, 2004 880 977
9.50%, 2004 585 567
Vanguard Cellular Systems,
9.375%, 2006 1,280 1,331
Western Wireless
10.50%, 2006 and 2007 1,940 2,098
Winstar Equipment,
12.50%, 2004 1,180 1,324
--------------------------------------------------
48,140
</TABLE>
49
<PAGE> 50
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSTRUCTION MATERIALS--4.3%
- ----------------------------------------------------------
Airxcel,
11.00%, 2007 $ 840 $ 865
American Standard, Inc.
(b) 10.50%, 2005 1,110 1,127
9.25%, 2016 1,445 1,503
(b) Building Materials
Corporation of America,
11.75%, 2004 3,895 3,681
Desa International,
9.875%, 2007 1,250 1,281
Falcon Building Products, Inc.,
9.50%, 2007 1,120 1,165
Kevco,
10.375%, 2007 925 945
Nortek, Inc.
9.875%, 2004 1,240 1,265
9.125%, 2007 1,470 1,487
Triangle Pacific Corp.,
10.50%, 2003 2,185 2,302
Waxman Industries, Inc.
(b) 12.75%, 2004 400 362
(a) 52,274 warrants, expiring
2004 89
Werner Holdings,
10.00%, 2007 750 773
--------------------------------------------------
16,845
- ----------------------------------------------------------
CONSUMER PRODUCTS AND SERVICES--10.8%
- ----------------------------------------------------------
AFC Enterprises, Inc.,
10.25%, 2007 1,970 2,083
Allied Waste Industries
10.25%, 2006 790 870
(b) 11.30%, 2007 1,770 1,246
Ameriking,
10.75%, 2006 920 966
AMF Bowling World
(b) 12.25%, 2006 1,800 1,422
10.875%, 2006 2,890 3,175
Avondale Mills,
10.25%, 2006 1,670 1,791
Cinemark USA, Inc.,
9.625%, 2008 980 1,014
Coinmach Corp.,
11.75%, 2005 3,430 3,807
(b) Crown Castle International Corp.,
10.625%, 2007 2,500 1,562
Doskocil Manufacturing Co.,
10.125%, 2007 850 880
Dyersburg Corp.,
9.75%, 2007 590 618
Flagstar Corp.
10.75%, 2001 780 798
10.875%, 2002 480 494
Hedstrom Corp.,
10.00%, 2007 370 373
Herff Jones, Inc.,
11.00%, 2005 900 981
Hollywood Entertainment Corp.,
10.625%, 2004 1,115 1,087
Kinder-Care Learning Centers,
9.50%, 2009 3,080 3,065
Knoll, Inc.,
10.875%, 2006 676 757
Krystal Co.,
10.25%, 2007 490 502
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS AND SERVICES--CONTINUED
- ----------------------------------------------------------
NBTY, Inc.,
8.625%, 2007 $ 1,000 $ 1,000
Perkins Finance,
10.125%, 2007 600 603
Pillowtex Corp.,
9.00%, 2007 500 513
Premier Parks, Inc.,
12.00%, 2003 780 867
Riddell Sports, Inc.,
10.50%, 2007 1,095 1,136
Scovill Fasteners,
11.25%, 2007 800 818
(b) Sealy Mattress,
10.875%, 2007 500 304
(b) Six Flags Theme Park,
12.25%, 2005 3,850 4,100
Van De Kamps, Inc.,
12.00%, 2005 900 1,004
West Point Stevens, Inc.,
9.375%, 2005 3,300 3,473
Windy Hill Pet Food Company, Inc.,
9.75%, 2007 770 801
--------------------------------------------------
42,110
- ----------------------------------------------------------
DRUGS AND HEALTH CARE--3.5%
- ----------------------------------------------------------
Dade International Inc.,
11.125%, 2006 1,730 1,912
Genesis Eldercare,
9.00%, 2007 1,680 1,649
Graham-Field Health,
9.75%, 2007 560 588
Integrated Health Services, Inc.,
9.50%, 2007 1,150 1,182
Packard Bioscience,
9.375%, 2007 400 384
(b) Paragon Health Networks,
10.50%, 2007 2,170 1,340
Tenet Healthcare
10.125%, 2005 3,530 3,848
8.00%, 2005 590 600
8.625%, 2007 610 628
Vencor,
8.625%, 2007 1,570 1,574
--------------------------------------------------
13,705
- ----------------------------------------------------------
ENERGY AND RELATED SERVICES--6.4%
- ----------------------------------------------------------
AEI Holdings,
10.00%, 2007 550 567
Bellweather Exploration Co.,
10.875%, 2007 990 1,084
Benton Oil & Gas Co.
11.625%, 2003 1,515 1,670
9.375%, 2007 1,170 1,196
Clark Refining,
8.875%, 2007 600 608
Coda Energy,
10.50%, 2006 1,460 1,582
Dailey Petro Service,
9.75%, 2007 800 840
Espirito Santo,
10.00%, 2007 1,670 1,495
Ferrellgas Partners, L.P.,
9.375%, 2006 1,000 1,065
</TABLE>
50
<PAGE> 51
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
ENERGY AND RELATED SERVICES--CONTINUED
- ----------------------------------------------------------
Forcenergy Gas Exploration
9.50%, 2006 $ 1,470 $ 1,567
8.50%, 2007 1,520 1,535
National Energy Corp.,
10.75%, 2006 800 830
Ocean Energy,
9.75%, 2006 490 538
Pacalta Resources, Ltd.,
10.75%, 2004 1,900 1,843
Parker Drilling Corp.,
9.75%, 2006 1,140 1,226
Plains Resources,
10.25%, 2006 1,300 1,398
Rutherford-Moran Oil Corp.,
10.75%, 2004 570 580
Stone Energy Corp.,
8.75%, 2007 620 632
United Meridian Corp.,
10.375%, 2005 1,920 2,131
Vintage Petroleum
9.00%, 2005 1,635 1,700
8.625%, 2009 400 416
Wiser Oil Co.,
9.50%, 2007 460 450
--------------------------------------------------
24,953
- ----------------------------------------------------------
FINANCIAL SERVICES, HOME BUILDING AND REAL ESTATE--3.8%
- ----------------------------------------------------------
Continental Homes Holding,
10.00%, 2006 496 536
Del Webb Corp.,
9.75%, 2008 1,590 1,663
Donaldson, Lufkin & Jenrette
5.984%, 2002 1,400 1,392
DVI, Inc.,
9.875%, 2004 520 545
Emergent Group,
10.750%, 2004 620 618
Forecast Group, L.P.,
11.375%, 2000 765 711
Fortress Group,
13.75%, 2003 880 990
Hovnanian Enterprises,
11.25%, 2002 1,858 1,939
Intertek Finance,
10.25%, 2006 940 989
Kaufman & Broad Home Corp.
7.75%, 2004 1,000 994
9.625%, 2006 310 328
New Millen Home Building,
12.00%, 2004 220 218
Presley Cos.,
12.50%, 2001 1,275 1,227
Southern Pacific Funding,
11.50%, 2004 530 519
UDC Homes,
12.50%, 2000 970 980
Williams Scotsman, Inc.,
9.875%, 2007 1,300 1,345
--------------------------------------------------
14,994
- ----------------------------------------------------------
HOTELS AND GAMING--2.3%
- ----------------------------------------------------------
Eldorado Resorts,
10.50%, 2006 2,010 2,201
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
HOTELS AND GAMING--CONTINUED
- ----------------------------------------------------------
Empress River Casino,
10.75%, 2002 $ 1,640 $ 1,763
Harvey's Casino Resorts,
10.625%, 2006 740 807
HMH Properties
9.50%, 2005 1,650 1,749
8.875%, 2007 750 786
Players International,
10.875%, 2005 660 713
Trump Atlantic City,
11.25%, 2006 1,049 1,017
--------------------------------------------------
9,036
- ----------------------------------------------------------
MANUFACTURING, METALS AND MINING--10.8%
- ----------------------------------------------------------
Aftermarket Technology,
12.00%, 2004 1,035 1,149
Alvey Systems,
11.375%, 2003 370 393
Bar Technologies,
13.50%, with warrants,
2001 1,060 1,192
Centaur Mining,
11.00%, 2007 700 703
Collins & Aikman Corp.,
11.50%, 2006 1,820 2,043
Crain Industries, Inc.,
13.50%, 2005 1,240 1,513
Day International Group,
Inc.,
11.125%, 2005 1,710 1,881
Delco Remy International
10.625%, 2006 1,630 1,760
8.625%, 2007 750 758
Euramax International, PLC,
11.25%, 2006 1,580 1,714
Foamex, L.P.,
9.875%, 2007 1,930 1,949
Fort Worth Tower,
9.875%, 2007 610 625
GS Technologies
12.00%, 2004 380 417
12.25%, 2005 620 695
Hayes Wheels International, Inc.,
11.00%, 2006 1,750 1,951
IMO Industries,
11.75%, 2006 1,750 1,934
Johnstown American,
11.75%, 2005 660 723
JPS Automotive Products Corp.,
11.125%, 2001 1,780 1,985
Koppers Industries,
9.875%, 2007 550 567
MMI Products, Inc.,
11.25%, 2007 450 491
Motors and Gears, Inc.,
10.75%, 2006 1,200 1,272
Neenah Corp.,
11.125%, 2007 1,820 1,997
Park-Ohio Industries,
9.25%, 2007 1,110 1,136
Renco Metals,
11.50%, 2003 1,005 1,070
Telex Communication,
10.50%, 2007 320 316
</TABLE>
51
<PAGE> 52
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
MANUFACTURING, METALS AND MINING--CONTINUED
- ----------------------------------------------------------
Thermadyne Industries, Inc.
10.25%, 2002 $ 1,390 $ 1,442
10.75%, 2003 626 673
UCAR Global,
12.00%, 2005 2,472 2,762
Venture Holdings,
9.50%, 2005 1,510 1,536
WCI Steel, Inc.,
10.00%, 2004 1,240 1,266
Wheeling-Pitt Corp.,
9.25%, 2007 1,800 1,737
Weirton Steel Corp.,
11.375%, 2004 1,000 1,055
Wells Aluminum Corp.,
10.125%, 2005 1,400 1,484
--------------------------------------------------
42,189
- ----------------------------------------------------------
PAPER, FOREST PRODUCTS, AND CONTAINERS--8.0%
- ----------------------------------------------------------
AEP Industries,
9.875%, 2007 550 565
Berry Plastics Corp.,
12.25%, 2004 1,330 1,450
BPC Holding Corp.,
12.50%, 2006 750 818
BWAY Corp.,
10.25%, 2007 870 953
Doman Industry,
9.25%, 2007 700 682
Fonda Group,
9.50%, 2007 840 798
Gaylord Container Corp.
12.75%, 2005 2,530 2,713
9.75%, 2007 690 669
Huntsman Corp.
9.50%, 2007 1,700 1,776
Maxxam Group, Inc.
(b) 12.25%, 2003 440 439
11.25%, 2003 1,653 1,760
National Fiberstock Corp.,
11.625%, 2002 760 802
Pindo Deli Finance
Mauritius, Ltd.,
10.75%, 2007 600 513
Printpack, Inc.
9.875%, 2004 530 563
10.625%, 2006 1,360 1,443
Riverwood International
10.25%, 2006 1,180 1,174
10.625%, 2007 1,270 1,283
10.875%, 2008 3,785 3,596
Specialty Paperboard,
9.375%, 2006 865 913
Spinnaker Industries,
10.75%, 2006 1,450 1,486
Stone Container Corp.
9.875%, 2001 1,600 1,588
12.25%, 2002 1,020 1,033
11.50%, 2006 2,185 2,272
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
PAPER, FOREST PRODUCTS, AND CONTAINERS--CONTINUED
- ----------------------------------------------------------
Tjiwi Kimia Finance
Mauritius, Ltd.,
10.00%, 2004 $ 600 $ 486
U.S. Can Corp.,
10.125%, 2006 1,570 1,649
--------------------------------------------------
31,424
- ----------------------------------------------------------
RETAILING--3.6%
- ----------------------------------------------------------
Cole National Group
9.875%, 2006 270 289
8.625%, 2007 1,090 1,083
(a) Color Tile, Inc.,
10.75%, 2001 1,470 15
Finlay Fine Jewelry Corp.,
10.625%, 2003 1,945 2,042
Guitar Center Management,
11.00%, 2006 880 977
J. Crew Group
10.375%, 2007 880 766
(b) 13.125%, 2008 1,330 579
Nine West Group,
9.00%, 2007 650 618
Pamida Holdings,
11.75%, 2003 1,340 1,367
Pathmark Stores
12.625%, 2002 490 407
9.625%, 2003 780 718
Petro Shopping Centers, L.P.,
10.50%, 2007 2,520 2,671
Specialty Retailers
8.50%, 2005 270 275
9.00%, 2007 470 479
TravelCenters of
America, Inc.,
10.25%, 2007 1,880 1,974
--------------------------------------------------
14,260
- ----------------------------------------------------------
TECHNOLOGY--.9%
- ----------------------------------------------------------
Communication and Power
Industry, Inc.,
12.00%, 2005 585 655
EV International,
11.00%, 2007 920 938
Viasystems, Inc.,
9.75%, 2007 1,700 1,755
--------------------------------------------------
3,348
- ----------------------------------------------------------
TRANSPORTATION--.5%
- ----------------------------------------------------------
TFM, S.A. de C.V.,
10.25%, 2007 1,440 1,483
(b) Transtar Holdings, L.P.,
13.375%, 2003 631 549
--------------------------------------------------
2,032
--------------------------------------------------
TOTAL CORPORATE
OBLIGATIONS--87.1%
(Cost: $329,618) 341,164
--------------------------------------------------
</TABLE>
52
<PAGE> 53
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
COMMON AND PREFERRED STOCKS OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
Benedek Unit, PIK,
preferred with warrants 5,000 $ 660
(a) Capital Pacific Holdings 3,634 4
Clark USA,
PIK, preferred 2,600 277
Crown American Realty Trust,
preferred 16,400 857
(a) Echostar Communications
Corp. 7,387 124
(a) Empire Gas Corp.,
warrants 2,070 10
(a) Foamex International,
warrants 940 19
(a) Gaylord Container Corp. 122,950 707
(a) Gulf States Steel, warrants 1,810 9
(a) Intelcom Group, Inc., warrants 4,851 68
Sinclair Capital, preferred 13,000 1,417
(a) Sullivan Broadcasting 12,960 130
--------------------------------------------------
TOTAL COMMON AND
PREFERRED STOCKS--1.1%
(Cost: $3,437) 4,282
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------
<S> <C> <C>
MONEY MARKET INSTRUMENTS
Yield--5.88% to 6.51%
Due--January 1998
Cooper Industries, Inc. $14,000 $ 13,990
Whirlpool Financial Corp. 10,000 9,993
Other 13,753 13,731
--------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--9.6%
(Cost: $37,715) 37,714
--------------------------------------------------
TOTAL INVESTMENTS--98.2%
(Cost: $372,411) 384,800
--------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--1.8% 6,864
--------------------------------------------------
NET ASSETS--100% $391,664
--------------------------------------------------
</TABLE>
NOTES TO KEMPER HIGH YIELD PORTFOLIO OF INVESTMENTS
(a) 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.
(b) Deferred interest obligation; currently zero coupon under terms of the
initial offering.
Based on the cost of investments of $372,411,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $16,096,000, the
gross unrealized depreciation was $3,707,000 and the net unrealized appreciation
on investments was $12,389,000.
See accompanying Notes to Financial Statements.
53
<PAGE> 54
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES--1.1%
- ----------------------------------------------------------
(a) Femsa 17,400 $ 137
(a) USA Waste Services 150,300 5,899
-----------------------------------------------------
6,036
- ----------------------------------------------------------
CAPITAL GOODS--.1%
- ----------------------------------------------------------
-----------------------------------------------------
Technip, S.A. 4,634 491
- ----------------------------------------------------------
COMPUTER SYSTEMS AND SOFTWARE--16.1%
- ----------------------------------------------------------
(a) Cadence Design Systems 476,000 11,662
Compaq Computer Corp. 98,650 5,568
(a) Electronic Arts 351,800 13,302
(a) Gartner Group 398,600 14,848
Hewlett-Packard Co. 130,100 8,131
International Business
Machines Corp. 11,500 1,202
(a) Oracle Corp. 152,800 3,409
(a) Parametric Technology Corp. 201,600 9,551
(a) PeopleSoft, Inc. 178,400 6,958
(a) Sterling Commerce, Inc. 242,800 9,333
(a) Sun Microsystems 163,700 6,528
-----------------------------------------------------
90,492
- ----------------------------------------------------------
CONSUMER CYCLICALS--13.1%
- ----------------------------------------------------------
(a) AutoZone 246,000 7,134
Dayton Hudson Corp. 145,100 9,794
(a) Federated Department Stores 271,700 11,700
Hilton Hotels Corp. 200,000 5,950
Hudson's Bay Co. 16,700 372
J.C. Penney Co. 34,600 2,087
Lowes Companies 95,900 4,573
May Department Stores Co. 231,200 12,181
(a) Tommy Hilfiger Corp. 199,600 7,011
(a) Toys R Us 412,500 12,968
-----------------------------------------------------
73,770
- ----------------------------------------------------------
CONSUMER STAPLES--3.9%
- ----------------------------------------------------------
Avon Products 63,900 3,922
Gillette Co. 71,500 7,181
International Flavors &
Fragrances 120,400 6,201
Wm. Wrigley Jr. Co. 54,800 4,360
-----------------------------------------------------
21,664
- ----------------------------------------------------------
ENERGY--4.9%
- ----------------------------------------------------------
Baker Hughes, Inc. 289,200 12,616
BJ Services Co. 24,500 1,762
Halliburton Co. 104,500 5,427
Schlumberger, Ltd. 99,000 7,970
(a) Transocean Offshore, Inc. 400 19
-----------------------------------------------------
27,794
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
FINANCE--14.4%
- ----------------------------------------------------------
ADVANTA Corp 225,900 $ 5,732
American Express Co. 60,800 5,426
Banc One Corp. 209,400 11,373
Citicorp 4,100 518
Corestates Financial 18,100 1,449
First Union Corp. 151,700 7,775
Hartford Financial Services 40,000 3,743
Household International 71,100 9,070
Merrill Lynch & Co. 28,900 2,108
Morgan Stanley, Dean Witter,
Discover & Co. 202,300 11,961
NationsBank 235,300 14,309
PNC Bank Corp. 103,800 5,923
Washington Mutual, Inc. 29,400 1,876
-----------------------------------------------------
81,263
- ----------------------------------------------------------
HEALTH CARE--23.3%
- ----------------------------------------------------------
ALZA Corp. 179,700 5,717
American Home Products
Corp. 134,800 10,312
(a) Amgen, Inc. 228,000 12,341
Baxter International 131,900 6,653
(a) Biogen 302,000 10,985
(a) Boston Scientific Corp. 109,100 5,005
Bristol-Myers Squibb Co. 112,200 10,617
(a) Crescendo Pharmaceutical 8,985 104
Eli Lilly & Co. 132,000 9,191
Medtronic, Inc. 138,800 7,261
Perkin-Elmer Corp. 161,100 11,448
SmithKline Beecham Group 161,800 8,323
United Healthcare Corp. 396,800 19,716
Warner-Lambert Co. 108,900 13,504
-----------------------------------------------------
131,177
- ----------------------------------------------------------
SEMICONDUCTORS AND NETWORKING--13.3%
- ----------------------------------------------------------
AMP, Inc. 180,200 7,568
(a) Analog Devices 225,500 6,244
(a) Applied Materials, Inc. 89,800 2,705
(a) Ascend Communications, Inc. 114,300 2,800
(a) Cisco Systems 210,700 11,747
Intel Corp. 157,000 11,029
Linear Technology Corp. 78,200 4,506
(a) Microchip Technology 192,200 5,766
(a) National Semiconductor Corp. 205,400 5,328
(a) Teradyne, Inc. 185,600 5,939
Texas Instruments 57,600 2,592
(a) 3Com Corp. 115,500 4,035
United Technologies 66,000 4,806
-----------------------------------------------------
75,065
- ----------------------------------------------------------
TELECOMMUNICATIONS--3.9%
- ----------------------------------------------------------
CBS, Inc. 197,000 5,799
(a) Nokia Corp. 31,500 2,205
(a) Tellabs, Inc. 111,500 5,896
(a) WorldCom, Inc. 260,900 7,892
-----------------------------------------------------
21,792
</TABLE>
54
<PAGE> 55
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------
<S> <C> <C>
-----------------------------------------------------
TRANSPORTATION--2.0%
-----------------------------------------------------
CSX Corp. 106,700 $ 5,762
Norfolk Southern Corp. 182,100 5,611
-----------------------------------------------------
11,373
-----------------------------------------------------
TOTAL COMMON STOCKS--96.1%
(Cost: $501,837) 540,917
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--2.3%
Yield--6.15%
Due--January 1998
(Cost: $12,991) $13,000 12,991
-----------------------------------------------------
TOTAL INVESTMENTS--98.4%
(Cost: $514,828) 553,908
-----------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.6% 9,108
-----------------------------------------------------
NET ASSETS--100% $563,016
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $514,828,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $59,414,000, the
gross unrealized depreciation was $20,334,000 and the net unrealized
appreciation on investments was $39,080,000.
See accompanying Notes to Financial Statements.
55
<PAGE> 56
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER GOVERNMENT SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT
NATIONAL MORTGAGE
ASSOCIATION -- 56.9%
(Cost: $47,510)
Adjustable Rate Mortgages 7.00% 2022 $ 2,470 $ 2,543
Pass-through Certificates 7.00 2022-2024 13,556 13,703
7.50 2022-2027 10,904 11,212
8.00 2016-2027 12,355 12,856
8.50 2016-2028 4,111 4,329
9.00 2016-2027 3,200 3,429
9.50 2013-2022 528 571
10.00 2016 586 645
-------------------------------------------------------------------------------
49,288
- --------------------------------------------------------------------------------------------------------------------
U.S. TREASURY
SECURITIES -- 12.2%
(Cost: $10,843)
Notes 8.75 2000 5,000 5,367
7.875 2001 1,000 1,069
7.00 2006 1,600 1,728
Bonds 11.875 2003 870 1,131
9.125 2009 484 566
9.125 2018 555 756
-------------------------------------------------------------------------------
10,617
- --------------------------------------------------------------------------------------------------------------------
FEDERAL HOME
LOAN MORTGAGE
CORPORATION -- 10.0%
(Cost: $8,059)
Pass-through Certificates 7.00 2023-2024 8,605 8,711
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 9.3%
(Cost: $7,911)
Pass-through Certificates 6.50 2025 502 496
7.00 2028 5,000 5,036
7.50 2025 1,644 1,683
8.00 2024-2025 788 816
-------------------------------------------------------------------------------
8,031
- --------------------------------------------------------------------------------------------------------------------
CANADIAN PROVINCIAL
OBLIGATIONS -- 1.3%
(Cost: $1,094)
Province of Ontario 7.625 2004 500 537
Province of Quebec 8.625 2005 500 562
-------------------------------------------------------------------------------
1,099
-------------------------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--89.7%
(Cost: $75,417) 77,746
-------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 57
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
TYPE RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(a) CORPORATE
OBLIGATIONS -- 16.0%
American Express Master Trust 7.60% 2002 $ 2,500 $ 2,624
Banco Central Hispano 7.50 2005 500 521
Chase Credit Co. 5.55 2003 2,500 2,460
Equitable Life 6.95 2005 500 510
Ford Motor Credit 8.00 2002 500 531
Green Tree Financial Corp. 7.00 2027 2,500 2,539
Nabisco, Inc. 6.70 2002 500 505
NCNB/NationsBank Corp. 9.50 2004 500 581
Olympic Automobile Receivable 7.00 2004 2,500 2,558
Sears Roebuck Acceptance Corp. 6.75 2005 500 509
Southwestern Bell Telephone 6.625 2005 500 509
-------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--16.0%
(Cost: $13,778) 13,847
-------------------------------------------------------------------------------
TOTAL INVESTMENTS--105.7%
(Cost: $89,195) 91,593
-------------------------------------------------------------------------------
LIABILITIES, LESS CASH AND OTHER ASSETS--(5.7)% (4,911)
-------------------------------------------------------------------------------
NET ASSETS--100% $ 86,682
-------------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER GOVERNMENT SECURITIES PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) The portfolio may invest up to 35% of total assets in fixed income
securities other than U.S. Government Securities.
Based on the cost of investments of $89,195,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $2,839,000, the
gross unrealized depreciation was $441,000 and the net unrealized appreciation
on investments was $2,398,000.
See accompanying Notes to Financial Statements.
57
<PAGE> 58
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
COMMON STOCKS OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
EUROPE
- ----------------------------------------------------------
NETHERLANDS--15.8%
Koninklijke Ahold, N.V.
FOOD RETAILER 198,003 $ 5,167
Aegon, N.V.
INSURANCE COMPANY 50,911 4,533
ING Groep, N.V.
BANKING AND INSURANCE 106,456 4,484
Getronics, N.V.
INFORMATION AND
COMMUNICATION SERVICES 96,500 3,075
Unique International, N.V.
TEMPORARY EMPLOYMENT 102,730 2,189
Nedcon Groep
MANUFACTURER OF RACKING
SYSTEMS 42,000 2,051
Royal Dutch Petroleum
PETROLEUM PRODUCER 36,260 1,991
Vedior, N.V.
TEMPORARY EMPLOYMENT 106,000 1,908
(a) Baan Company, N.V.
SERVICE SOFTWARE
APPLICATIONS 57,800 1,893
Aalberts Industries, N.V.
CAPITAL GOODS AND
COMPONENTS 62,059 1,638
De Boer Unigro, N.V.
FOOD RETAILER 48,300 1,525
Sligro Beheer, N.V.
DISTRIBUTOR OF FOOD AND
NON-FOOD PRODUCTS 9,000 564
Beter Bed Holding, N.V.
FURNITURE RETAILER 27,000 521
-----------------------------------------------------
31,539
- ----------------------------------------------------------
UNITED KINGDOM--13.5%
- ----------------------------------------------------------
Barclays, PLC
BANKING 199,621 5,335
BBA Group, PLC
DIVERSIFIED ENGINEERING
COMPANY 692,064 4,672
Glaxo Wellcome, PLC
PHARMACEUTICAL COMPANY 189,822 4,523
Rentokil Group, PLC
SERVICES COMPANY 960,000 4,210
British Petroleum
PETROLEUM PRODUCER 303,424 4,017
Prudential Corp., PLC
FINANCIAL SERVICES 190,000 2,308
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM--CONTINUED
- ----------------------------------------------------------
Marks & Spencer, PLC
CONSUMER GOODS AND FOOD
RETAILER 110,000 $ 1,090
(a) British Bio-Tech Group
PHARMACEUTICAL COMPANY 450,000 774
-----------------------------------------------------
26,929
- ----------------------------------------------------------
SWITZERLAND--9.6%
- ----------------------------------------------------------
Novartis
PHARMACEUTICAL COMPANY 4,160 6,759
Ciba Specialty Chemicals
CHEMICAL PRODUCER 44,160 5,268
Roche Holdings, A.G.
PHARMACEUTICAL COMPANY 525 5,221
Alusuisee-Lonza Holding
ALUMINUM, CHEMICALS AND
PACKAGING MANUFACTURER 2,000 1,910
-----------------------------------------------------
19,158
- ----------------------------------------------------------
FRANCE--7.2%
- ----------------------------------------------------------
Elf Aquitaine
OIL AND GAS PRODUCER 53,800 6,290
Carrefour, S.A.
FOOD RETAILER 8,400 4,405
AXA--UAP, S.A.
INSURANCE COMPANY 25,000 1,945
Technip, S.A.
ENGINEERING COMPANY 16,400 1,739
-----------------------------------------------------
14,379
- ----------------------------------------------------------
GERMANY--4.9%
- ----------------------------------------------------------
Mannesmann, A.G.
CAPITAL GOODS PRODUCER 5,260 2,659
Veba, A.G.
ELECTRIC UTILITY 32,000 2,180
SAP, A.G.
COMPUTER SOFTWARE COMPANY 6,900 2,097
Viag, A.G.
DIVERSIFIED MANUFACTURING
COMPANY 3,600 1,940
SGL CARBON, A.G.
CHEMICAL PRODUCER 7,000 903
-----------------------------------------------------
9,779
- ----------------------------------------------------------
IRELAND--4.3%
- ----------------------------------------------------------
Bank of Ireland
BANKING 411,234 6,283
Independent Newspapers, PLC
PUBLISHER 443,201 2,400
-----------------------------------------------------
8,683
</TABLE>
58
<PAGE> 59
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
SPAIN--4.2%
- ----------------------------------------------------------
Banco Popular Espanol, S.A.
BANKING 32,400 $ 2,264
Telefonica de Espana, S.A.
DOMESTIC AND INTERNATIONAL
TELECOMMUNICATIONS 74,000 2,112
Banco Santander, S.A.
BANKING 46,000 1,536
Banco Bilbao Vizcaya, S.A.
BANKING 37,800 1,223
Repsol, S.A.
OIL COMPANY 23,300 994
Prosegur, Cia de Seguridad, S.A.
SECURITY SERVICES PROVIDER 35,000 351
----------------------------------------------------
8,480
- ----------------------------------------------------------
ITALY--3.6%
- ----------------------------------------------------------
Telecom Italia, SpA
TELECOMMUNICATIONS PROVIDER 620,000 3,963
Telecom Italia Mobile
MOBILE TELECOMMUNICATIONS
PROVIDER 700,000 3,233
-----------------------------------------------------
7,196
- ----------------------------------------------------------
SWEDEN--.6%
- ----------------------------------------------------------
(a) Industri-Matematik
International Corp.
SERVICE SOFTWARE
APPLICATIONS 41,300 1,218
-----------------------------------------------------
- ----------------------------------------------------------
PORTUGAL--.3%
- ----------------------------------------------------------
Electricidade de Portugal, S.A.
ELECTRICITY PROVIDER 32,000 607
-----------------------------------------------------
TOTAL EUROPEAN
COUNTRIES--64.0% 127,968
-----------------------------------------------------
PACIFIC REGION
- ----------------------------------------------------------
JAPAN--11.1%
- ----------------------------------------------------------
Sony Corp.
ELECTRONICS MANUFACTURER 43,400 3,872
Fuji Photo Film Co., Ltd.
PRECISION INSTRUMENTS
MANUFACTURER 78,000 2,999
Honda Motor Co., Ltd.
AUTOMOBILE MANUFACTURER 72,000 2,652
Ricoh Co., Ltd.
PRECISION INSTRUMENTS
MANUFACTURER 185,000 2,305
Toray Industries
TEXTILE MANUFACTURER 360,000 1,620
Shohkoh Fund & Co., Ltd.
FINANCING COMPANY 5,200 1,592
Circle K Japan
CONVENIENCE RETAILER 32,400 1,557
Canon, Inc.
PRECISION INSTRUMENTS
MANUFACTURER 58,000 1,356
Bellsystem 24, Inc.
TELEMARKETING FIRM 10,000 1,315
Toppan Printing Co., Ltd.
PRINTING SERVICES 78,000 1,020
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
JAPAN--CONTINUED
- ----------------------------------------------------------
Murata Manufacturing
ELECTRONICS COMPONENTS
MANUFACTURER 47,000 $ 1,186
Noritsu Koki Co., Ltd.
PRECISION INSTRUMENTS
MANUFACTURER 30,400 753
-----------------------------------------------------
22,227
- ----------------------------------------------------------
HONG KONG--1.2%
- ----------------------------------------------------------
HSBC Holdings, PLC
BANKING 56,601 1,395
CITIC Pacific, Ltd.
CONGLOMERATE 243,000 966
-----------------------------------------------------
2,361
-----------------------------------------------------
TOTAL PACIFIC REGION--12.3% 24,588
-----------------------------------------------------
COMMONWEALTH COUNTRIES
- ----------------------------------------------------------
CANADA--5.8%
- ----------------------------------------------------------
Petro-Canada
OIL AND GAS COMPANY 282,700 5,195
Hudson's Bay Co.
DEPARTMENT STORE RETAILER 133,500 2,975
(a) Philip Services Corp.
RECYCLING 166,500 2,393
(a) Boardwalk Equities, Inc.
REAL ESTATE COMPANY 85,000 1,056
-----------------------------------------------------
11,619
- ----------------------------------------------------------
AUSTRALIA--.9%
- ----------------------------------------------------------
St. George Bank, Ltd.
BANKING 335,575 1,909
-----------------------------------------------------
- ----------------------------------------------------------
NEW ZEALAND--.3%
- ----------------------------------------------------------
Restaurant Brands New
Zealand, Ltd.
RETAILER 630,000 624
-----------------------------------------------------
TOTAL COMMONWEALTH
COUNTRIES--7.0% 14,152
-----------------------------------------------------
LATIN AMERICA
- ----------------------------------------------------------
MEXICO--3.2%
- ----------------------------------------------------------
Fomento Economico Mexicano,
S.A. de C.V., "B," ADR
BEER AND SOFT DRINK
MANUFACTURER 245,000 1,936
Kimberly-Clark de Mexico,
S.A. de C.V.
PAPER PRODUCTS PRODUCER 392,700 1,861
Grupo Elektra, S.A. de C.V., GDR
RETAILER 902,500 1,559
Industries Bachoco, S.A.
POULTRY PRODUCER 53,250 1,038
-----------------------------------------------------
6,394
</TABLE>
59
<PAGE> 60
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
BRAZIL--1.6%
- ----------------------------------------------------------
Telecommunicoes Brasileiro, S.A.
TELEPHONE COMPANY 13,500 $ 1,572
Petroleo Brasileiro, S.A.
OIL AND GAS COMPANY 6,550,000 1,532
-----------------------------------------------------
3,104
- ----------------------------------------------------------
CHILE--.5%
- ----------------------------------------------------------
Supermercados Unimarc, S.A.
FOOD RETAILER 85,100 1,048
-----------------------------------------------------
TOTAL LATIN AMERICAN
COUNTRIES--5.3% 10,546
-----------------------------------------------------
TOTAL COMMON STOCKS--88.6%
(Cost: $140,986) 177,254
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
MONEY MARKET INSTRUMENTS
Yield--5.80% to 5.94%
Due--January and February 1998
CIESCO, L.P. $10,000 $ 9,986
IBM Credit Corp. 6,000 5,986
Other 6,200 6,188
-----------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--11.1%
(Cost: $22,163) 22,160
-----------------------------------------------------
TOTAL INVESTMENTS--99.7%
(Cost: $163,149) 199,414
-----------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--.3% 632
-----------------------------------------------------
NET ASSETS--100% $200,046
-----------------------------------------------------
</TABLE>
At December 31, 1997, the Kemper International Portfolio had the following
industry diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
-----------------------------------------------------------------------------
<S> <C> <C>
Finance $ 36,829 18.5
-----------------------------------------------------------------------------
Consumer Cyclicals 30,895 15.5
-----------------------------------------------------------------------------
Capital Goods 20,825 10.4
-----------------------------------------------------------------------------
Energy 20,019 10.0
-----------------------------------------------------------------------------
Health Care 17,277 8.6
-----------------------------------------------------------------------------
Technology 16,882 8.4
-----------------------------------------------------------------------------
Utilities 13,667 6.8
-----------------------------------------------------------------------------
Basic Industries 12,094 6.0
-----------------------------------------------------------------------------
Consumer Staples 8,766 4.4
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS 177,254 88.6
-----------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS, CASH AND OTHER NET ASSETS 22,792 11.4
-----------------------------------------------------------------------------
NET ASSETS $200,046 100.0
-----------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER INTERNATIONAL PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $163,149,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $41,364,000, the
gross unrealized depreciation was $5,470,000 and the net unrealized appreciation
on investments was $35,894,000.
See accompanying Notes to Financial Statements.
60
<PAGE> 61
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------
NUMBER
COMMON STOCKS OF SHARES VALUE
- -----------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES--1.1%
- -----------------------------------------------------
(a) Casella Waste Systems,
Inc. 57,400 $1,514
- -----------------------------------------------------
CAPITAL GOODS--1.6%
- -----------------------------------------------------
(a) Global Industries, Ltd. 70,000 1,190
(a) Littlefuse, Inc. 42,000 1,045
------------------------------------------------
2,235
- -----------------------------------------------------
CONSUMER CYCLICALS--23.8%
- -----------------------------------------------------
(a) American Coin
Merchandising 91,100 1,606
American Skiing Co. 180,000 2,678
(a) Bright Horizons
Children's
Center, Inc. 102,900 1,929
(a) CapStar Hotel Co. 127,500 4,375
Four Seasons Hotels,
Inc. 34,700 1,097
Hertz Corp. 86,500 3,482
(a) MGM Grand 63,000 2,272
(a) Neiman-Marcus 51,000 1,543
(a) Outdoor Systems, Inc. 88,250 3,387
(a) Preview Travel, Inc. 57,100 432
(a) Romac International 95,000 2,321
Royal Caribbean Cruises,
Ltd. 76,000 4,052
(a) SOS Staffing Service,
Inc. 72,600 1,370
(a) Sportsline USA, Inc. 62,000 667
Travis Boats 65,000 1,568
------------------------------------------------
32,779
- -----------------------------------------------------
CONSUMER DURABLES--2.4%
- -----------------------------------------------------
Noble International,
Ltd. 32,400 290
U.S. Industries 98,250 2,960
------------------------------------------------
3,250
- -----------------------------------------------------
CONSUMER STAPLES--7.4%
- -----------------------------------------------------
(a) American Italian Pasta
Co. 58,600 1,465
Corn Products
International 30,000 894
(a) Education Management
Corp. 34,800 1,079
(a) Hearst-Argyle
Television, Inc. 70,300 2,091
(a) Jacor Communications 55,000 2,922
Middleby Corp. 100,000 781
(a) Whole Foods Market 19,000 971
------------------------------------------------
10,203
- -----------------------------------------------------
ENERGY--1.4%
- -----------------------------------------------------
(a) Dawson Geophysical Co. 40,600 665
(a) Precision Drilling Corp. 50,000 1,219
------------------------------------------------
1,884
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -----------------------------------------------------
<S> <C> <C>
FINANCE--19.4%
- -----------------------------------------------------
(a) ABR Information Services 84,000 $ 2,006
AmerUs Life Holdings,
Inc. 62,300 2,297
ARM Financial Corp. 60,400 1,593
Commercial Federal Corp. 57,000 2,027
Executive Risk 26,500 1,850
Financial Federal Corp. 64,800 1,531
First Union Real Estate
Investments 190,000 3,088
Flag Financial Corp. 35,000 752
Peoples Heritage
Financial Group 57,500 2,645
Protective Life
Insurance Co. 30,000 1,792
Sirrom Capital Corp. 28,500 1,485
Spieker Properties 50,000 2,143
Texas Regional
Bancshares 34,200 1,043
(a) Trammell Crow Co. 89,900 2,315
------------------------------------------------
26,567
- -----------------------------------------------------
HEALTH CARE--11.7%
- -----------------------------------------------------
Coast Dental Services,
Inc. 53,600 1,286
Concentra Managed Care,
Inc. 53,000 1,789
(a) Dura Pharmaceuticals 40,000 1,835
Hansen Orthopedic Group 115,800 1,491
(a) Healthworld Corp. 101,300 1,222
(a) Ocular Sciences, Inc. 29,000 761
Omnicare, Inc. 60,000 1,860
(a) PAREXEL International
Corp. 42,500 1,572
RehabCare Group 75,000 1,988
(a) Safeskin Corp. 40,500 2,298
------------------------------------------------
16,102
- -----------------------------------------------------
TECHNOLOGY--20.0%
- -----------------------------------------------------
(a) Advanced Fibre Co. 45,000 1,311
(a) Analog Devices 51,500 1,426
Belden, Inc. 61,500 2,168
(a) Brightpoint, Inc. 65,000 902
(a) Comverse Technology 38,500 1,502
(a) Electronic Arts 28,000 1,059
(a) Gartner Group 57,000 2,123
(a) Interface Systems 61,500 1,784
(a) Keane, Inc. 30,000 1,219
(a) KLA-Tencor Corp. 32,000 1,236
Linear Technology Corp. 36,000 2,074
(a) Microchip Technology 40,000 1,200
(a) Natural MicroSystems
Corp. 39,800 1,851
Pittway Corp. 32,000 2,228
(a) Smart Modular
Technologies, Inc. 30,000 690
(a) VIASOFT, Inc. 25,000 1,056
(a) Visio Corp. 60,000 2,302
(a) World Access, Inc. 55,000 1,313
------------------------------------------------
27,444
</TABLE>
61
<PAGE> 62
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<S> <C> <C>
TRANSPORTATION--1.2%
- -------------------------------------------------------
(a) Knight Transportation 60,000 $ 1,665
--------------------------------------------------
TOTAL COMMON STOCKS--90.0%
(Cost: $112,888) 123,643
--------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--5.87% to 6.15%
Due -- January 1998
Cooper Industries $ 3,000 $ 2,998
Whirlpool Financial 3,000 2,998
Other 6,000 5,990
--------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--8.7%
(Cost: $11,986) 11,986
--------------------------------------------------
TOTAL INVESTMENTS--98.7%
(Cost: $124,874) $135,629
--------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.3% 1,786
--------------------------------------------------
NET ASSETS -- 100% $137,415
--------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER SMALL CAP GROWTH PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $124,874,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $13,710,000, the
gross unrealized depreciation was $2,955,000 and the net unrealized appreciation
on investments was $10,755,000.
See accompanying Notes to Financial Statements.
62
<PAGE> 63
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER INVESTMENT GRADE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PRINCIPAL
GOVERNMENT OBLIGATIONS AMOUNT VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTE
- ---------------------------------------------------------------------------------
6.25%, 2003 $ 50 $ 51
U.S. TREASURY BOND
10.75%, 2003 450 552
- ---------------------------------------------------------------------------------
MORTGAGE BACKED SECURITY
- ---------------------------------------------------------------------------------
FNMA, 7.00%, 2027 1,089 1,097
- ---------------------------------------------------------------------------------
GOVERNMENT AGENCY
- ---------------------------------------------------------------------------------
Tennessee Valley Authority,
6.25%, 2017 100 100
----------------------------------------------------------------------------
TOTAL GOVERNMENT
OBLIGATIONS--11.6%
(Cost: $1,787) 1,800
----------------------------------------------------------------------------
CORPORATE OBLIGATIONS
- ---------------------------------------------------------------------------------
AEROSPACE--2.0%
- ---------------------------------------------------------------------------------
Lockheed Martin,
7.25%, 2006 150 157
Raytheon Co.,
6.75%, 2007 150 153
---------------------------------------------------------------------------
310
- --------------------------------------------------------------------------------
ASSET BACKED SECURITIES--1.3%
- --------------------------------------------------------------------------------
Pacific Gas & Electric,
6.42%, 2008 100 100
Southern California Edison Co.
6.22%, 2004 50 50
6.28%, 2005 50 50
---------------------------------------------------------------------------
200
- --------------------------------------------------------------------------------
BANKS--11.1%
- --------------------------------------------------------------------------------
Abbey National, PLC,
7.35%, 2049 25 26
ABN-Amro Holding, N.V.,
8.25%, 2009 100 108
Banco Central Hispano,
7.50%, 2005 100 104
BCH Cayman Islands, Ltd.,
7.70%, 2006 70 74
Capital One Bank,
8.125%, 2000 100 103
Corporation Andina De Formento,
7.79%, 2017 100 104
Crestar Financial Corp.,
8.25%, 2002 100 107
Den Danske Bank,
7.40%, 2010 50 52
Fleet Financial Group, Inc.
8.125%, 2004 25 27
8.625%, 2007 175 199
Kansallis Osake Bank,
10.00%, 2002 100 113
NationsBank Corp.,
9.50%, 2004 200 232
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKS--CONTINUED
- --------------------------------------------------------------------------------
Peoples Bank Bridgeport,
7.20%, 2006 $ 100 $ 102
Riggs National Corp.,
8.50%, 2006 100 106
Scotland International,
8.80%, 2004 50 56
Svenska Handelsbanken,
7.125%, 2049 100 101
Wells Fargo & Co.,
6.875%, 2006 100 102
---------------------------------------------------------------------------
1,716
- --------------------------------------------------------------------------------
COMMUNICATIONS, MEDIA AND ELECTRONICS--7.4%
- --------------------------------------------------------------------------------
Cablevision Systems Corp.,
7.875%, 2007 150 153
Comcast Cable,
8.875%, 2017 50 59
Comcast Cablevision,
8.50%, 2027 100 118
News American Holdings, Inc.,
9.25%, 2013 200 238
Tele-Communications, Inc.,
9.80%, 2012 150 187
Time Warner
Entertainment Co., L.P.,
8.375%, 2023 75 86
Time Warner, Inc.
7.25%, 2017 50 51
9.15%, 2023 75 92
Viacom, Inc.,
7.75%, 2005 50 51
WorldCom, Inc.
7.75%, 2007 50 53
7.75%, 2027 50 55
---------------------------------------------------------------------------
1,143
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS, SERVICES AND RETAIL--9.9%
- --------------------------------------------------------------------------------
Chrysler Corp.,
7.45%, 2027 150 160
Dayton Hudson Corp.,
7.50%, 2006 100 106
Dimon, Inc.,
8.875%, 2006 100 107
Federated Department Stores,
10.00%, 2001 200 221
Harman International,
7.32%, 2007 75 77
J.C. Penney Co.
7.95%, 2017 155 173
May Department Stores Co.,
6.875%, 2005 50 51
Phillip Morris Cos.,
7.20%, 2007 150 155
Royal Caribbean Cruises, Ltd.,
8.25%, 2005 120 130
</TABLE>
63
<PAGE> 64
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS, SERVICES AND RETAIL--CONTINUED
- ----------------------------------------------------------------------------
Sears Roebuck Acceptance Corp.,
7.00%, 2007 $ 150 $ 156
Staples, Inc.,
7.125%, 2007 200 203
-----------------------------------------------------------------------
1,539
- ----------------------------------------------------------------------------
DRUGS AND HEALTH CARE--1.2%
- ----------------------------------------------------------------------------
MedPartners, Inc.,
7.375%, 2006 40 39
Tenet Healthcare,
8.625%, 2003 150 158
-----------------------------------------------------------------------
197
- ----------------------------------------------------------------------------
ENERGY AND CHEMICALS--1.3%
- ----------------------------------------------------------------------------
Gulf Canada Resources,
8.35%, 2006 75 81
USX Corp.,
9.375%, 2012 100 123
-----------------------------------------------------------------------
204
- ----------------------------------------------------------------------------
FINANCIAL SERVICES--10.0%
- ----------------------------------------------------------------------------
Aegon, N.V.,
8.00%, 2006 200 219
Associates Corp.,
6.625%, 2001 200 202
Case Credit Corp.,
6.75%, 2007 200 203
Felcor Suites, L.P.
7.375%, 2004 75 75
7.625%, 2007 25 25
FINOVA Capital Corp.,
6.50%, 2002 100 101
General Electric Capital Corp.
8.75%, 2007 50 58
8.625%, 2008 50 59
Lehman Brothers Holdings
7.25%, 2003 50 52
7.375%, 2007 100 104
Morgan Stanley, Dean Witter,
Discover & Co.
6.875%, 2007 200 204
Simon DeBartolo,
7.125%, 2007 100 102
Tanger Properties, L.P.,
7.875%, 2004 50 51
TriNet Corporate Realty Trust,
7.70%, 2017 100 104
-----------------------------------------------------------------------
1,559
- ----------------------------------------------------------------------------
TRANSPORTATION--3.1%
- ----------------------------------------------------------------------------
Continental Airlines, Inc.
7.75%, 2014 49 52
6.90%, 2018 50 51
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION--CONTINUED
- ----------------------------------------------------------------------------
CSX Corp.,
7.45%, 2007 $ 150 $ 159
Ford Motor Credit,
7.75%, 2005 100 108
Norfolk Southern Corp.,
7.35%, 2007 100 106
-----------------------------------------------------------------------
476
- ----------------------------------------------------------------------------
UTILITIES--5.9%
- ----------------------------------------------------------------------------
Centerior Energy,
7.67%, 2004 100 104
Cleveland Electric Illumination,
7.43%, 2009 100 103
Commonwealth Edison
7.375%, 2004 50 52
7.00%, 2005 100 103
Hyder, PLC,
6.875%, 2007 150 151
Niagara Mohawk Power,
8.00%, 2004 50 53
Northwest Pipeline,
6.625%, 2007 100 101
U.S. West Capital Funding, Inc.
7.90%, 2027 125 137
7.95%, 2097 100 109
-----------------------------------------------------------------------
913
-----------------------------------------------------------------------
TOTAL CORPORATE
OBLIGATIONS--53.2%
(Cost: $8,117) 8,257
-----------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--5.60% to 5.76%
Due--January 1998
Federal Home Loan Mortgage Corp. 2,700 2,692
Federal National
Mortgage
Association 2,300 2,295
-----------------------------------------------------------------------
TOTAL MONEY
MARKET INSTRUMENTS--32.2%
(Cost: $4,987) 4,987
-----------------------------------------------------------------------
TOTAL INVESTMENTS--97.0%
(Cost: $14,891) 15,044
-----------------------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--3.0% 460
-----------------------------------------------------------------------
NET ASSETS--100% $ 15,504
-----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER INVESTMENT GRADE BOND PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $14,891,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $155,000, the gross
unrealized depreciation was $2,000 and the net unrealized appreciation on
investments was $153,000.
See accompanying Notes to Financial Statements.
64
<PAGE> 65
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------
BANKS--11.5%
- -----------------------------------------------------------
Banc One Corp. 31,200 $ 1,695
BankAmerica Corp. 15,000 1,095
Bankers Trust New York Corp. 10,000 1,124
Chase Manhattan Corp. 16,000 1,752
First Union Corp. 50,400 2,583
Golden West Financial Corp. 15,000 1,467
Mellon Bank Corp. 30,000 1,819
NationsBank 38,400 2,335
Norwest Corp. 18,200 703
PNC Bank, N.A. 18,900 1,078
Wachovia Corp. 20,000 1,622
Wells Fargo & Co. 4,200 1,426
------------------------------------------------------
18,699
- -----------------------------------------------------------
BASIC INDUSTRIES--10.4%
- -----------------------------------------------------------
ALCOA 20,000 1,407
Crown Cork & Seal Co. 48,000 2,406
Dow Chemical Co. 21,500 2,182
Eastman Chemical Co. 25,000 1,489
Georgia-Pacific Corp. 15,000 911
Louisiana-Pacific Corp. 70,000 1,330
Nucor Corp. 45,000 2,174
Praxair, Inc. 30,000 1,350
Sonoco Products Co. 60,000 2,081
Timber Co. 15,000 340
Union Camp Corp. 21,500 1,154
------------------------------------------------------
16,824
- -----------------------------------------------------------
CAPITAL GOODS--5.1%
- -----------------------------------------------------------
General Electric Co. 57,000 4,182
Pitney Bowes 16,500 1,484
Xerox Corp. 35,000 2,583
------------------------------------------------------
8,249
- -----------------------------------------------------------
CONSUMER CYCLICALS--4.7%
- -----------------------------------------------------------
Honeywell 30,000 2,055
May Department Stores Co. 30,000 1,581
McDonald's Corp. 50,000 2,388
Whitman Corp. 60,000 1,564
------------------------------------------------------
7,588
- -----------------------------------------------------------
CONSUMER DURABLES--4.0%
- -----------------------------------------------------------
Ford Motor Co. 78,500 3,822
Superior Industries
International 99,000 2,654
------------------------------------------------------
6,476
- -----------------------------------------------------------
CONSUMER STAPLES--4.8%
- -----------------------------------------------------------
Philip Morris Cos. 134,500 6,095
UST, Inc. 47,900 1,769
------------------------------------------------------
7,864
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------
ENERGY--10.6%
- -----------------------------------------------------------
AMOCO Corp. 40,700 $ 3,465
Atlantic Richfield Co. 30,000 2,404
Chevron Corp. 23,500 1,810
Enron Corp. 47,500 1,974
Exxon Corp. 60,000 3,671
Kerr-McGee Corp. 30,000 1,899
Texaco 35,000 1,903
------------------------------------------------------
17,126
- -----------------------------------------------------------
FINANCIAL SERVICES--13.6%
- -----------------------------------------------------------
American International Group 20,900 2,273
BRE Properties, Inc. 60,000 1,688
Federal Home Loan Mortgage
Corp. 134,600 5,645
Federal National Mortgage
Association 78,600 4,485
General Re Corp. 8,000 1,696
H.F. Ahmanson & Co. 25,300 1,694
Meditrust 39,652 1,452
National City Corp. 20,000 1,315
Post Properties 45,000 1,828
------------------------------------------------------
22,076
- -----------------------------------------------------------
HEALTH CARE--7.3%
- -----------------------------------------------------------
American Home Products Corp. 40,000 3,060
Becton Dickinson & Co. 50,000 2,500
Bristol-Myers Squibb Co. 30,000 2,839
C.R. Bard 64,500 2,020
Glaxo Wellcome, ADR 31,200 1,494
------------------------------------------------------
11,913
- -----------------------------------------------------------
TECHNOLOGY--3.3%
- -----------------------------------------------------------
AMP, Inc. 67,000 2,814
Raytheon Co. 51,500 2,601
------------------------------------------------------
5,415
- -----------------------------------------------------------
UTILITIES--3.1%
- -----------------------------------------------------------
GTE Corp. 60,000 3,135
Southern Co. 74,000 1,915
------------------------------------------------------
5,050
- -----------------------------------------------------------
OTHER--3.6%
- -----------------------------------------------------------
Standard & Poor's Depository
Receipts 60,000 5,816
------------------------------------------------------
TOTAL COMMON STOCKS--82.0%
(Cost: $118,102) 133,096
------------------------------------------------------
</TABLE>
65
<PAGE> 66
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--7.7%
State Street Bank, dated 12/31/97,
4.75%, due 1/2/98
Collateralized by U.S.
Treasury bonds
(Cost: $12,553) $ 12,553 $ 12,553
- ------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--5.55% to 6.11%
Due--January and February
1998
CIESCO, L.P. 4,000 3,994
Ford Motor Credit 3,000 2,993
GTE Corp. 3,000 2,982
Sheffield Receivables 3,000 2,989
Other 6,077 6,051
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
VALUE
- ------------------------------------------------------------------------
<S> <C>
TOTAL MONEY MARKET
INSTRUMENTS--11.7%
(Cost: $19,011) 19,009
- ------------------------------------------------------------------------
TOTAL INVESTMENTS--101.4%
(Cost: $149,666) $164,658
- ------------------------------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS--(1.4)% (2,278)
- ------------------------------------------------------------------------
NET ASSETS--100% $162,380
- ------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO KEMPER VALUE PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $149,666,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $15,612,000, the
gross unrealized depreciation was $620,000 and the net unrealized appreciation
on investments was $14,992,000.
See accompanying Notes to Financial Statements.
66
<PAGE> 67
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
NUMBER
COMMON STOCKS OF SHARES VALUE
- ---------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY--13.1%
- ---------------------------------------------------------------
Applebee's International 22,900 $ 414
(a) BJ's Wholesale Club 15,100 474
(a) Boston Chicken 39,700 255
Brown Group, Inc. 27,700 369
Burlington Coat Factory 5,000 82
Bush Industries 11,000 286
Carmike Cinemas 10,700 307
CDI Corp. 11,100 508
DIMON, Inc. 24,900 654
Finish Line, Inc. 26,900 353
First Brands Corp. 27,100 730
Footstar, Inc. 5,000 134
(a) Friedman's, Inc. 27,500 375
Haggar Apparel Co. 9,600 151
Harman International
Industries 10,800 458
Heilig - Meyers 13,200 158
Herbalife International, Inc.
Class A 9,266 195
Class B 18,533 398
Hollywood Entertainment Corp. 46,500 494
Homebase, Inc. 13,100 103
(a) Lone Star Steakhouse & Saloon 26,900 471
(a) ShopKo Stores 5,000 109
Springs Industries, Inc. 12,200 634
(a) Swisher International Group,
Inc. 5,000 85
(a) Tommy Hilfiger Corp. 10,000 351
(a) Valassis Communications 12,000 444
(a) Wet Seal 9,500 280
(a) Young Broadcasting Corp. 18,500 717
----------------------------------------------------------
9,989
- ---------------------------------------------------------------
CONSUMER STAPLES--.6%
- ---------------------------------------------------------------
(a) Performance Food Group 18,000 428
- ---------------------------------------------------------------
ENERGY--5.4%
- ---------------------------------------------------------------
Atmos Energy Corp. 15,800 478
(a) Basin Exploration 7,500 133
(a) Chieftain International, Inc. 18,000 382
Giant Industries 11,500 219
KCS Energy 24,100 500
(a) Nuevo Energy Co. 15,800 644
(a) Seitel, Inc. 24,800 425
(a) Tesoro Petroleum Corp. 24,500 380
(a) Triton Energy Corp. 11,900 347
(a) Veritas DGC, Inc. 15,100 596
----------------------------------------------------------
4,104
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES--20.6%
- ---------------------------------------------------------------
(a) Acceptance Insurance Cos. 16,100 $ 389
Ambassador Apartments 15,500 319
(a) Amerin 10,000 280
Associated Banc Corp. 11,876 655
Astoria Financial Corp. 11,800 658
Bank Atlantic Bancorp 35,500 579
Chartwell Re Corp. 11,900 402
Commercial Federal Corp. 21,750 773
Compass Bancshares 8,550 374
Consumer Portfolio Services 12,000 115
Cullen Frost Bankers 13,000 789
Doral Financial Corp. 13,800 350
Excel Realty Trust, Inc. 12,800 403
(a) First Alliance Corp. 7,000 129
First Commerce Corp. 8,500 572
Fremont General Corp. 13,000 712
HUBCO, Inc. 12,360 484
Imperial Credit Commercial
Mortgage Investment 39,300 575
Imperial Credit Industries 33,300 683
Lawyers Title Insurance Corp. 5,000 157
Long Island Bancorp 12,300 610
ML Bancorp, Inc. 800 24
New Century Financial Co. 3,300 34
(a) Ocwen Financial Corp. 5,000 127
PennCorp Financial Group 10,000 357
Peoples Heritage Financial
Group 4,500 207
Redwood Trust 21,100 430
Reliance Group Holdings, Inc. 38,700 547
RenaissanceRe Holdings, Ltd. 6,000 265
Resource Bancshares Mortgage
Group 46,515 759
(a) Southern Pacific Funding
Corp. 46,200 606
Sovereign Bancorp 5,000 104
(a) Trans Financial, Inc. 7,500 292
United Companies Financial
Corp. 15,100 234
UST Corp. 10,000 278
W.R. Berkley Corp. 9,000 395
Webster Financial Corp. 12,100 805
Winston Hotels 18,000 237
----------------------------------------------------------
15,709
- ---------------------------------------------------------------
HEALTH CARE--3.4%
- ---------------------------------------------------------------
(a) Apria Healthcare Group 24,500 329
(a) CONMED Corp. 28,800 756
(a) Genesis Health Ventures 20,000 528
(a) Hologic, Inc. 16,100 333
Integrated Health Services 21,389 667
----------------------------------------------------------
2,613
</TABLE>
67
<PAGE> 68
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
MATERIALS AND PROCESSING--13.7%
- -----------------------------------------------------------
AK Steel Holding Corp. 30,000 $ 531
AMCOL International 41,250 655
Ball Corp. 18,000 636
(a) Buckeye Technologies, Inc. 10,000 462
Carpenter Technology Corp. 13,300 639
Del Webb Corp. 13,600 354
Elcor Corp. 20,250 486
Flowserve Corp. 18,526 517
Furon Co. 35,400 739
(a) Global Industrial
Technologies, Inc. 18,000 305
Intermet Corp. 33,000 578
(a) Lone Star Technologies 18,500 525
(a) Lydall, Inc. 22,800 445
MascoTech 24,500 450
Mississippi Chemical Corp. 10,000 183
(a) Mueller Industries, Inc. 3,500 207
Oregon Metallurgical Corp. 23,500 784
Quanex Corp. 16,500 464
(a) Shaw Group 19,700 453
Trinity Industries 12,200 544
(a) Wyman-Gordon Co. 22,000 432
------------------------------------------------------
10,389
- -----------------------------------------------------------
PRODUCER DURABLES--4.4%
- -----------------------------------------------------------
Blount International, "A" 19,000 507
Briggs & Stratton Corp. 12,000 583
(a) Electroglas 5,000 77
General Cable Corp. 19,600 709
Pacific Scientific Co. 9,800 235
Stewart & Stevenson Services 23,900 609
Watts Industries, Inc. 22,500 637
------------------------------------------------------
3,357
- -----------------------------------------------------------
TECHNOLOGY--7.2%
- -----------------------------------------------------------
(a) Altron, Inc. 15,000 199
Belden, Inc. 14,000 493
(a) Benchmark Electronics 9,600 214
Breed Technologies, Inc. 14,200 259
(a) Burr Brown Corp. 8,950 287
(a) ESS Technology 18,000 137
(a) EXAR Corp. 7,100 117
(a) HADCO Corp. 4,800 217
(a) HMT Technology Corp. 42,500 553
(a) Hutchinson Technology 18,200 398
(a) Komag, Inc. 15,000 223
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
- -----------------------------------------------------------
(a) Kulicke & Soffa Industries 2,500 $ 47
(a) Learning Co. 40,900 657
(a) MasTec, Inc. 11,000 252
(a) MicroAge, Inc. 3,400 51
(a) Read-Rite Corp. 25,900 408
Scientific-Atlanta 36,800 616
(a) Tech-Sym Corp. 7,400 188
(a) Vanstar Corp. 11,300 128
------------------------------------------------------
5,444
- -----------------------------------------------------------
TRANSPORTATION--4.0%
- -----------------------------------------------------------
Airborne Freight Corp. 11,500 714
(a) America West Holdings 36,600 682
Borg-Warner Automotive, Inc. 12,700 660
Fleetwood Enterprises 15,000 636
Myers Industries 22,220 379
------------------------------------------------------
3,071
- -----------------------------------------------------------
UTILITIES--.6%
- -----------------------------------------------------------
(a) Jones Intercable, Inc. 24,900 437
------------------------------------------------------
TOTAL COMMON STOCKS--73.0%
(Cost: $49,480) 55,541
------------------------------------------------------
(b) MONEY MARKET INSTRUMENTS
Yield--4.98% to 6.47%
Due--January and February 1998
American Honda Finance Corp. $2,000 1,996
CIESCO, L.P. 3,000 2,995
Countrywide Funding Corp. 2,000 1,997
FINOVA Capital Corp. 2,000 1,994
General Motors Corp. 2,000 1,998
Lehman Brothers Holdings,
Inc. 2,000 1,997
Matterhorn Capital 2,000 1,984
Sheffield Receivables 2,000 1,993
Other 3,100 3,088
------------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--26.3%
(Cost: $20,044) 20,042
------------------------------------------------------
TOTAL INVESTMENTS--99.3%
(Cost: $69,524) 75,583
------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--.7% 525
------------------------------------------------------
NET ASSETS--100% $76,108
------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER SMALL CAP VALUE PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) The Fund has entered into exchange-traded Russell 2000 Index futures
contracts in order to take advantage of anticipated market conditions and
effectively invest in equities approximately $2,700,000 of money market
instruments. As a result, approximately 76% of the Fund's net assets are
effectively invested in equities. (See Note 6 of the Notes to Financial
Statements.)
Based on the cost of investments of $69,524,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $9,300,000, the
gross unrealized depreciation was $3,241,000 and the net unrealized appreciation
on investments was $6,059,000.
See accompanying Notes to Financial Statements.
68
<PAGE> 69
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER VALUE+GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
NUMBER
COMMON STOCKS OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES--5.0%
- -----------------------------------------------------------
AMP, Inc. 9,700 $ 407
Champion International Corp. 2,000 91
Dow Chemical Co. 3,800 386
Eastman Chemical Co. 3,300 197
Georgia-Pacific Corp. 1,800 109
Louisiana-Pacific Corp. 15,000 285
Nucor Corp. 7,000 338
Praxair, Inc. 5,000 225
Sonoco Products Co. 14,000 486
Timber Co. 1,800 41
Union Camp Corp. 4,200 225
(a) USA Waste Services 15,175 596
Weyerhaeuser Co. 2,000 98
------------------------------------------------------
3,484
- -----------------------------------------------------------
CAPITAL GOODS--6.6%
- -----------------------------------------------------------
B.F. Goodrich Co. 7,200 298
Crown Cork & Seal Co. 7,000 351
Emerson Electric Co. 9,800 553
General Electric Co. 24,500 1,798
Pitney Bowes, Inc. 3,000 270
Raytheon Co. 6,000 303
(a) U.S. Filter Corp. 17,900 536
Xerox Corp. 6,000 443
------------------------------------------------------
4,552
- -----------------------------------------------------------
CONSUMER CYCLICALS--11.1%
- -----------------------------------------------------------
American Greetings Corp. 21,000 822
(a) AutoZone 16,100 467
Carnival Corp. 16,000 886
Dillard Department Stores 16,500 582
May Department Stores Co. 6,500 342
(a) MGM Grand 19,000 685
NIKE 20,500 805
(a) Nine West Group 21,000 545
Sears, Roebuck & Co. 14,900 674
(a) Tommy Hilfiger Corp. 19,700 692
V.F. Corp. 4,000 184
Walt Disney Co. 10,100 1,000
------------------------------------------------------
7,684
- -----------------------------------------------------------
CONSUMER DURABLES--1.8%
- -----------------------------------------------------------
Ford Motor Co. 13,000 633
Magna International, Inc.,
"A" 3,800 239
Superior Industries
International 14,000 375
------------------------------------------------------
1,247
- -----------------------------------------------------------
CONSUMER STAPLES--10.2%
- -----------------------------------------------------------
McDonald's Corp. 15,000 716
Newell Co. 16,500 701
PepsiCo 6,500 237
Philip Morris Cos. 60,500 2,741
Procter & Gamble Co. 6,000 479
Tricon Global Restaurants,
Inc. 1,050 30
UST, Inc. 58,200 2,150
------------------------------------------------------
7,054
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
ENERGY--4.0%
- ----------------------------------------------------------
AMOCO Corp. 6,000 $ 511
Atlantic Richfield Co. 4,900 393
Chevron Corp. 3,700 285
Columbia Gas System 1,800 141
Enron Corp. 6,000 249
Exxon Corp. 10,200 624
Kerr-McGee Corp. 4,500 285
Royal Dutch Petroleum 2,800 152
YPF Sociedad Anonima, ADR 4,500 154
-----------------------------------------------------
2,794
- ----------------------------------------------------------
FINANCE--20.3%
- ----------------------------------------------------------
American General Corp. 3,300 178
American International Group 3,000 326
Banc One Corp. 6,700 364
BankAmerica Corp. 3,200 233
Bankers Trust New York Corp. 1,900 214
Bank of New York Co. 5,600 324
Barnett Banks 3,000 216
Bear Stearns Cos. 11,700 556
BRE Properties, Inc. 9,000 253
Chase Manhattan Corp. 4,500 493
Crestar Financial Corp. 1,400 80
Federal Home Loan Mortgage
Corp. 24,700 1,036
Federal National Mortgage
Association 29,100 1,660
First Chicago NBD Corp. 4,000 334
First Union Corp. 4,600 236
General Re Corp. 3,500 742
Golden West Financial Corp. 3,000 293
Hartford Financial Services 6,000 561
H.F. Ahmanson & Co. 5,000 335
Hibernia Corp. 34,000 640
Jefferson-Pilot Corp. 6,100 475
J.P. Morgan & Co. 700 79
KeyCorp 1,000 71
MBIA, Inc. 2,400 160
Meditrust 3,604 132
Merrill Lynch & Co. 12,100 882
MGIC Investment Corp. 7,000 465
Morgan Stanley, Dean Witter,
Discover & Co. 11,000 650
NationsBank 9,000 547
PNC Bank Corp. 7,000 399
Post Properties 8,000 325
Republic NY Corp. 600 67
Safeco Corp. 8,000 390
Torchmark Corp. 2,000 84
Wells Fargo & Co. 700 238
-----------------------------------------------------
14,038
</TABLE>
69
<PAGE> 70
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
HEALTH CARE--14.0%
- ----------------------------------------------------------
Abbott Laboratories 11,500 $ 754
(a) ALZA Corp. 34,500 1098
American Home Products Corp. 20,500 1,568
Astra, A.B., ADR 36,700 631
Baxter International 5,000 252
Becton Dickinson & Co. 8,000 400
(a) Biogen 10,200 371
Boston Scientific Corp. 6,000 275
Bristol-Myers Squibb Co. 4,700 445
C.R. Bard 15,500 485
Crescendo Pharmaceutical 1,050 12
(a) HealthCare COMPARE Corp. 10,500 537
Johnson & Johnson 7,500 494
Mallinckrodt Group 16,400 623
Merck & Co. 10,100 1,073
United Healthcare Corp. 13,100 651
-----------------------------------------------------
9,669
- ----------------------------------------------------------
TECHNOLOGY--22.9%
- ----------------------------------------------------------
(a) Applied Materials, Inc. 29,400 886
(a) Ascend Communications, Inc. 10,000 245
(a) Atmel Corp. 33,000 613
(a) Cisco Systems 25,350 1,413
Compaq Computer Corp. 21,600 1,219
(a) Computer Sciences Corp. 12,800 1,069
Diebold 18,500 937
Electronic Data Systems 2,500 110
First Data Corp. 9,000 263
Hewlett-Packard Co. 2,800 175
Intel Corp. 21,200 1,489
Linear Technology Corp. 11,100 640
(a) Microchip Technology 22,500 675
(a) Novellus Systems 14,500 469
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
- ----------------------------------------------------------
(a) Parametric Technology Corp. 13,000 $ 616
(a) Quantum Corp. 30,000 602
Reynolds & Reynolds Co. 34,500 636
(a) Seagate Technology 13,000 250
(a) Sun Microsystems 25,500 1,017
(a) Teradyne, Inc. 25,500 816
(a) 3Com Corp. 37,975 1,327
(a) Western Digital Corp. 19,900 320
-----------------------------------------------------
15,787
- ----------------------------------------------------------
TRANSPORTATION--.4%
- ----------------------------------------------------------
Canadian National Railway Co. 5,200 246
- ----------------------------------------------------------
UTILITIES--3.5%
- ----------------------------------------------------------
GTE Corp. 11,000 575
Southern Co. 20,000 518
(a) WorldCom, Inc. 42,700 1,292
-----------------------------------------------------
2,385
-----------------------------------------------------
TOTAL COMMON STOCKS--99.8%
(Cost: $64,717) 68,940
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--1.4%
Yield--6.45%
Due--January 1998
(Cost: $999) $ 1,000 999
-----------------------------------------------------
TOTAL INVESTMENTS--101.2%
(Cost: $65,716) 69,939
-----------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS--(1.2)% (845)
-----------------------------------------------------
NET ASSETS--100% $69,094
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER VALUE + GROWTH PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $65,716,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $6,796,000, the
gross unrealized depreciation was $2,573,000 and the net unrealized appreciation
on investments was $4,223,000.
See accompanying Notes to Financial Statements.
70
<PAGE> 71
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER HORIZON 20+ PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
U.S. TREASURY SECURITIES--15.8%
- ----------------------------------------------------------
Notes 7.50%, 1999 $ 100 $ 103
8.875%, 2000 250 267
8.50%, 2000 450 480
6.75%, 2000 499 510
5.50%, 2000 575 572
6.625%, 2001 450 463
7.875%, 2004 211 236
-----------------------------------------------------
2,631
- ----------------------------------------------------------
MORTGAGE BACKED SECURITIES--3.2%
- ----------------------------------------------------------
FHLMC, 6.00%, 2006 66 66
FHLMC, 6.50%, 2014 107 108
FNMA, 6.01%, 2000 150 151
GNMA, 7.00%, 2015 210 213
-----------------------------------------------------
538
-----------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--19.0%
(Cost: $3,147) 3,169
-----------------------------------------------------
COMMON STOCKS
- ----------------------------------------------------------
BASIC INDUSTRIES--3.1%
- ----------------------------------------------------------
AK Steel Holding Corp. 1,210 shs. 21
AMCOL International 1,815 29
Crown Cork & Seal Co. 1,000 50
Dow Chemical Co. 500 50
Eastman Chemical Co. 500 29
Georgia-Pacific Corp. 300 18
Louisiana-Pacific Corp. 2,000 38
Nucor Corp. 900 43
Oregon Metallurgical Corp. 975 33
Rentokil Initial, PLC 12,205 54
Sonoco Products Co. 1,500 52
Technip, S.A. 193 20
Timber Co. 300 7
Toray Industries 7,500 34
Union Camp Corp. 600 32
-----------------------------------------------------
510
- ----------------------------------------------------------
CAPITAL GOODS--6.0%
- ----------------------------------------------------------
Applied Industrial
Technologies 600 16
B.F. Goodrich Co. 800 33
Blount International, "A" 1,460 39
Casella Waste System, Inc. 3,000 79
General Electric Co. 3,800 279
(a) Littelfuse, Inc. 1,900 47
Mannesmann, A.G. 151 76
Murata Manufacturing 1,200 30
Noble International, Ltd. 300 3
Pacific Scientific Co. 2,010 48
Raytheon Co. 900 45
Sony Corp. 700 62
Trinity Industries 570 25
(a) USA Waste Services 1,852 73
(a) U.S. Filter Corp. 4,500 135
-----------------------------------------------------
990
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS--9.8%
- ----------------------------------------------------------
(a) American Coin Merchandising 3,600 $ 63
American Greetings Corp. 2,400 94
(a) AutoZone 1,800 52
Borg-Warner Automotive, Inc. 450 23
(a) Bright Horizons Children's
Center, Inc. 2,800 53
Brown Group, Inc. 1,360 18
(a) CapStar Hotel Co. 1,100 38
Carnival Corp. 1,800 100
Carrefour, S.A. 76 40
(a) Consolidated Graphics, Inc. 500 23
Dillard Department Stores 2,800 99
(a) Education Management Corp. 500 16
Femsa "B" Fomento Economico
Mexicano, S.A. 6,200 49
Finish Line 1,430 19
Four Seasons Hotels, Inc. 1,400 44
(a) Friedman's, Inc. 1,600 22
(a) Hearst-Argyle Television,
Inc. 600 18
Hertz Corp. 400 16
Hudson's Bay Co. 2,975 66
May Department Stores Co. 600 32
(a) Men's Wearhouse 1,400 49
Meredith Corp. 400 14
(a) MGM Grand 1,800 65
(a) Neiman-Marcus 800 24
NIKE 2,950 116
(a) Nine West Group 3,000 78
(a) Outdoor Systems, Inc. 1,100 42
(a) Outsource International 500 6
(a) Preview Travel, Inc. 500 4
Sears, Roebuck & Co. 1,900 86
(a) SOS Staffing Services 500 9
(a) SportsLine USA, Inc. 1,200 13
(a) Tommy Hilfiger Corp. 2,500 88
Trammell Crow Co. 800 21
Walt Disney Co. 1,300 129
-----------------------------------------------------
1,629
- ----------------------------------------------------------
CONSUMER DURABLES--2.0%
- ----------------------------------------------------------
BBA Group, PLC 5,180 35
Ford Motor Co. 1,800 88
Honda Motor Co., Ltd. 1,100 41
Magna International Inc.,
"A" 600 38
Simpson Industries 2,000 24
Superior Industries
International 2,000 54
U.S. Industries 1,750 53
-----------------------------------------------------
333
- ----------------------------------------------------------
CONSUMER STAPLES--10.5%
- ----------------------------------------------------------
(a) American Italian Pasta Co. 2,000 50
Arbor Drugs 2,850 53
Avon Products 2,000 123
(a) Boston Chicken 1,790 12
Coca Cola Co. 700 47
(a) Emmis Broadcasting Corp. 800 37
Flowserve Corp. 986 28
Independent Newspapers, PLC 11,320 61
</TABLE>
71
<PAGE> 72
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--CONTINUED
- ----------------------------------------------------------
Kimberly-Clark de Mexico,
S.A. de C.V. 15,400 $ 73
Koninklijke Ahold, N.V. 4,898 128
(a) Lone Star Steakhouse &
Saloon 1,340 23
McDonald's Corp. 3,600 172
(a) MSC Industrial Direct 1,400 59
Newell Co. 2,700 115
Ocular Sciences, Inc. 200 5
PepsiCo 1,500 55
Philip Morris Cos. 7,100 322
Procter & Gamble Co. 1,300 104
Star Buffet, Inc. 200 2
UST, Inc. 6,200 229
(a) Whole Foods Market 1,000 51
-----------------------------------------------------
1,749
- ----------------------------------------------------------
ENERGY--3.8%
- ----------------------------------------------------------
AMOCO Corp. 600 51
Atlantic Richfield Co. 700 56
Atmos Energy Corp. 600 18
British Petroleum 2,961 39
Chevron Corp. 500 39
Columbia Gas System 300 24
(a) Dawson Geophysical Co. 2,000 33
Elf Aquitaine 528 62
Exxon Corp. 1,200 73
Giant Industries 1,110 21
KCS Energy 780 16
Petro-Canada 2,300 42
Repsol, S.A. 820 35
Royal Dutch Petroleum 1,396 77
(a) Tesoro Petroleum Corp. 1,190 18
YPF Sociedad Anonima, ADR 900 31
-----------------------------------------------------
635
- ----------------------------------------------------------
FINANCE--16.9%
- ----------------------------------------------------------
American General Corp. 1,000 54
AmerUS Life Holdings, Inc. 1,000 37
ARM Financial Corp. 2,300 61
Astoria Financial Corp. 485 27
AXA-UAP, S.A. 500 39
Banco Bilbao Vizcaya 1,801 58
Banco Popular Espanol 880 61
Banc One Corp. 700 38
BankAmerica Corp. 400 29
Bankers Trust New York Corp. 200 22
Bank of Ireland 5,430 83
Barnett Banks 600 43
Bear Stearns Cos. 1,600 76
BRE Properties, Inc. 1,200 34
Chase Manhattan Corp. 400 44
CITIC Pacific, Ltd. 6,500 26
Commercial Federal Corp. 550 20
Compass Bancshares 610 27
Del Webb Corp. 1,230 32
Excel Realty Trust, Inc. 765 24
Executive Risk 300 21
Federal Home Loan Mortgage
Corp. 3,400 143
Federal National Mortgage
Association 4,000 228
Financial Federal Corp. 2,900 69
First Chicago NBD Corp. 400 33
First Commerce Corp. 420 28
First Union Corp. 1,640 84
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
- ----------------------------------------------------------
Fleet Financial Group, Inc. 300 $ 22
Golden West Financial Corp. 400 39
Hartford Financial Services 600 56
H.F. Ahmanson & Co. 300 20
Hibernia Corp. 3,000 56
HSBC Holdings, PLC 3,644 90
Imperial Credit Industries 1,035 21
ING Groep, N.V. 1,020 43
Jefferson-Pilot Corp. 550 43
Kansas City Southern
Industries 600 19
KeyCorp 300 21
LaSalle Partners 1,200 43
Meditrust 720 26
Merrill Lynch & Co. 1,300 95
MGIC Investment Corp. 1,600 106
Morgan Stanley, Dean Witter,
Discover & Co. 2,000 118
NationsBank 2,550 155
PennCorp Financial Group 720 26
PNC Bank Corp. 800 46
Post Properties 900 37
Protective Life Insurance
Co. 400 24
Republic NY Corp. 250 29
Resource Bancshares Mortgage
Group 1,890 31
Safeco Corp. 1,000 49
Texas Regional Bancshares 150 5
Torchmark Corp. 2,100 88
United Companies Financial
Corp. 940 15
Vedior, N.V. 1,130 20
Wells Fargo & Co. 100 34
-----------------------------------------------------
2,818
- ----------------------------------------------------------
HEALTH CARE--9.3%
- ----------------------------------------------------------
Abbott Laboratories 1,500 98
ALZA Corp. 3,900 124
American Home Products Corp. 1,900 145
Astra, A.B., ADR 3,366 58
Baxter International 600 30
Becton Dickinson & Co. 400 20
(a) Biogen 1,600 58
Bristol-Myers Squibb Co. 800 76
(a) British Biotech, PLC 5,110 9
Concentra Managed Care, Inc. 457 15
(a) CONMED Corp. 1,270 33
C.R. Bard 1,300 41
Crescendo Pharamaceutical 125 1
(a) Dura Pharamaceuticals 600 28
Glaxo Wellcome, PLC 2,194 52
(a) Hanger Orthopedic Group 2,500 32
(a) HealthCare COMPARE Corp. 1,450 74
(a) Healthworld Corp. 1,700 21
Johnson & Johnson 1,200 79
Mallinckrodt Group 1,700 65
Merck & Co. 1,200 128
Novartis 21 34
(a) PAREXEL International Corp. 1,000 37
RehabCare Group 1,000 27
Roche Holding, A.G. 5 50
(a) Safeskin Corp. 900 51
(a) Sofamor-Danek Group 600 39
United Healthcare Corp. 1,700 84
Zeneca Group, PLC 1,115 39
-----------------------------------------------------
1,548
</TABLE>
72
<PAGE> 73
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--15.4%
- ----------------------------------------------------------
(a) Adaptec, Inc. 2,500 $ 93
AMP, Inc. 900 38
(a) Analog Devices 2,600 72
(a) Applied Materials, Inc. 3,900 117
(a) Ascend Communications, Inc. 1,500 37
(a) Atmel Corp. 4,700 87
Belden, Inc. 800 28
Canon, Inc. 900 21
(a) Cisco Systems 3,300 184
Compaq Computer Corp. 2,575 145
(a) Computer Sciences Corp. 1,650 138
(a) Comverse Technology 100 4
Diebold 2,000 101
ESS Technologies, Inc. 1,570 12
Fuji Photo Film Co., Ltd. 1,000 38
(a) Gartner Group 400 15
Getronics 1,050 33
Hewlett-Packard Co. 400 25
HMT Technology Corp. 1,600 21
Intel Corp. 2,700 190
(a) Jones Intercable, Inc. 1,435 25
(a) KLA-Tencor Corp. 100 4
(a) Learning Co. 1,850 30
Linear Technology Corp. 1,500 86
(a) MRV Communications 300 7
(a) Natural MicroSystems Corp. 300 14
(a) Novellus Systems 1,800 58
(a) Parametric Technology Corp. 1,800 85
Pittway Corp. 100 7
(a) Quantum Corp. 2,400 48
(a) Read-Rite Corp. 1,380 22
Reynolds & Reynolds Co. 6,300 116
(a) Sanmina Corp. 450 30
(a) Seagate Technology 1,500 29
(a) Sun Microsystems 5,000 199
(a) Tech-Sym Corp. 120 3
Telecom Italia Spa 5,700 36
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
- ----------------------------------------------------------
(a) Teradyne, Inc. 3,700 $ 118
(a) 3Com Corp. 4,950 173
(a) VIASOFT, Inc. 200 8
(a) Western Digital Corp. 4,100 66
-----------------------------------------------------
2,563
- ----------------------------------------------------------
TRANSPORTATION--.2%
- ----------------------------------------------------------
Canadian National Railway
Co. 700 33
(a) Knight Transportation 200 6
-----------------------------------------------------
39
- ----------------------------------------------------------
UTILITIES--2.7%
- ----------------------------------------------------------
GTE Corp. 1,200 63
Southern Co. 1,800 47
Telecom Italia Mobile 13,915 64
Telefonica de Espana, S.A. 1,830 52
Veba, A.G. 635 43
(a) WorldCom, Inc. 6,100 185
-----------------------------------------------------
454
-----------------------------------------------------
TOTAL COMMON STOCKS--79.7%
(Cost: $12,159) 13,268
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--2.7%
Yield--5.73%
Due--January 1998
(Cost: $449) $ 450 449
-----------------------------------------------------
TOTAL INVESTMENTS--101.4%
(Cost: $15,755) 16,886
-----------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS--(1.4)% (227)
-----------------------------------------------------
NET ASSETS -- 100% $16,659
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER HORIZON 20+ PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $15,755,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $1,597,000, the
gross unrealized depreciation was $466,000 and the net unrealized appreciation
on investments was $1,131,000.
See accompanying Notes to Financial Statements.
73
<PAGE> 74
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER HORIZON 10+ PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
U. S. TREASURY SECURITIES--31.8%
- -----------------------------------------------------------
Notes 8.875%, 2000 $ 1,178 $ 1,261
8.50%, 2000 1,370 1,455
6.75%, 2000 670 685
5.50%, 2000 1,200 1,193
8.00%, 2001 1,000 1,069
6.625%, 2001 850 874
6.25%, 2002 450 458
7.875%, 2004 150 168
------------------------------------------------------
7,163
- -----------------------------------------------------------
MORTGAGE BACKED SECURITIES--6.6%
- -----------------------------------------------------------
FHLMC, 6.00%, 2006 219 218
FHLMC, 6.50%, 2014 230 232
FNMA, 6.01%, 2000 500 502
GNMA, 7.00%, 2015 531 537
------------------------------------------------------
1,489
------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--38.4%
(Cost: $8,608) 8,652
------------------------------------------------------
COMMON STOCKS
- -----------------------------------------------------------
BASIC INDUSTRIES--2.5%
- -----------------------------------------------------------
AK Steel Holding Corp. 1,650 shs. 29
AMCOL International 2,625 41
Champion International Corp. 300 13
Crown Cork & Seal Co. 600 30
Dow Chemical Co. 600 60
Eastman Chemical Co. 400 23
Georgia-Pacific Corp. 300 18
Louisiana-Pacific Corp. 1,200 23
Millennium Chemicals, Inc. 107 3
Nucor Corp. 700 34
Oregon Metallurgical Corp. 1,440 48
Rentokil Initial, PLC 15,248 67
Sonoco Products Co. 2,000 69
Technip, S.A. 350 37
Timber Co. 300 6
Toray Industries 9,000 40
Union Camp Corp. 500 27
------------------------------------------------------
568
- -----------------------------------------------------------
CAPITAL GOODS--4.5%
- -----------------------------------------------------------
Applied Industrial
Technologies 1,050 28
B.F. Goodrich Co. 700 29
Blount International, "A" 2,180 58
Casella Waste System, Inc. 1,500 40
Emerson Electric Co. 1,200 68
General Electric Co. 3,800 279
(a) Littelfuse, Inc. 700 17
Mannesmann, A.G. 85 43
Murata Manufacturing 1,000 25
Noble International, Ltd. 300 3
Pacific Scientific Co. 2,980 72
Raytheon Co. 900 45
Sony Corp. 800 71
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS--CONTINUED
- -----------------------------------------------------------
Trinity Industries 830 $ 37
(a) USA Waste Services 1,775 70
(a) U.S. Filter Corp. 3,100 93
Xerox Corp. 600 44
------------------------------------------------------
1,022
- -----------------------------------------------------------
CONSUMER CYCLICALS--7.3%
- -----------------------------------------------------------
(a) American Coin Merchandising 2,100 37
American Greetings Corp. 2,100 82
(a) AutoZone 2,300 67
Borg Warner Automotive, Inc. 640 33
(a) Bright Horizons Children's
Center, Inc. 2,100 39
Brown Group, Inc. 2,000 27
(a) CapStar Hotel Co. 1,500 51
Carnival Corp. 1,800 100
Carrefour, S.A. 81 42
(a) Consolidated Graphics, Inc. 1,050 49
Dillard Department Stores 2,400 85
(a) Education Management Corp. 800 25
Femsa "B" Fomento Economico
Mexicano, S.A. 8,700 69
Finish Line 2,130 28
Four Seasons Hotels, Inc. 1,000 32
(a) Friedman's, Inc. 2,285 31
(a) Hearst-Argyle Television,
Inc. 900 27
Hertz Corp. 300 12
Hudson's Bay Co. 3,375 75
May Department Stores Co. 300 16
(a) Men's Wearhouse 1,300 45
Meredith Corp. 400 14
(a) MGM Grand 2,000 72
(a) Neiman-Marcus 600 18
NIKE 3,000 118
(a) Outdoor Systems, Inc. 1,100 42
(a) Outsource International 400 5
(a) Preview Travel, Inc. 500 4
Sears, Roebuck & Co. 2,200 100
(a) SOS Staffing Services 600 11
(a) SportsLine USA, Inc. 1,200 13
(a) Tommy Hilfiger Corp. 2,800 98
Trammell Crow Co. 1,200 31
V.F. Corp. 600 28
Walt Disney Co. 1,300 129
------------------------------------------------------
1,655
- -----------------------------------------------------------
CONSUMER DURABLES--1.8%
- -----------------------------------------------------------
BBA Group, PLC 6,044 41
Ford Motor Co. 2,000 97
Honda Motor Co., Ltd 2,300 85
Magna International Inc.,
"A" 600 38
Simpson Industries 3,000 35
Superior Industries
International 2,000 54
U.S. Industries 1,450 44
------------------------------------------------------
394
</TABLE>
74
<PAGE> 75
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--6.7%
- ----------------------------------------------------------
(a) American Italian Pasta Co. 700 $ 18
Arbor Drugs 1,275 24
(a) Boston Chicken 2,610 17
Coca Cola Co. 800 53
(a) Emmis Broadcasting Corp. 700 32
Flowserve Corp. 1,440 40
Imperial Tobacco Group, ADR 375 5
Independent Newspapers, PLC 6,938 38
Kimberly-Clark de Mexico,
S.A. de C.V. 17,600 83
Koninklijke Ahold, N.V. 2,600 68
(a) Lone Star Steakhouse &
Saloon 1,950 34
McDonald's Corp. 2,700 129
(a) MSC Industrial Direct 400 17
Newell Co. 2,500 106
Ocular Sciences, Inc. 500 13
PepsiCo 1,500 55
Philip Morris Cos. 7,600 344
Procter & Gamble Co. 1,300 104
Star Buffet, Inc. 200 2
UST, Inc. 7,500 277
(a) Whole Foods Market 1,000 51
-----------------------------------------------------
1,510
- ----------------------------------------------------------
ENERGY--3.4%
- ----------------------------------------------------------
AMOCO Corp. 700 60
Atlantic Richfield Co. 700 56
Atmos Energy Corp. 900 27
British Petroleum 4,246 56
Chevron Corp. 400 31
Columbia Gas System 500 39
(a) Dawson Geophysical Co. 1,900 31
Elf Aquitaine 639 75
Enron Oil & Gas Co. 800 33
Exxon Corp. 900 55
Giant Industries 1,620 31
KCS Energy 1,170 24
Petro-Canada 4,925 90
Repsol, S.A. 960 41
Royal Dutch Petroleum 1,534 84
(a) Tesoro Petroleum Corp. 1,760 27
-----------------------------------------------------
760
- ----------------------------------------------------------
FINANCE--12.6%
- ----------------------------------------------------------
American General Corp. 1,000 54
AmerUS Life Holdings, Inc. 1,500 55
ARM Financial Corp. 2,000 53
Astoria Financial Corp. 690 38
AXA-UAP, S.A. 500 39
Banco Bilbao Vizcaya 2,166 70
Banco Popular Espanol 941 66
Banc One Corp. 900 49
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
- ----------------------------------------------------------
BankAmerica Corp. 400 $ 29
Bankers Trust New York Corp. 400 45
Bank of Ireland 4,796 73
Barnett Banks 600 43
Bear Stearns Companies 1,400 67
BRE Properties, Inc. 800 23
CITIC Pacific, Ltd. 13,500 54
Commercial Federal Corp. 950 34
Compass Bancshares 900 39
Del Webb Corp. 1,800 47
Excel Realty Trust, Inc. 1,120 35
Executive Risk 400 28
Federal Home Loan Mortgage
Corp. 3,400 143
Federal National Mortgage
Association 3,700 211
Financial Federal Corp. 1,500 35
First Chicago NBD Corp. 500 42
First Commerce Corp. 620 42
First Union Corp. 1,560 80
Fleet Financial Group, Inc. 200 15
General Re Corp. 500 106
Hartford Financial Services 600 56
Hibernia Corp. 4,000 75
HSBC Holdings, PLC 4,855 120
Imperial Credit Industries 1,490 31
ING Groep, N.V. 1,087 46
Jefferson-Pilot Corp. 500 39
Kansas City Southern
Industries 600 19
KeyCorp 200 14
LaSalle Partners 500 18
Meditrust 720 26
Merrill Lynch & Co. 1,100 80
MGIC Investment Corp. 1,400 93
Morgan Stanley, Dean Witter,
Discover & Co. 1,000 59
NationsBank 2,200 134
PennCorp Financial Group 1,050 37
PNC Bank Corp. 900 51
Post Properties 800 33
Protective Life Insurance
Co. 400 24
Republic NY Corp. 200 23
Resource Bancshares Mortgage
Group 2,657 43
Safeco Corp. 1,200 59
Texas Regional Bancshares 150 5
Torchmark Corp. 600 25
United Companies Financial Corp. 1,370 21
Vedior, N.V. 2,014 36
Washington Mutual, Inc. 500 32
Wells Fargo & Co. 100 34
-----------------------------------------------------
2,848
</TABLE>
75
<PAGE> 76
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
HEALTH CARE--7.3%
- ----------------------------------------------------------
Abbott Laboratories 1,200 $ 79
ALZA Corp. 4,400 140
American Home Products Corp. 2,800 214
Astra, A.B., ADR 5,400 93
Baxter International 600 30
Becton Dickinson & Co. 600 30
(a) Biogen 1,400 51
Bristol-Myers Squibb Co. 700 66
(a) British Biotech, PLC 8,148 14
Concentra Managed Care, Inc. 557 19
(a) CONMED Corp. 1,850 49
C.R. Bard 1,000 31
Crescendo Pharamaceutical 125 1
(a) Dura Pharamaceuticals 600 28
Glaxo Wellcome, PLC 2,521 60
(a) Hanger Orthopedic Group 2,000 26
(a) HealthCare COMPARE Corp. 1,450 74
(a) Healthworld Corp. 2,000 24
Mallinckrodt Group 1,500 57
Merck & Co. 1,300 138
Novartis 31 50
(a) PAREXEL International Corp. 1,000 37
RehabCare Group 1,300 34
Roche Holding, A.G. 7 70
(a) Safeskin Corp. 900 51
(a) Sofamor-Danek Group 800 52
United Healthcare Corp. 1,600 80
Zeneca Group, PLC 1,466 52
-----------------------------------------------------
1,650
- ----------------------------------------------------------
TECHNOLOGY--11.9%
- ----------------------------------------------------------
AMP, Inc. 600 25
(a) Analog Devices 1,000 28
(a) Applied Materials, Inc. 4,300 130
(a) Ascend Communications, Inc. 1,400 34
(a) Atmel Corp. 2,600 48
Belden, Inc. 850 30
Canon, Inc. 1,700 40
(a) Cisco Systems 3,600 201
Compaq Computer Corp. 2,675 151
(a) Computer Sciences Corp. 1,620 135
(a) Comverse Technology 300 12
Diebold 2,500 127
ESS Technologies, Inc. 2,300 17
First Data Corp. 1,000 29
Fuji Photo Film Co., Ltd. 1,000 38
(a) Gartner Group 400 15
Getronics 1,230 39
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------
TECHNOLOGY--CONTINUED
- ----------------------------------------------------------
Hewlett-Packard Co. 300 $ 19
HMT Technology Corp. 2,300 30
Intel Corp. 2,800 197
(a) Jones Intercable, Inc. 2,080 37
(a) KLA-Tencor Corp. 300 12
(a) Learning Co. 2,700 43
Linear Technology Corp. 1,800 104
(a) Microchip Technology 3,900 117
(a) MRV Communications 300 7
(a) Novellus Systems 2,100 68
(a) Parametric Technology Corp. 2,100 99
Pittway Corp. 200 14
(a) Quantum Corp. 4,600 92
(a) Read-Rite Corp. 1,940 31
Reynolds & Reynolds Co. 6,500 120
(a) Sanmina Corp. 400 27
(a) Seagate Technology 1,500 29
(a) Sun Microsystems 4,100 163
(a) Tech-Sym Corp. 110 3
Telecom Italia Spa 8,600 55
(a) Teradyne, Inc. 4,000 128
(a) 3Com Corp. 4,525 158
(a) Western Digital Corp. 1,900 31
-----------------------------------------------------
2,683
- ----------------------------------------------------------
TRANSPORTATION--.2%
- ----------------------------------------------------------
Canadian National Railway
Co. 800 38
(a) Knight Transportation 200 6
-----------------------------------------------------
44
- ----------------------------------------------------------
UTILITIES--2.2%
- ----------------------------------------------------------
GTE Corp. 1,200 63
Southern Co. 2,200 57
Telecom Italia Mobile 15,820 73
Telefonica de Espana, S.A. 2,194 63
Veba, A.G. 1,000 68
(a) WorldCom, Inc. 5,500 166
-----------------------------------------------------
490
-----------------------------------------------------
TOTAL COMMON STOCKS--60.4%
(Cost: $12,509) 13,624
-----------------------------------------------------
TOTAL INVESTMENTS--98.8%
(Cost: $21,117) 22,276
-----------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.2% 277
-----------------------------------------------------
NET ASSETS--100% $22,553
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER HORIZON 10+ PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $21,117,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $1,709,000, the
gross unrealized depreciation was $550,000 and the net unrealized appreciation
on investments was $1,159,000.
See accompanying Notes to Financial Statements.
76
<PAGE> 77
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER HORIZON 5 PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
U. S. TREASURY SECURITIES--50.0%
- -----------------------------------------------------------
Notes 8.875%, 2000 $1,470 $ 1,574
8.50%, 2000 1,100 1,180
6.75%, 2000 1,249 1,277
5.875%, 2000 340 341
5.50%, 2000 400 398
8.00%, 2001 200 214
6.625%, 2001 550 566
6.50%, 2001 1,120 1,147
6.25%, 2002 200 204
7.875%, 2004 200 224
------------------------------------------------------
7,125
- -----------------------------------------------------------
MORTGAGE BACKED SECURITIES--7.9%
- -----------------------------------------------------------
FHLMC, 6.00%, 2006 139 139
FHLMC, 6.50%, 2014 141 142
FNMA, 6.01%, 2000 350 351
GNMA, 7.00%, 2015 489 494
------------------------------------------------------
1,126
------------------------------------------------------
TOTAL GOVERNMENT
OBLIGATIONS--57.9%
(Cost: $8,207) 8,251
------------------------------------------------------
COMMON STOCKS
- -----------------------------------------------------------
BASIC INDUSTRIES--1.3%
- -----------------------------------------------------------
AK Steel Holding Corp. 530 shs. 9
AMCOL International 960 15
Champion International Corp. 100 5
Dow Chemical Co. 200 20
Eastman Chemical Co. 200 12
Georgia-Pacific Corp. 100 6
Louisiana-Pacific Corp. 900 17
Nucor Corp. 200 10
Oregon Metallurgical Corp. 540 18
Rentokil Initial, PLC 3,200 14
Sonoco Products Co. 800 28
Technip, S.A. 169 18
Timber Co. 100 2
Toray Industries 1,500 7
Union Camp Corp. 200 11
-----------------------------------------------------
192
- -----------------------------------------------------------
CAPITAL GOODS--2.8%
- -----------------------------------------------------------
Applied Industrial
Technologies 600 16
B.F. Goodrich Co. 200 8
Blount International, "A" 800 21
Casella Waste System, Inc. 1,000 26
Emerson Electric Co. 500 28
General Electric Co. 1,400 103
(a) Littelfuse, Inc. 400 10
Mannesmann, A.G. 42 21
Murata Manufacturing 700 18
Noble International, Ltd. 200 2
Pacific Scientific Co. 1,070 26
Raytheon Co. 400 20
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------
CAPITAL GOODS--CONTINUED
- ----------------------------------------------------------
Sony Corp. 400 $ 36
Trinity Industries 290 13
(a) USA Waste Services 630 25
(a) U.S. Filter Corp. 1,000 30
-----------------------------------------------------
403
- ----------------------------------------------------------
CONSUMER CYCLICALS--5.5%
- ----------------------------------------------------------
(a) American Coin Merchandising 5,000 88
American Greetings Corp. 800 31
(a) AutoZone 600 17
Borg-Warner Automotive, Inc. 240 12
(a) Bright Horizons Children's
Centers, Inc. 1,300 24
Brown Group, Inc. 730 10
(a) CapStar Hotel Co. 600 21
Carnival Corp. 800 44
Carrefour, S.A. 38 20
(a) Consolidated Graphics, Inc. 350 16
Dillard Department Stores 800 28
(a) Education Management Corp. 500 16
Femsa "B" Fomento Economico
Mexicano, S.A. 2,300 18
Finish Line 745 10
Four Seasons Hotels, Inc. 800 25
(a) Friedman's, Inc. 840 11
(a) Hearst-Argyle Television,
Inc. 500 15
Hertz Corp. 300 12
Hudson's Bay Co. 1,550 35
May Department Stores Co. 200 11
(a) Men's Wearhouse 500 17
Meredith Corp. 200 7
(a) MGM Grand 200 7
(a) Neiman-Marcus 600 18
NIKE 1,500 59
(a) Nine West Group 1,000 26
(a) Outdoor Systems, Inc. 300 12
(a) Outsource International 200 2
(a) Preview Travel, Inc. 200 2
Sears, Roebuck & Co. 1,000 45
(a) SOS Staffing Services 400 8
(a) SportsLine USA, Inc. 700 8
(a) Tommy Hilfiger Corp. 1,000 35
Trammell Crow Co. 700 18
V.F. Corp. 200 9
Walt Disney Co. 500 50
-----------------------------------------------------
787
- ----------------------------------------------------------
CONSUMER DURABLES--1.1%
- ----------------------------------------------------------
BBA Group, PLC 2,440 16
Ford Motor Co. 900 44
Honda Motor Co., Ltd 600 22
Magna International Inc.,
"A" 200 13
Simpson Industries 1,060 12
Superior Industries
International 1,000 27
U.S. Industries 800 24
-----------------------------------------------------
158
</TABLE>
77
<PAGE> 78
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES--4.4%
- ----------------------------------------------------------
(a) American Italian Pasta Co. 600 $ 15
Arbor Drugs 675 12
Avon Products 500 31
(a) Boston Chicken 950 6
(a) Emmis Broadcasting Corp. 400 18
Flowserve Corp. 519 14
Independent Newspapers, PLC 1,585 9
Kimberly-Clark de Mexico,
S.A. de C.V. 9,900 47
Koninklijke Ahold, N.V. 988 26
(a) Lone Star Steakhouse &
Saloon 705 12
McDonald's Corp. 1,500 72
(a) MSC Industrial Direct 200 8
Newell Co. 1,300 55
Ocular Sciences, Inc. 100 3
Philip Morris Cos. 3,700 168
Procter & Gamble Co. 400 32
Star Buffet, Inc. 100 1
UST, Inc. 2,600 96
-----------------------------------------------------
625
- ----------------------------------------------------------
ENERGY--2.3%
- ----------------------------------------------------------
AMOCO Corp. 400 34
Atlantic Richfield Co. 300 24
Atmos Energy Corp. 320 10
British Petroleum 1,146 15
Chevron Corp. 300 23
Columbia Gas System 100 8
(a) Dawson Geophysical Co. 500 8
Elf Aquitaine 363 42
Exxon Corp. 500 31
Giant Industries 590 11
KCS Energy 420 9
Kerr-McGee Corp. 400 25
Petro-Canada 1,600 29
Repsol, S.A. 390 17
Royal Dutch Petroleum 636 35
(a) Tesoro Petroleum Corp. 650 10
-----------------------------------------------------
331
- ----------------------------------------------------------
FINANCE--7.3%
- ----------------------------------------------------------
American General Corp. 200 11
AmerUS Life Holdings, Inc. 100 4
ARM Financial Corp. 1,200 32
Astoria Financial Corp. 250 14
AXA-UAP, S.A. 115 9
Banco Popular Espanol 170 12
Banc One Corp. 300 16
BankAmerica Corp. 200 15
Bankers Trust New York Corp. 100 11
Bank of Ireland 3,425 52
Barnett Banks 200 14
Bear Stearns Cos. 400 19
BRE Properties, Inc. 300 8
CITIC Pacific, Ltd. 6,000 24
Commercial Federal Corp. 400 14
Compass Bancshares 320 14
Del Webb Corp. 650 17
Excel Realty Trust, Inc. 410 13
Executive Risk 200 14
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
FINANCE--CONTINUED
- ----------------------------------------------------------
Federal Home Loan Mortgage
Corp. 1,600 $ 67
Federal National Mortgage
Association 1,400 80
Financial Federal Corp. 1,000 24
First Chicago NBD Corp. 200 17
First Commerce Corp. 220 15
First Union Corp. 620 32
General Re Corp. 200 42
Hartford Financial Services 300 28
Hibernia Corp. 1,500 28
HSBC Holdings, PLC 814 20
Imperial Credit Industries 550 11
ING Groep, N.V. 551 23
Jefferson-Pilot Corp. 250 19
Kansas City Southern
Industries 300 10
KeyCorp 200 14
LaSalle Partners 300 11
Meditrust 360 13
Merrill Lynch & Co. 200 15
MGIC Investment Corp. 500 33
Morgan Stanley, Dean Witter,
Discover & Co. 500 30
NationsBank 650 40
PennCorp Financial Group 380 14
PNC Bank Corp. 500 29
Post Properties 400 16
Protective Life Insurance
Co. 200 12
Republic NY Corp. 50 6
Resource Bancshares Mortgage
Group 945 15
Safeco Corp. 500 24
Texas Regional Bancshares 150 5
Torchmark Corp. 200 8
United Companies Financial
Corp. 480 7
Vedior, N.V. 455 8
Washington Mutual, Inc. 200 13
-----------------------------------------------------
1,042
- ----------------------------------------------------------
HEALTH CARE--4.8%
- ----------------------------------------------------------
Abbott Laboratories 600 39
ALZA Corp. 2,000 64
American Home Products Corp. 800 61
Astra, A.B., ADR 1,600 28
Baxter International 400 20
Becton Dickinson & Co. 400 20
(a) Biogen 600 22
Bristol-Myers Squibb Co. 300 28
(a) British Biotech, PLC 3,550 6
Concentra Managed Care, Inc. 278 9
(a) CONMED Corp. 685 18
C.R. Bard 300 9
Crescendo Pharmaceutical 50 1
(a) Dura Pharmaceuticals 400 18
Glaxo Wellcome, PLC 1,225 29
(a) Hanger Orthopedic Group 500 6
(a) HealthCare COMPARE Corp. 500 26
(a) Healthworld Corp. 1,200 14
Mallinckrodt Group 600 23
Merck & Co. 500 53
Novartis 14 23
(a) PAREXEL International Corp. 500 19
</TABLE>
78
<PAGE> 79
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
HEALTH CARE--CONTINUED
- ----------------------------------------------------------
RehabCare Group 300 $ 8
Roche Holding, A.G. 3 30
(a) Safeskin Corp. 500 28
(a) Sofamor-Danek Group 300 20
United Healthcare Corp. 600 30
Zeneca Group, PLC 780 28
-----------------------------------------------------
680
- ----------------------------------------------------------
TECHNOLOGY--9.0%
- ----------------------------------------------------------
(a) Adaptec, Inc. 1,000 37
AMP, Inc. 300 13
(a) Analog Devices 1,000 28
(a) Applied Materials, Inc. 2,000 60
(a) Ascend Communications, Inc. 600 15
(a) Atmel Corp. 2,400 45
Belden, Inc. 150 5
Canon, Inc. 400 9
(a) Cisco Systems 1,650 92
Compaq Computer Corp. 1,100 62
(a) Computer Sciences Corp. 800 67
(a) Comverse Technology 200 8
Diebold 1,000 51
ESS Technologies, Inc. 830 6
Fuji Photo Film Co., Ltd. 2,000 77
(a) Gartner Group 200 7
Getronics 480 15
Hewlett-Packard Co. 100 6
HMT Technology Corp. 800 10
Intel Corp. 900 63
(a) Jones Intercable, Inc. 750 13
(a) KLA-Tencor Corp. 200 8
(a) Learning Co. 970 16
Linear Technology Corp. 700 40
(a) Microchip Technology 1,100 33
(a) MRV Communications 300 7
(a) Natural MicroSystems Corp. 100 5
(a) Novellus Systems 800 26
(a) Parametric Technology Corp. 1,000 47
Pittway Corp. 100 7
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--CONTINUED
- ----------------------------------------------------------
(a) Quantum Corp. 1,400 $ 28
(a) Read-Rite Corp. 700 11
Reynolds & Reynolds Co. 3,100 57
(a) Sanmina Corp. 150 10
(a) Seagate Technology 600 12
(a) Sun Microsystems 1,800 72
(a) Tech-Sym Corp. 40 1
Telecom Italia Spa 4,500 29
(a) Teradyne, Inc. 1,800 58
(a) 3Com Corp. 2,400 84
(a) VIASOFT, Inc. 100 4
(a) Western Digital Corp. 1,200 19
Xerox Corp. 250 18
-----------------------------------------------------
1,281
- ----------------------------------------------------------
TRANSPORTATION--.2%
- ----------------------------------------------------------
Canadian National Railway
Co. 400 19
(a) Knight Transportation 100 3
-----------------------------------------------------
22
- ----------------------------------------------------------
UTILITIES--1.6%
- ----------------------------------------------------------
GTE Corp. 600 31
Southern Co. 900 23
Telecom Italia Mobile 6,180 29
Telefonica de Espana, S.A. 883 25
Veba, A.G. 451 31
(a) WorldCom, Inc. 3,000 91
-----------------------------------------------------
230
-----------------------------------------------------
TOTAL COMMON STOCKS--40.3%
(Cost: $5,326) 5,751
-----------------------------------------------------
TOTAL INVESTMENTS--98.2%
(Cost: $13,533) 14,002
-----------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.8% 256
-----------------------------------------------------
NET ASSETS--100% $14,258
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER HORIZON 5 PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $13,533,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $697,000, the gross
unrealized depreciation was $228,000 and the net unrealized appreciation on
investments was $469,000.
See accompanying Notes to Financial Statements.
79
<PAGE> 80
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER BLUE CHIP PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
NUMBER
COMMON STOCKS OF SHARES VALUE
- ------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES--3.1%
- ------------------------------------------------------------
Betz Dearborn, Inc. 2,800 $ 171
Imperial Chemical Industries,
ADR 2,700 175
PPG Industries 3,700 211
Temple-Inland, Inc. 300 16
-------------------------------------------------------
573
- ------------------------------------------------------------
CAPITAL GOODS--4.4%
- ------------------------------------------------------------
Boeing Co. 1,500 73
Emerson Electric Co. 1,600 90
General Electric Co. 600 44
Raytheon Co. 3,343 167
Sundstrand Corp. 4,500 227
(a) U.S. Industries 6,750 203
-------------------------------------------------------
804
- ------------------------------------------------------------
CONSUMER CYCLICALS--9.6%
- ------------------------------------------------------------
CBS Corp. 5,000 147
(a) Clear Channel Communications 1,300 103
(a) Consolidated Stores Corp. 600 26
Dillard Department Stores 3,000 106
Harcourt General 2,650 145
J.C. Penney Co. 2,500 151
May Department Stores Co. 4,000 211
(a) MGM Grand 3,500 126
Newell Co., convertible
preferred 3,000 155
R.R. Donnelley & Sons Co. 7,300 272
Service Corporation
International 4,500 166
(a) Toys R Us 5,300 167
-------------------------------------------------------
1,775
- ------------------------------------------------------------
CONSUMER DURABLES--3.1%
- ------------------------------------------------------------
Federal-Mogul Corp.,
convertible preferred 2400 121
GM Corp. 4,500 166
Stanley Works 5,900 278
-------------------------------------------------------
565
- ------------------------------------------------------------
CONSUMER STAPLES--9.3%
- ------------------------------------------------------------
Dial Corp. 7,300 152
General Mills, Inc. 1,600 115
Gillette Co. 1,000 100
H.J. Heinz Co. 2,400 122
International Flavors &
Fragrances 4,200 216
Kimberly-Clark Corp. 1,700 84
McCormick & Co. 9,000 252
PepsiCo 3,000 109
Procter & Gamble Co. 1,000 80
Seagram Co. 2,000 65
Unilever, N.V., ADR 2,000 125
UST, Inc. 5,000 185
Whitman Corp. 4,000 104
-------------------------------------------------------
1,709
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------
<S> <C> <C>
ENERGY--5.6%
- ------------------------------------------------------------
Baker Hughes, Inc. 2,900 $ 127
Chevron Corp. 3,000 231
Enron Corp. 6,000 248
Exxon Corp. 2,100 128
MCN Energy Group, Inc.,
convertible preferred 2,000 125
Mobil Corp. 1,200 87
Pennzoil Co. 100 7
Unocal Corp. 2,000 78
-------------------------------------------------------
1,031
- ------------------------------------------------------------
FINANCE--18.8%
- ------------------------------------------------------------
American Express Co. 1,100 98
American General Corp. 4,900 265
Beneficial Corp. 2,000 166
Compass Bancshares 4,000 175
Federal National Mortgage
Association 2,000 114
First Chicago NBD Corp. 4,000 334
First Union Corp. 1,200 62
Fleet Financial Group, Inc. 2,570 193
General Growth Properties,
Inc. 2,200 79
H.F. Ahmanson & Co. 1,500 100
Hibernia Corp. 4,000 75
Highwood Properties, Inc. 4,000 149
Jefferson-Pilot Corp. 3,400 265
KeyCorp 3,000 212
Mid Ocean, Ltd. 3,900 212
Morgan Stanley, Dean Witter,
Discover & Co. 1,200 71
NationsBank 3,000 182
PNC Bank Corp. 2,500 143
Safeco Corp. 5,000 244
Spieker Properties, Inc. 3,000 128
Summit Bancorp 3,150 168
Wilmington Trust Corp. 600 37
-------------------------------------------------------
3,472
- ------------------------------------------------------------
HEALTH CARE--9.2%
- ------------------------------------------------------------
Abbott Laboratories 3,000 197
ALZA Corp. 3,000 95
American Home Products Corp. 3,600 275
Baxter International, Inc. 4,200 212
Bristol-Myers Squibb Co. 1,500 142
(a) Crescendo Pharmaceutical
Corp. 150 2
(a) HealthCare COMPARE Corp. 700 36
(a) HEALTHSOUTH Corp. 4,100 114
McKesson Corp., convertible
preferred 1,000 75
McKesson Corp. 700 76
Merck & Co. 2,200 234
(a) Tenet Healthcare Corp. 5,000 166
United Healthcare Corp. 1,300 65
-------------------------------------------------------
1,689
</TABLE>
80
<PAGE> 81
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY--15.2%
- ------------------------------------------------------------
AMP, Inc. 5,500 $ 231
(a) Analog Devices 5,700 158
(a) Cisco Systems 3,150 176
Computer Associates
International 900 48
(a) Computer Sciences Corp. 3,000 251
Diebold 3,400 172
(a) Gartner Group 3,500 130
Harris Corp. 3,800 174
Hewlett-Packard Co. 5,900 369
International Business
Machines Corp. 2,500 261
(a) National Semiconductor Corp. 4,500 117
(a) Newbridge Networks Corp. 2,000 70
(a) Parametric Technology Corp. 3,500 166
Pitney Bowes 300 27
(a) Sterling Commerce, Inc. 4,000 154
(a) Sun Microsystems 6,000 239
(a) Teradyne, Inc. 2,000 64
-------------------------------------------------------
2,807
- ------------------------------------------------------------
TRANSPORTATION--3.3%
- ------------------------------------------------------------
Canadian Pacific, Ltd. 5,000 136
CSX Corp. 4,800 259
(a) Federal Express Corp. 1,000 61
Norfolk Southern Corp. 5,000 154
-------------------------------------------------------
610
- ------------------------------------------------------------
UTILITIES--3.9%
- ------------------------------------------------------------
AirTouch Communications,
convertible preferred 1,900 118
Ameritech Corp. 1,500 121
AT&T 1,200 74
Cincinnati Bell, Inc. 6,000 186
SBC Communications, Inc. 2,900 212
-------------------------------------------------------
711
-------------------------------------------------------
TOTAL COMMON STOCKS--85.5%
(Cost: $15,218) 15,746
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
NUMBER
OF SHARES
OR PRINCIPAL
CORPORATE OBLIGATIONS AMOUNT VALUE
- ------------------------------------------------------------
<S> <C> <C>
HEALTH CARE--.5%
- ------------------------------------------------------------
ALZA Corp., 5.00%, 2006 100 $ 104
- ------------------------------------------------------------
ENERGY--.5%
- ------------------------------------------------------------
Diamond Offshore Drilling,
Inc., 3.75%, 2007 65 88
-------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--1.0%
(Cost: $184) 192
-------------------------------------------------------
MONEY MARKET INSTRUMENTS
Yield--5.60% to 5.75%
Due--January, 1998
Federal Home Loan Bank $ 650 647
Federal Home Loan Mortgage
Corp. 2,050 2,045
Federal National Mortgage
Association 1,700 1,697
-------------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--23.8%
(Cost: $4,389) 4,389
-------------------------------------------------------
TOTAL INVESTMENTS--110.3%
(Cost: $19,791) 20,327
-------------------------------------------------------
LIABILITIES, LESS CASH AND
OTHER ASSETS--(10.3)% (1,906)
-------------------------------------------------------
NET ASSETS--100% $18,421
-------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER BLUE CHIP PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $19,791,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $800,000, the gross
unrealized depreciation was $264,000 and the net unrealized appreciation on
investments was $536,000.
See accompanying Notes to Financial Statements.
81
<PAGE> 82
PORTFOLIO OF INVESTMENTS
INVESTORS FUND SERIES KEMPER GLOBAL INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS AT DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. DOLLAR--20.0% U.S. Treasury Notes
5.75%, 2003 320 $ 320
6.25%, 2007 105 109
----------------------------------------------------------------------------
429
- -------------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--18.1% Commonwealth of Australia
9.75%, 2002 90 68
Federal National Mortgage Association
6.50%, 2002 140 94
New South Wales Treasury Corp.
7.00%, 2004 200 136
Queensland Treasury Corp.
6.50%, 2005 135 90
----------------------------------------------------------------------------
388
- --------------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--12.2% Int'l Bank for Recon. and Dev.
4.75%, 2004 10,000 93
Italian Treasury
5.00%, 2004 9,000 84
Kingdom of Spain
3.10%, 2006 10,000 84
----------------------------------------------------------------------------
261
- --------------------------------------------------------------------------------------------------------------------------
BRITISH POUND--11.5% Export-Import Bank of the United States
6.00%, 2004 47 75
IBRD World Bank
7.125%, 2007 46 79
United Kingdom
8.50%, 2005 50 93
----------------------------------------------------------------------------
247
- --------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND DOLLAR--10.1% New Zealand Government
10.00%, 2002 200 128
8.00%, 2004 145 88
----------------------------------------------------------------------------
216
- --------------------------------------------------------------------------------------------------------------------------
FRENCH FRANC--10.0% French Treasury
6.75%, 2003 176 32
6.75%, 2004 1,000 183
----------------------------------------------------------------------------
215
- --------------------------------------------------------------------------------------------------------------------------
GERMAN MARK--6.6% Federal Republic of Germany
6.50%, 2003 110 66
Government of Ireland
7.25%, 2003 125 76
----------------------------------------------------------------------------
142
</TABLE>
82
<PAGE> 83
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LOCAL CURRENCY U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CANADIAN DOLLAR--4.8% Government of Canada
4.75%, 1999 105 $ 73
8.00%, 2027 35 31
----------------------------------------------------------------------------
104
----------------------------------------------------------------------------
TOTAL INVESTMENTS--93.3%
(Cost: $2,062) 2,002
----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--6.7% 143
----------------------------------------------------------------------------
NET ASSETS--100% $2,145
----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO KEMPER GLOBAL INCOME PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
The Fund is a non-diversified investment company and may invest a relatively
high percentage of its assets in the obligations of a limited number of issuers.
Based on the cost of investments of $2,062,000 for federal income tax purposes
at December 31, 1997, the gross unrealized appreciation was $11,000, the gross
unrealized depreciation was $71,000 and the net unrealized depreciation on
investments was $60,000.
See accompanying Notes to Financial Statements.
83
<PAGE> 84
This annual report must be preceded or accompanied by
the current prospectus.
INVESTMENT MANAGER:
Scudder Kemper Investments, Inc.
222 South Riverside Plaza Chicago, IL 60606
(Tel) 800-778-1482
[RECYCLE LOGO]
Printed on recycled paper.
KIF (2/98) 1044030
Printed in the U.S.A. [KEMPER ANNUITIES LOGO]
Long-term investing in a short-term world(SM)
