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SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JUNE 30, 1999
Kemper Variable Series
[KEMPER VARIABLE SERIES LOGO]
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BLANK PAGE
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KEMPER VARIABLE 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 CONTRARIAN 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
KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO
KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO
KEMPER GLOBAL BLUE CHIP PORTFOLIO
KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO
KEMPER AGGRESSIVE GROWTH PORTFOLIO
KEMPER TECHNOLOGY GROWTH 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
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A PH.D. IN ECONOMICS FROM NORTHEASTERN UNIVERSITY IN BOSTON, MASS.
HE IS A MEMBER OF BOTH THE BLUE CHIP ECONOMIC AND FINANCIAL SURVEYS, AND SERVES
ON THE POLICY ADVISORY COMMITTEES OF THE FEDERAL RESERVE BOARDS OF CHICAGO AND
CLEVELAND.
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR CONTRACT HOLDER:
In his July 22 Humphrey-Hawkins testimony on the economy and Fed policy, Federal
Reserve Board Chairman Alan Greenspan indicated that the Fed will raise interest
rates soon unless job creation slows and productivity continues to increase. But
why, ask many investors, is the Fed tightening when there is no indication of
inflation?
Talk of rising interest rates began last spring, and on June 30 the Fed
boosted the overnight bank lending rate one quarter of a point (0.25%). With
this move the Fed said it was not inclined to increase rates again anytime
soon -- although it noted that it was alert to the potential emergence of
inflationary pressures that could undermine economic growth. The Fed might then
decide that the June rate increase wasn't enough.
That is exactly what appears to be happening. In his July 22 commentary to the
House Banking Committee, which was part of the Fed's twice-yearly outlook report
required by the Humphrey-Hawkins Full Employment and Balanced Growth Act of
1978, Greenspan didn't say that the Fed definitely would raise the overnight
bank loan rate at its next meeting on August 24. Still, the tone of his report
included more warnings than expected about the need to follow the June rate
increase with another.
The possibility of another rate hike frustrates many investors, who do not
understand why the Fed is tightening when there are no signs of inflation. But
Fed policymakers look at the rate hike another way: If the June 30 increase was
not enough to bring inflation risks into balance, a "euphoric" rise in stocks
may fuel increased consumer spending, which could necessitate a more disruptive
adjustment later. If new data confirms this theory, the Fed will likely act
promptly to prevent such an adjustment. In other words, the Fed strongly
believes that "a stitch in time saves nine" -- it wants to be preemptive by
raising interest rates and slowing the economy BEFORE an inflation problem
arises.
What data may confirm the Fed's theory? To start, the Fed forecasts that the
consumer price index (CPI), the average value of an imaginary "basket" of goods
and services in the economy, could rise as much as 2.5 percent this year, up
from 1.6 percent in 1998. The CPI is the standard measure of inflation in the
United States, so a marked increase would suggest rising inflation.
Employment growth also suggests inflation. Job creation has exceeded the
growth of the working-age population by almost one-half a percentage point
(0.50%) in the past year. The Fed believes that if the pool of job seekers
shrinks sufficiently, upward pressures on wage costs are likely. Such cost
increases have invariably presaged rising inflation in that past, and presumably
would in the future.
The Fed also believes that gross domestic product (GDP), the value of all
goods and services produced in the United States, is growing faster than it
would grow without inflation. The Fed believes that GDP can grow 3.0 percent to
3.5 percent per without generating inflation. Actual 1998 GDP growth was 4.3
percent, and 1999 GDP growth is projected to be 3.8 percent.
Productivity growth is another indicator of inflation pressure. After
languishing at about 1 percent in the 1970s and 1980s, productivity growth has
been above 2 percent in each of the past three years. Over the past four
quarters it has increased 2.8 percent, and could reach 3.5 percent if
second-quarter productivity growth comes in close to 4 percent. According to the
Fed, this has enabled output to grow beyond what normally would have been
expected -- and has held down inflationary pressures. But productivity must
continue to grow at an ever faster pace to keep inflation from accelerating. The
Fed is concerned that the gains in technology that have fostered the
productivity growth will slow, and any inflationary pressures in the labor
market could ultimately show in product prices.
The improving global economy could also contribute to inflation. Improving
economic conditions around the world mean that the U.S. economy will no longer
experience declines in basic commodity and import prices that curtailed
inflation in recent years. A rise in the price of imported crude oil -- which is
used to make everything from gasoline to plastic bags -- is already up 57
percent this year. To the Fed, which cut interest rates by 75 basis points last
year because of a slowdown in the global economy, raising interest rates in June
and again in August or October is only "taking back" some of what it gave last
year.
Clearly, then, if the Fed does raise interest rates in August or October, it
will do so to slow the economy. As a result, consumer spending will likely
decrease, leading to a decline in corporate profits. That will have negative
effects on capital spending. The end result could be a decline in the value of
equities in general.
Of course, if the economy slows naturally, the Fed is not likely to increase
interest rates. If stock markets don't continue "outsized" gains, consumer
spending could ease, and business investment could fall back, making a rate hike
unnecessary. But for several years the Fed has been counting on an economic
slowdown to keep inflation in check. So far, that hasn't happened. And now the
Fed feels that unexploited profit-making opportunities made possible by
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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 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 (7/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 5.79 4.72 5.46 6.22
Prime rate(2) 8.00 7.75 8.50 8.50
Inflation rate(3)* 1.96 1.61 1.68 2.21
The U.S. dollar(4) -2.82 -4.37 8.79 7.32
Capital goods orders(5)* -0.21 12.89 10.92 7.87
Industrial production(5)* 2.71 1.55 3.59 5.07
Employment growth(6) 2.33 2.25 2.43 2.57
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. in the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of 6/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
low inflation and the growth of technology may mute a natural cyclical slowdown.
All things considered, a hike of 25 basis points is likely when the Fed meets
in August or October. But one rate hike will likely be the end of the Fed's
interest in interest rates for the next six months. The Fed is unlikely to raise
rates between November and February because of the Y2K issue: It doesn't want to
encourage Y2K fears or appear responsible for Y2K-related volatility in the
financial markets.
The long-term possibility of interest rate hikes is likely to be affected by
political considerations. Election primaries begin in February 2000. Will
candidates be talking about tax cuts? Medicare reform? Social Security reform?
These will be the issues to consider when we look at the economy in early- to
mid-2000.
Hopefully it will be as easy for investors to obtain information about Fed
policies at that time as it is today. The Humphrey-Hawkins hearings were created
to give Congress and the public some idea of economic growth and inflation. But
this round of Humphrey-Hawkins hearings could be the last, because the
Humphrey-Hawkins law expires this year. Although Greenspan has said he thinks it
is important for the Fed to report to Congress, and House Banking Committee
Chairman Jim Leach intends to press for a new law, there has been no move to
enact a new reporting requirement. Although the Fed could still provide
hearings, without a law forcing it to do so within a certain framework, we would
likely have no consistent basis for analyzing monetary policy.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF JULY 26, 1999, AND
MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
TO OBTAIN A PROSPECTUS, PLEASE TALK TO YOUR FINANCIAL REPRESENTATIVE. THE
PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING FEES, CHARGES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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MANAGEMENT SUMMARY
KEMPER MONEY MARKET PORTFOLIO
In general, the Money Market Portfolio maintained a defensive, short average
maturity strategy throughout the first half of 1999. Following several rate cuts
in 1998, the markets were calm, interest rates appeared certain to remain steady
for at least a few months and the yield curve offered no income reward for
lengthening the portfolio.
Largely, events unfolded as we expected. Our neutral average maturity policy
provided us with the flexibility to react quickly to developing market
opportunities. That flexibility proved an asset as, in light of a
healthier-than-expected economy, the Federal Reserve raised rates in June.
In light of these events, we began to look for opportunities to lengthen the
portfolio's duration within our neutral range, because we expected some
steepening of the yield curve. We will maintain a defensive posture because of
the possibility of additional mandatory tightening and market uncertainties as
the calendar changes into 2000.
Going forward, we will also continue to emphasize high-quality credits, which
should allow us to provide the stability and liquidity our investors expect from
the Money Market Portfolio.
Frank J. Rachwalski, Jr.
Portfolio Manager
AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE
PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
KEMPER TOTAL RETURN PORTFOLIO
The Total Return Portfolio's conservative approach to growth, as well as the
stability provided by its fixed-income holdings, served the portfolio well
during recent bouts of volatility in the markets, without dampening its ability
to participate in the upswings. Overall, the portfolio stuck to its stock
selection discipline, which helped us find good performers in nearly every
sector of the stock market.
Among the positive notes during the period was the performance of some more
economically sensitive holdings, which benefited the portfolio as the market
shifted into a more cyclical climate. In addition, the technology sector
continued to be an area of strong performance. Specifically, the portfolio
enjoyed good performance from names such as Hewlett-Packard, IBM, Tyco
International and Unocal. Certain sectors, including health care and financials,
fluctuated during the period, although those fluctuations provided opportunities
to buy quality companies on short-term price weakness.
We have also continued to focus on attractively priced stocks in areas that we
believe will benefit from strong consumer confidence, including retail, leisure,
entertainment, consumer services and media sectors.
Once again, our bond holdings served as a stabilizing factor during dips in
the market, although they can at the same time prevent the portfolio from
experiencing the full measure of a market rally. As a balanced portfolio,
though, that is a trade-off we willingly accept. We know that our investors put
a premium on steady, consistent performance.
Overall, we believe that a disciplined, diversified approach to investing
still offers strong potential for long-term investors, and that a healthy
economy and a robust market promise many attractive opportunities in the months
ahead.
Gary Langbaum
Portfolio Manager
KEMPER HIGH YIELD PORTFOLIO(5)
1999 began on an optimistic note for the high-yield markets. Tame domestic
default rates, benign inflation and strong mutual fund cash flows all added up
to a positive outlook for the new year.
What's more, the Brazilian financial crisis that hit in mid-January proved not
to have the impact on the high-yield markets that the Russian crisis had late in
1998.
Indeed, despite some turbulence in the first quarter of 1999, the High Yield
Portfolio held its own and entered the second quarter strong, bolstered in part
by holdings in the surging cable/wireless video sector. That performance was
dampened somewhat late in the period, as a hefty new issue calendar added to
woes created by the turbulent Treasury market and profit-taking following
April's strong gains. Also, there were signs that the default rate was moving to
higher-than-average levels.
The good news is that strong supply, which hindered the market in the short
term, offers us more and more opportunities to take advantage of good values in
the markets in the second quarter. We continue to be encouraged by the outlook
for the high-yield market, and whether an investor is total return-oriented or
looking for income, high-yield investing might make a wise addition to a
diversified investment portfolio.
Harry Resis, Jr.
Lead Portfolio Manager
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MANAGEMENT SUMMARY
KEMPER GROWTH PORTFOLIO
The Growth Portfolio underwent a small but significant change during the period,
as we worked to bring the portfolio more closely in line with our pure growth
strategy. Following the restructuring, the portfolio owned many of the same
stocks it did previously, although we reduced the overall number of positions,
eliminated some stocks and added others that offered consistent, sustainable
earnings growth potential and excellent management.
Following the restructuring, a primary objective of the portfolio was to
closely mirror the sector weightings of the Russell 1000 Growth Index. With that
in mind, we took steps to decrease the portfolio's stake in financial services
stocks and bolstered its exposure to consumer durable names.
Despite our efforts to increase both the quality and diversity of the
portfolio, however, the market's tilt toward cyclical stocks hindered
performance somewhat. Many quality growth stocks suffered in April and May,
including portfolio holdings like Costco, American International Group and
Pfizer. However, we kept our sights set on what we believe to be the best
companies in each market sector, stock holdings that will serve the portfolio
best in the long term.
Despite the volatility of the past year, we continue to keep the portfolio's
focus on quality growth names and a low-turnover management strategy. By
focusing on long-term earnings growth as opposed to trying to guess the next
market swing, we expect the portfolio to be well-positioned for the long term.
Valerie Malter
Portfolio Manager
KEMPER GOVERNMENT SECURITIES PORTFOLIO(6)
Rumors of a cooling economy didn't come to fruition as we entered 1999, and the
government securities market suffered accordingly. Compounding the problem were
renewed signs of strength in the Japanese markets.
Despite that weakness, however, the Government Securities Portfolio stayed the
course, understanding that the economy typically strengthens in the first
quarter as individuals spend their tax refunds. We also expected, correctly,
that Japanese repatriation would slow as the country's March 31 fiscal year
deadline approached.
The markets rebounded somewhat in March and April, although interest rate
fears, fueled by higher-than-expected jumps in both the producer price index and
the consumer price index, dampened performance in May. By June, however, hints
that the Federal Reserve Board would raise rates were fully absorbed by the
markets, which, combined with the relative attractiveness of mortgages, boosted
returns late in the period.
Going forward, we are quite optimistic about the outlook for the government
securities market, and believe the portfolio is well-positioned to take
advantage of likely opportunities in the second half of the year and beyond.
Richard L. Vandenberg
Portfolio Manager
KEMPER INTERNATIONAL PORTFOLIO(4)
1999 to date has proved a volatile period for international markets. But two
themes dominated the period -- Japan and the Federal Reserve.
Japan showed its first signs of strength in months, and we took steps to
increase our exposure to the Asian markets, albeit with a wary eye. In March,
seven of the fund's 10 leading performers were Japanese names, and we expect
more growth from the area in the months to come.
By contrast, the Federal Reserve acted to dampen international markets, as a
backlash against the Fed's shift toward an upward rate bias depressed stocks in
nearly all world markets. Also disappointing was last year's star, the European
market. As a result of sluggish performance in the region, we reduced our
weighting there somewhat, although prospects for the European markets are still
good and the portfolio maintains many individual stocks with outstanding
long-term potential.
Sectors that stood out among all markets during the period included
technology, media, commodity metals and economic cyclicals. The notably weak
sectors were European financials and pharmaceuticals. Major individual positions
that performed well included the industrial gas company BOC, which rose sharply
as the economy improved and the company became the subject of takeover rumors.
Likewise, STMicroelectronics got a boost on the back of surging demand for
microchips.
Despite a management change in the portfolio in the second quarter, its
overall strategy has not changed. While we continue to make stock-specific
adjustments to the portfolio's positioning, we have generally opted to stick to
the broader strategies that were adopted earlier in the year. Looking forward,
we are optimistic that the international markets will continue to be propelled
by the prospect of further recovery in Asia, better prospects for economic
growth and greater corporate focus on profitability.
Irene Cheng
Joan Gregory
Portfolio Managers
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MANAGEMENT SUMMARY
KEMPER SMALL CAP GROWTH PORTFOLIO(3)
In spite of volatility at points during the first half of 1999, market
conditions for small-cap stocks have improved recently, and we continue to find
many good values within the portfolio's investment universe. In light of this
fact, we believe the portfolio is well-positioned for the near term and for the
future as well.
Over the past several months, the portfolio has increased holdings in several
sectors, including retail, capital goods and Internet-related companies. We have
found many stocks in these areas that are trading at attractive multiples and
could perform well in an accelerating economy.
Equities in the technology sector continue to be an important part of the
portfolio's long-term focus, and selected issues have enjoyed success early in
1999. Performers of late include chip manufacturers like Cree Research as well
as Internet-focused companies like Verity.
On the downside, health care stocks suffered early in the period, primarily
due to legislative uncertainty. However, as the year wears on, we're keeping our
eyes peeled for attractive opportunities in the sector.
We believe the outlook is very positive for the Small Capitalization Growth
Portfolio. Large-cap stocks are making a bit more room for smaller issues,
especially as the U.S. economy continues strong. Despite the fact that the
attractiveness of small-cap stocks is not yet fully appreciated, however, we are
continuing to take advantage of the many individual buying opportunities within
our universe. And we will continue to follow the growth-at-the-right-price
investment strategy that has proved successful for us over time.
Kurt Stalzer
Portfolio Manager
KEMPER INVESTMENT GRADE BOND PORTFOLIO
The big news in the fixed-income markets during the first half of the year was
the Federal Reserve's decision to hike short-term rates 25 basis points and
shift from a tightening bias to a neutral bias. The move was perhaps the most
well-announced rate hike in history, and it was discounted by the markets well
in advance.
The hike and the expectations that preceded it took a toll on most
fixed-income securities, resulting in negative returns during most of the year.
At the same time, spreads widened toward the middle of period, putting
pressure on corporate securities and causing them to underperform relative to
Treasuries. Corporates have also suffered due to an influx of new issues and a
wariness on the part of some buyers due to the uncertainty surrounding Y2K.
Together, these events provided us with an excellent buying opportunity.
Going forward, we expect many of these buying opportunities to continue and
expect to further increase our exposure to the corporate sector. We may not see
an immediate benefit from this strategy, but the portfolio does not take a
short-term view of performance. We believe the moves we are making now will be
quite fruitful for the portfolio over time, a view we think best benefits our
investors.
Robert Cessine
Portfolio Manager
KEMPER CONTRARIAN VALUE PORTFOLIO
After many months of extreme, narrow market conditions, the Contrarian Value
Portfolio took full advantage of the recent broadening trend in stocks. We have
spent much of 1999 working on improving the portfolio's diversification,
lowering its price-to-earnings ratio, raising its dividend yield and improving
its projected growth rate.
At the same time, we sold many holdings whose P/Es rose to levels that
exceeded the wider market or no longer offered a favorable risk/reward tradeoff,
such as Hewlett-Packard, Avery Dennison and Chevron.
Despite the fact that, until recently, the market has primarily favored stocks
in which the Contrarian Portfolio won't invest, we've been pleased with the
portfolio to date and look forward to even more opportunities to add long-term
value -- stocks that appear to have limited downside potential and solid
returns. Some areas we have favored recently include depressed blue-chip stocks,
high-quality food industry stocks, and a host of individual, value-oriented
issues like Honeywell and Newell Companies.
Sectors that have contributed to portfolio performance recently include basic
industry, capital goods and retail trade. Many of these sectors have been aided
by the trend toward a broader market.
We are currently seeing a shift that we expect may create more opportunities
for value stocks in general and the Contrarian Value Portfolio in particular. In
light of those potential opportunities, we will continue to keep the portfolio
well-positioned for the future by focusing on low-valuation holdings that give
the portfolio a favorable risk/reward profile. In short, we are quite pleased
with the portfolio's composition and are optimistic about its long-term
prospects.
Thomas Sassi
Portfolio Manager
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MANAGEMENT SUMMARY
KEMPER SMALL CAP VALUE PORTFOLIO(3)
To a large extent, the sharp disparity between large vs. small stocks and growth
vs. value stocks continued unabated during the first half of 1999. A small but
significant turning point came in April, when the portfolio rose sharply as the
market's attention began to broaden.
Although we did not see many positive results early in 1999, we did use the
down market as an opportunity to add value to the portfolio. Our team-oriented,
bottom-up approach to stock selection helped us identify many new names that we
believe have outstanding long-term prospects. One example is Xylan, an Internet
equipment business, which was acquired by Alcatel at a significant premium to
our purchase price.
Despite our success with Xylan, our strict valuation criteria did not allow
the portfolio to participate much in the Internet mania that has characterized
the last few months, although technology positions we do have performed
respectably during the period. Likewise, the materials and processing sector
performed well for us late in the period, as did durable stocks such as Briggs &
Stratton.
Overall, we feel we have a diversified, undervalued portfolio of solid
companies, which positions us well for the future. Regardless of market
conditions, we will continue to focus on a bottom-up approach to stock
selection, identifying companies with considerable value relative to the market.
When small caps gain back their strength, we expect that strategy to serve us
well.
Steven T. Stokes
Portfolio Manager
KEMPER VALUE+GROWTH PORTFOLIO
The market's general tilt toward overvalued, large-cap growth stocks hindered
performance of the portfolio somewhat in recent months, although we've seen a
more beneficial, broadening market climate of late and expect it to continue as
stocks continue their climb.
The portfolio remained fairly evenly divided between value and growth stocks
during the period, both of which provided some solid gains on an individual
basis. Overall, though, growth stocks led the way during most of the year, as
they have for some time. Although that bias hindered short-term performance, it
allowed us to find many attractive value-oriented stocks, which should aid the
portfolio as the market continues to expand its focus.
Given the markets' unpredictability, we steered away from sector-based
forecasting and focused on individual stock selection instead. Some names that
performed well for us during the period include software companies such as
Legato Systems and Veritas, computer systems firms like Tech Data and QLogic, an
information-technology services company. On the downside, we saw insurance and
pharmaceutical stocks lag early in the year.
We have long anticipated that the market would need to expand its focus to
include smaller, value-oriented stocks before it could continue its climb. With
that in mind, we bought many issues we felt would benefit from that trend and
now feel the portfolio's fundamental characteristics offer good potential in
this increasingly healthy market climate. The valuations and growth potential of
many of our holdings are excellent, and we are quite optimistic about the
future.
Robert Tymoczko
Portfolio Manager
KEMPER HORIZON 20+, HORIZON 10+
AND HORIZON 5 PORTFOLIOS
In the first quarter of 1999, the market continued in the direction we had seen
during most of 1998: large-cap stocks beat out small caps, growth stocks beat
value. For the Horizon Portfolios, which use a disciplined, quantitative
approach to investing, that meant that many of our holdings remained on the
periphery of the action in the stock markets.
But the portfolios stayed the course, avoiding high-priced market favorites in
favor of a long-term view. For example, we underweighted technology stocks
relative to the Russell 1000 index, focusing instead on smaller stocks that
offer the strong growth rates and attractive relative valuations demanded by our
quantitative models.
Despite our rather contrarian stance, the Horizon Portfolios had success with
a number of individual issues during the first quarter, including Sun
Microsystems, Scientific-Atlanta, Wet Seal and Nine West Group as well as a
number of international stocks.
Our patience and focus began to pay off in the second quarter, as the market
began at long last to turn its attention toward smaller cap, value-oriented
issues. The portfolios' diversification suddenly became an asset, and all posted
strong performance in April. Cyclical stocks such as Ingersoll-Rand, Trinity
Industries and Dow Chemical all flourished in this environment.
The market continued its broadening trend as the period came to a close, and
we are quite encouraged about opportunities available to the portfolios in the
months ahead. We will continue to adhere to our disciplined, quantitative focus,
believing that, over the long term, remaining clear-sighted and cool-headed is
the most sensible course. We remain confident about the longer-term potential of
a diversified approach that includes a broad variety of assets.
Robert Tymoczko
Portfolio Manager
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MANAGEMENT SUMMARY
KEMPER BLUE CHIP PORTFOLIO
Despite ongoing volatility in the markets and the continued overpricing of many
market-leading blue-chip stocks, the Blue Chip Portfolio enjoyed healthy
performance during the first half of 1999. Despite conditions, our focus
remained fixed on our growth-at-a-reasonable-price discipline, which helped us
identify several attractive stocks over the period.
One example of a sector that met our growth and pricing criteria was the media
sector. Strong performers for the period included Young & Rubicam, Univision,
Tribune and AT&T-Liberty Media. Toward the end of the period, we paired back
several of our better-performing holdings to capture profits, in keeping with
our price discipline.
Over the period, we've seen the market slowly turn its favor toward cyclical
stocks. With that in mind, several of our cyclical holdings, including Emerson
Electric, and Canadian National, contributed to healthy gains recently.
On the downside, exposure to the financial sector dampened our overall
performance somewhat. However, because we only purchase names that offer
attractive growth potential and attractive valuations, we not only sidestepped
the worst of those declines, but we found many solid individual performers.
Going forward, we expect both volatility and overpricing to continue among
blue-chip stocks, at least in the near future. But, as part of our broad
investment philosophy, we expect that uncertainty will always be present. So we
will respond to that uncertainty with a thoughtful, prudent, long-term
investment discipline that we feel has the potential to translate those
challenges into opportunity for our investors.
Tracy McCormick
Portfolio Manager
KEMPER GLOBAL INCOME PORTFOLIO(1,4)
Overall, 1999 to date has proved a difficult period for bond investors
worldwide. Healthy growth, a rise in interest rates in the U.S. and currency
weakness abroad all added up to uncertainty and generally unimpressive returns
from most markets.
Early in the year, we made significant changes to the Global Income Portfolio
in an effort to increase current income levels. For example, we reduced our
exposure to U.S. Treasury securities in favor of dollar-denominated eurobonds
and Brady bonds. At the time, we also switched our exposure in the euro markets
from Austrian and Spanish bonds to German and Irish issues that offered higher
yields. However, weakness of the euro vs. the dollar led to some disappointing
results in March.
At that time, we also decreased our exposure to Canada, whose positive growth
forecasts are likely to put pressure on bond yields.
Good news came in April, as a publication from the International Monetary Fund
reported an uncertain growth forecast and diminished concerns about capital
flow. The bond markets responded favorably, although the Federal Reserve Board's
decision to tighten rates shortly thereafter caused spreads to widen, which hurt
some of the spreads we held in the portfolio. Nonetheless, our hedged positions
against the yen and the euro served the fund well, as the U.S. dollar continued
to gain strength.
Jan Faller
Portfolio Manager
KEMPER-DREMAN HIGH RETURN
EQUITY PORTFOLIO(2)
1999 began much like 1998 -- overvalued, large-cap technology stocks continued
in favor, while fundamentally solid companies with reasonable price-to-earnings
multiples languished. For value investors like the High Return Equity Portfolio,
it had the makings of a difficult period, albeit one that allowed to us to add
significantly to our portfolio holdings. Within a month or so, however, we began
to see a shift as the market slowly began to turn its attention to issues it had
previously overlooked.
During the period, we continued to look for financially sound companies with
low price-to-earnings, price-to-book, price-to-cash-flow and price-to-dividend
ratios. As contrarians, we're always loath to pay a premium for any stock, and
this year was no different.
With that in mind, we found opportunities in many sectors that had been beaten
down to their lowest levels in three years, such as financial and tobacco
stocks. We continue to believe that companies like RJ Reynolds and Phillip
Morris are enormously undervalued. We also experienced a boost from our major
position in oil, which we believe will continue to perform as oil prices creep
up.
In general, and in keeping with our philosophy, we stayed away from the
relatively narrow group of stocks the market seemed to like, such as
Internet-oriented financial stocks, which we believe are overvalued and
speculative.
The market seems to have begun a broadening trend. If the trend continues and
fundamentally strong but undervalued companies receive the attention we think
they deserve, the portfolio could enjoy some potentially strong performance in
the months ahead. Either way, we will continue to stay the course, believing
that keeping an eye on quality companies and long-term performance is always the
wisest strategy.
David N. Dreman
Portfolio Manager
8
<PAGE> 11
MANAGEMENT SUMMARY
KEMPER-DREMAN FINANCIAL SERVICES
PORTFOLIO(2)
After a difficult 1998, the tide is starting to turn in favor of value stocks.
In light of the market's focus on a handful of large growth stocks and Internet
issues, we structured a conservative portfolio with many undervalued names that
we believed would greatly enhance performance when the market's focus began to
broaden. Now that we are seeing what we feel is the beginning of that shift, we
are quite optimistic about the fund's prospects, despite the recent downturn in
financial stocks as a result of interest rate fears.
Because many of the stocks we favor have been overlooked by the market, we
have recently identified some excellent buying opportunities. For example, we
see regional banks and property and casualty insurers as having outstanding
long-term growth prospects, and we focused many of our investments in those
areas.
Because of our value investment philosophy, we have generally steered clear of
some of the so-called "hot" financial stocks, such as Internet-based financial
companies and high-risk secondary lending firms. In general, we see many of
these issues as speculative due to their overreliance on a surging stock market
and a robust economy.
We fully expect that the growth in financial services as a sector will
continue at a healthy rate. Banks, for example, have a good deal more growth
ahead as ongoing consolidation among regional firms boosts stock prices. We've
been pleased with our performance, although we hope that the recent gains by
value stocks signal even better times ahead. Regardless of short-term trends,
however, we believe that our contrarian investment approach continues to offer
attractive long-term benefits for our investors.
David N. Dreman
Portfolio Manager
KEMPER GLOBAL BLUE CHIP
PORTFOLIO(4,7)
1999 to date has been a mixed period for investors of all kinds, particularly
those who, like the Global Blue Chip Portfolio, generally avoid taking big
stakes in large-cap, high-valuation investments. We have also kept our
perspective on the real risks that we think can be associated with transitions
in the global economy, so we have taken steps to maintain a more conservative
profile for the portfolio.
There were several notable events during the period. Our "ultimate
subcontractor" theme, which focuses on low-cost producers able to protect their
wealth, recently turned in some benefits for the portfolio. Within that theme,
YPF, a petroleum company, and Rio Tinto Zinc both posted gains recently.
Likewise, our "first world savings" theme, which focuses on institutions that
may benefit from increased savings efforts by individuals in developed markets,
led us to add Prudential Insurance, a UK company, to the portfolio.
The European markets turned in conflicting results for the period, in part due
to the concerns earlier in the year about the currency devaluation in Brazil.
Japan, however, showed some promising signs of recovery, and we made a
significant re-entry into that market. The portfolio added names like Mitsubishi
Estate, Bank of Tokyo-Mitsubishi and Sanwa Bank.
Overall, we are optimistic about the future. A broadening US market will prove
beneficial for the portfolio, as will strength in Europe and signs of health in
Japan. We believe our disciplined, theme-oriented approach to the markets has
the portfolio well-positioned to capitalize on these and other potential
developments around the globe.
Diego Espinosa
Portfolio Manager
KEMPER INTERNATIONAL GROWTH AND
INCOME PORTFOLIO(4,7)
For the most part, 1999 started much like 1998 -- with growth stocks taking
center stage and value stocks underperforming. The good news is we've seen a
slight broadening in the markets recently, a trend that has given many of our
holdings a long-awaited boost.
Despite conditions, the focus of the portfolio has remained on identifying
relative yield -- the universe of stocks offering incrementally higher yields
than their broader markets. We believe a relative yield approach best identifies
stocks that are undervalued and helps the portfolio stay a steady course.
With that strategy in mind, we sought out both regions that we thought would
show strength during the year and those sectors best positioned to benefit from
some of the positive changes occurring in the regions like Asia. Among our Asian
holdings, companies like Nintendo Co., Industrial Bank of Japan and Sakura
performed very well during the period, and we took on a number of other new
Asian names as well.
The weakening of European currencies dampened returns from that region, a
disappointing development given the excitement surrounding the launch of the
euro. Nonetheless, we are still very optimistic about the region and remain
positioned in European cyclicals.
Going forward, we see continued prospects for European economic strengthening
and for Asia to continue its recovery. But many other regions and countries,
such as Russia, continue to be sources of trouble. The portfolio generally does
not invest in emerging markets and will continue to concentrate its investments
in companies and regions that offer good upside without undue levels of risk.
Sheridan Reilly
Portfolio Manager
9
<PAGE> 12
MANAGEMENT SUMMARY
KEMPER AGGRESSIVE GROWTH PORTFOLIO(8)
Introduced into the Kemper Variable Series starting May 1, 1999, the Aggressive
Growth Portfolio offers additional diversification and strong performance
potential to Kemper Annuity investors willing to accept an added measure of risk
in their investment strategy.
The portfolio's first two months in the Kemper Variable Series proved mixed,
primarily because small-cap stocks, which the portfolio favors, remain somewhat
out of favor compared with their larger-capitalization cousins. Plus, the market
shifted in favor of cyclical stocks, causing some of the portfolio's
holdings -- including several technology and health care names -- to stumble.
Recently, however, we have reaped gains from stocks in a variety of areas,
including billboard advertiser Outdoor Systems, Vitesse Semiconductor and Cinar
Films. Two technology-oriented contract manufacturers, Solectron and Sanmina,
also contributed to portfolio performance.
Overall, the Aggressive Growth Portfolio is geared toward solid, long-term
performance. With that in mind, we do not respond to or try to predict
short-term swings in the market. We seek out stocks that offer an ideal balance
between liquidity and high growth potential, and sell when certain issues no
longer meet our stringent criteria. With that in mind, we believe the portfolio
is well-positioned for the future, and could prove an outstanding long-term
performer if the market eventually shifts back in favor of the kinds of small
stocks we hold.
Sewall Hodges
Portfolio Manager
KEMPER TECHNOLOGY PORTFOLIO(9)
Introduced into the Kemper Variable Series starting May 1, 1999, the Technology
Portfolio offers Kemper Annuity investors the chance to participate in one of
the most dynamic and fastest-growing sectors of the economy. The portfolio
invests in businesses throughout the technology sector, focusing on those with
healthy fundamentals, outstanding products and proven business models.
As opposed to chasing overpriced, "hot" stocks -- many of them
Internet-related -- the portfolio instead includes the stocks of semiconductor
and component manufacturers, software firms, and telecommunications and data
communications companies. When we do purchase Internet stocks, we tend to focus
on names that are in tune with the service and equipment needs of the Internet,
such as Cisco Systems.
Despite the enormous long-term growth potential of the technology sector,
however, we have been somewhat cautious in recent months. April through October
have historically proved themselves to be slow periods in the sector, and
uncertainty surrounding Y2K's potential impact on corporate spending and the PC
industry is a cause for concern. That, combined with the fact we believe the
portfolio is already well-positioned for the coming months, has kept the
portfolio in a wait-and-see mode of late.
Overall, the Technology Portfolio is geared toward solid, long-term
performance from a sector that we believe will only become more important in
years to come. It's important to point out, however, that, while it offers some
potentially handsome rewards, technology investing can also expose a portfolio
to significant volatility. For investors willing and able to weather those ups
and downs, this is a portfolio well-positioned for the future.
Jim Burkart
Portfolio Manager
10
<PAGE> 13
MANAGEMENT SUMMARY
(1) SPECIAL RISK CONSIDERATIONS ARE ASSOCIATED WITH A NON-DIVERSIFIED
PORTFOLIO. THIS PRESENTS GREATER RISK OF LOSS OF PRINCIPAL AS FINANCIAL
CONDITIONS OR THE MARKET ASSESSMENT OF SUCH SECURITIES CHANGES. THESE
SPECIAL RISK CONSIDERATIONS ARE DISCUSSED IN THE PROSPECTUS.
(2) THE PORTFOLIO MAY CONCENTRATE INVESTMENTS IN SPECIFIC SECTORS, WHICH
CREATES SPECIAL RISK CONSIDERATIONS.
(3) INVESTMENTS BY THE PORTFOLIO IN SMALL COMPANIES PRESENT GREATER RISK OF
LOSS THAN INVESTMENTS IN LARGER, MORE ESTABLISHED COMPANIES.
(4) SPECIAL RISK CONSIDERATIONS ARE ASSOCIATED WITH INVESTMENTS IN NON-U.S.
COMPANIES, INCLUDING FLUCTUATING FOREIGN EXCHANGE RATES, FOREIGN
GOVERNMENTAL REGULATIONS AND DIFFERING DEGREES OF LIQUIDITY THAT MAY
ADVERSELY AFFECT THE PORTFOLIO.
(5) INVESTMENT BY THE PORTFOLIO IN LOWER-RATED AND NON-RATED BONDS PRESENTS
GREATER RISK TO PRINCIPAL AND INCOME THAN INVESTMENTS IN HIGHER-QUALITY
SECURITIES.
(6) ACCUMULATION UNITS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.
(7) THE ADVISOR HAS AGREED TO CERTAIN FEE WAIVERS OR REDUCTIONS FOR THE KEMPER
INTERNATIONAL GROWTH AND INCOME, KEMPER GLOBAL BLUE CHIP. WITHOUT SUCH
WAIVERS, THE PERFORMANCE FIGURES FOR THESE SUBACCOUNTS WOULD BE LOWER.
(8) THIS IS A NONDIVERSIFIED FUND. THIS PRESENTS GREATER RISK OF LOSS OF
PRINCIPAL AS THE FINANCIAL CONDITION FOR THE MARKET'S ASSESSMENT OF SUCH
SECURITIES CHANGES.
(9) CONCENTRATION OF THE PORTFOLIO'S INVESTMENT IN TECHNOLOGY STOCKS MAY
PRESENT A GREATER RISK THAN INVESTMENT IN A MORE DIVERSIFIED PORTFOLIO.
INVESTMENT BY THE PORTFOLIO IN EMERGING TECHNOLOGY COMPANIES PRESENTS
GREATER RISK THAN INVESTMENT IN MORE ESTABLISHED TECHNOLOGY COMPANIES.
11
<PAGE> 14
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
MONEY TOTAL HIGH
MARKET RETURN YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $185,859, $775,292, $457,161,
$509,263, $134,862, $175,542, $160,571, $65,205, $280,374,
$94,694 and $137,370, respectively) $185,859 907,208 431,312
- -------------------------------------------------------------------------------------------------------
Cash -- 296 --
- -------------------------------------------------------------------------------------------------------
Repurchase agreements (Cost: $11,222) -- -- --
- -------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold -- 3,287 777
- -------------------------------------------------------------------------------------------------------
Portfolio shares sold -- -- --
- -------------------------------------------------------------------------------------------------------
Dividends and interest 359 6,928 8,117
- -------------------------------------------------------------------------------------------------------
Foreign taxes -- -- --
- -------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts -- -- --
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 186,218 917,719 440,206
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Cash overdraft 941 -- 4,798
- -------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased -- 5,997 694
- -------------------------------------------------------------------------------------------------------
Dividends 362 -- --
- -------------------------------------------------------------------------------------------------------
Management fee 68 342 220
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses -- 10 34
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 13 51 26
- -------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward currency exchange
contracts -- -- --
- -------------------------------------------------------------------------------------------------------
Total liabilities 1,384 6,400 5,772
- -------------------------------------------------------------------------------------------------------
NET ASSETS $184,834 911,319 434,434
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $184,834 724,328 463,417
- -------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency related transactions -- 41,755 (23,918)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments -- 131,916 (25,849)
- -------------------------------------------------------------------------------------------------------
Futures -- -- --
- -------------------------------------------------------------------------------------------------------
Foreign currency related transactions -- -- --
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) -- 13,320 20,784
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $184,834 911,319 434,434
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
Shares outstanding 184,834 336,540 377,412
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (net assets /
shares outstanding) $ 1.000 2.708 1.151
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 15
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER KEMPER
KEMPER GOVERNMENT KEMPER SMALL CAP INVESTMENT CONTRARIAN SMALL CAP KEMPER
GROWTH SECURITIES INTERNATIONAL GROWTH GRADE BOND VALUE VALUE VALUE+GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
640,044 133,605 186,239 200,341 63,382 309,868 95,113 160,787
- -----------------------------------------------------------------------------------------------------------
-- -- -- 1 -- 2,116 -- 158
- -----------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- 11,222 --
- -----------------------------------------------------------------------------------------------------------
10,106 965 19,146 10,410 -- 824 42 --
- -----------------------------------------------------------------------------------------------------------
-- -- 47 5 -- -- -- 11
- -----------------------------------------------------------------------------------------------------------
290 930 347 36 568 530 75 99
- -----------------------------------------------------------------------------------------------------------
-- -- 280 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- -- 8 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
650,440 135,500 206,067 210,793 63,950 313,338 106,452 161,055
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
669 61 10,574 -- 375 -- 105 --
- -----------------------------------------------------------------------------------------------------------
6,359 871 4,382 4,199 -- 7,991 -- --
- -----------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
308 62 118 101 35 198 67 97
- -----------------------------------------------------------------------------------------------------------
7 13 31 8 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
36 13 110 10 2 7 3 2
- -----------------------------------------------------------------------------------------------------------
-- -- 35 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
7,379 1,020 15,250 4,318 412 8,196 175 99
- -----------------------------------------------------------------------------------------------------------
643,061 134,480 190,817 206,475 63,538 305,142 106,277 160,956
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
462,003 136,865 160,663 158,820 64,755 240,303 108,981 131,447
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
48,029 (5,124) 19,338 8,240 (939) 32,390 (3,280) 5,167
- -----------------------------------------------------------------------------------------------------------
130,781 (1,257) 10,697 39,770 (1,823) 29,494 419 23,417
- -----------------------------------------------------------------------------------------------------------
-- 88 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- -- (28) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
2,248 3,908 147 (355) 1,545 2,955 157 925
- -----------------------------------------------------------------------------------------------------------
643,061 134,480 190,817 206,475 63,538 305,142 106,277 160,956
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
197,428 117,081 128,244 100,539 57,918 165,762 95,035 92,546
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
3.257 1.149 1.488 2.054 1.097 1.841 1.118 1.739
- -----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS & LIABILITIES
June 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $34,435, $61,687, $39,250,
$108,976, $6,201, $109,334, $25,774,
$9,128, $4,569, $1,514 and $3,678, respectively) $37,980 65,516 40,298
- -----------------------------------------------------------------------------------------------------------
Cash 1,298 33 84
- -----------------------------------------------------------------------------------------------------------
Repurchase agreements (Cost: $549) -- -- --
- -----------------------------------------------------------------------------------------------------------
Foreign currency, at market 39 -- --
- -----------------------------------------------------------------------------------------------------------
Deferred organization expense -- -- --
- -----------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 1,263 705 561
- -----------------------------------------------------------------------------------------------------------
Portfolio shares sold -- -- --
- -----------------------------------------------------------------------------------------------------------
Dividends and interest 164 440 387
- -----------------------------------------------------------------------------------------------------------
Reimbursement from Adviser -- -- --
- -----------------------------------------------------------------------------------------------------------
Foreign taxes 13 17 8
- -----------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward currency exchange
contracts 2 -- 1
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 40,759 66,711 41,339
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Cash overdraft -- -- --
- -----------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 1,514 395 477
- -----------------------------------------------------------------------------------------------------------
Management fee 18 31 19
- -----------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 2 1 4
- -----------------------------------------------------------------------------------------------------------
Trustees' fees and other 8 9 5
- -----------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward currency exchange
contracts 3 2 1
- -----------------------------------------------------------------------------------------------------------
Total liabilities 1,545 438 506
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $39,214 66,273 40,833
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Paid-in capital $33,943 59,503 38,217
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency related transactions 1,330 2,113 720
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 3,545 3,829 1,048
- -----------------------------------------------------------------------------------------------------------
Futures -- -- --
- -----------------------------------------------------------------------------------------------------------
Options -- -- --
- -----------------------------------------------------------------------------------------------------------
Foreign currency related transactions (2) 1 1
- -----------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 398 827 847
- -----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $39,214 66,273 40,833
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -----------------------------------------------------------------------------------------------------------
Shares outstanding 25,120 46,537 31,329
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (net assets /
shares outstanding) $ 1.561 1.424 1.303
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 17
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER
KEMPER KEMPER KEMPER-DREMAN KEMPER-DREMAN KEMPER INTERNATIONAL KEMPER KEMPER
BLUE GLOBAL HIGH FINANCIAL GLOBAL GROWTH AND AGGRESSIVE TECHNOLOGY
CHIP INCOME RETURN EQUITY SERVICES BLUE CHIP INCOME GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
129,175 5,914 113,629 27,356 9,941 4,677 1,663 3,968
- ---------------------------------------------------------------------------------------------------------------
155 3 1 1 -- 24 22 --
- ---------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- 549
- ---------------------------------------------------------------------------------------------------------------
-- 3 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
-- -- -- -- -- 2 -- --
- ---------------------------------------------------------------------------------------------------------------
-- 22 1,191 8 134 104 13 --
- ---------------------------------------------------------------------------------------------------------------
-- -- 158 22 64 -- 11 58
- ---------------------------------------------------------------------------------------------------------------
91 97 172 34 14 13 -- --
- ---------------------------------------------------------------------------------------------------------------
-- -- -- 4 34 96 6 5
- ---------------------------------------------------------------------------------------------------------------
3 -- -- -- 3 8 -- --
- ---------------------------------------------------------------------------------------------------------------
-- 41 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
129,424 6,080 115,151 27,425 10,190 4,924 1,715 4,580
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
-- -- -- -- 130 -- -- --
- ---------------------------------------------------------------------------------------------------------------
3,092 19 1,916 244 284 39 11 325
- ---------------------------------------------------------------------------------------------------------------
61 4 64 14 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
5 1 9 7 -- 2 1 1
- ---------------------------------------------------------------------------------------------------------------
34 3 36 28 10 26 6 6
- ---------------------------------------------------------------------------------------------------------------
-- 10 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
3,192 37 2,025 293 424 67 18 332
- ---------------------------------------------------------------------------------------------------------------
126,232 6,043 113,126 27,132 9,766 4,857 1,697 4,248
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
107,857 6,353 105,592 25,434 9,030 4,873 1,552 3,925
- ---------------------------------------------------------------------------------------------------------------
(2,006) (136) 2,091 (29) (95) (147) (4) 24
- ---------------------------------------------------------------------------------------------------------------
20,199 (290) 4,295 1,582 813 108 149 290
- ---------------------------------------------------------------------------------------------------------------
-- -- 473 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
-- 3 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
-- 29 -- -- 1 -- -- --
- ---------------------------------------------------------------------------------------------------------------
182 84 675 145 17 23 -- 9
- ---------------------------------------------------------------------------------------------------------------
126,232 6,043 113,126 27,132 9,766 4,857 1,697 4,248
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
89,196 6,148 106,255 25,792 9,133 5,298 1,551 3,857
- ---------------------------------------------------------------------------------------------------------------
1.415 .983 1.065 1.052 1.069 .917 1.094 1.101
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
MONEY TOTAL HIGH
MARKET RETURN YIELD
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Dividends(a) $ -- 3,199 325
- -------------------------------------------------------------------------------------------------------
Interest 3,881 13,537 24,309
- -------------------------------------------------------------------------------------------------------
Total investment income 3,881 16,736 24,634
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 385 2,359 1,387
- -------------------------------------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 12 49 43
- -------------------------------------------------------------------------------------------------------
Professional fees 6 42 21
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 6 -- 108
- -------------------------------------------------------------------------------------------------------
Registration fee 2 -- --
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 19 249 29
- -------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 430 2,699 1,588
- -------------------------------------------------------------------------------------------------------
Less expense waived and absorbed by investment manager -- -- --
- -------------------------------------------------------------------------------------------------------
Total expenses absorbed by the portfolio 430 2,699 1,588
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 3,451 14,037 23,046
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments -- 43,575 (6,307)
- -------------------------------------------------------------------------------------------------------
Futures -- -- --
- -------------------------------------------------------------------------------------------------------
Options -- -- --
- -------------------------------------------------------------------------------------------------------
Foreign currency related transactions -- -- --
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) -- 43,575 (6,307)
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on:
Investments -- 9,468 (4,382)
- -------------------------------------------------------------------------------------------------------
Futures -- -- --
- -------------------------------------------------------------------------------------------------------
Options -- -- --
- -------------------------------------------------------------------------------------------------------
Foreign currency related transactions -- -- --
- -------------------------------------------------------------------------------------------------------
Net unrealized change in appreciation (depreciation) -- 9,468 (4,382)
- -------------------------------------------------------------------------------------------------------
Net gain (loss) on investments -- 53,043 (10,689)
- -------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $3,451 67,080 12,357
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Less foreign taxes withheld of $31, $14, $173, $59, $3 and $1 for the Kemper
Total Return, Kemper Growth, Kemper International, Kemper Contrarian Value,
Kemper Small Cap Value and the Kemper Value + Growth Portfolios,
respectively.
See accompanying Notes to Financial Statements.
16
<PAGE> 19
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER KEMPER
KEMPER GOVERNMENT KEMPER SMALL CAP INVESTMENT CONTRARIAN SMALL CAP KEMPER
GROWTH SECURITIES INTERNATIONAL GROWTH GRADE BOND VALUE VALUE VALUE+GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
1,881 -- 1,508 124 -- 3,435 638 1,468
- -----------------------------------------------------------------------------------------------------------
264 4,241 138 180 1,734 666 194 106
- -----------------------------------------------------------------------------------------------------------
2,145 4,241 1,646 304 1,734 4,101 832 1,574
- -----------------------------------------------------------------------------------------------------------
1,882 362 743 626 180 1,046 366 573
- -----------------------------------------------------------------------------------------------------------
38 28 92 16 5 15 15 5
- -----------------------------------------------------------------------------------------------------------
28 5 26 9 3 11 5 6
- -----------------------------------------------------------------------------------------------------------
-- 34 42 38 2 35 15 --
- -----------------------------------------------------------------------------------------------------------
-- 50 -- 8 1 -- -- --
- -----------------------------------------------------------------------------------------------------------
183 5 27 13 4 21 5 45
- -----------------------------------------------------------------------------------------------------------
2,131 484 930 710 195 1,128 406 629
- -----------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
2,131 484 930 710 195 1,128 406 629
- -----------------------------------------------------------------------------------------------------------
14 3,757 716 (406) 1,539 2,973 426 945
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
54,938 (1,022) 20,552 10,657 (643) 32,520 74 5,241
- -----------------------------------------------------------------------------------------------------------
-- (304) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- (2) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- -- 133 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
54,938 (1,328) 20,685 10,657 (643) 32,520 74 5,241
- -----------------------------------------------------------------------------------------------------------
6,107 (2,600) (18,551) (2,633) (2,378) (2,906) 4,837 4,217
- -----------------------------------------------------------------------------------------------------------
-- 88 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
-- -- (45) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
6,107 (2,512) (18,596) (2,633) (2,378) (2,906) 4,837 4,217
- -----------------------------------------------------------------------------------------------------------
61,045 (3,840) 2,089 8,024 (3,021) 29,614 4,911 9,458
- -----------------------------------------------------------------------------------------------------------
61,059 (83) 2,805 7,618 (1,482) 32,587 5,337 10,403
- -----------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 20
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends(a) $ 319 396 141
- -----------------------------------------------------------------------------------------------------------
Interest 253 804 720
- -----------------------------------------------------------------------------------------------------------
Total investment income 572 1,200 861
- -----------------------------------------------------------------------------------------------------------
Expenses:
Management fee 113 184 108
- -----------------------------------------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 21 22 18
- -----------------------------------------------------------------------------------------------------------
Professional fees 3 3 2
- -----------------------------------------------------------------------------------------------------------
Reports to shareholders 8 12 7
- -----------------------------------------------------------------------------------------------------------
Registration fee -- 1 1
- -----------------------------------------------------------------------------------------------------------
Trustees' fees and other 11 15 10
- -----------------------------------------------------------------------------------------------------------
Total expenses before expense waiver 156 237 146
- -----------------------------------------------------------------------------------------------------------
Less expenses waived and absorbed by investment manager -- -- --
- -----------------------------------------------------------------------------------------------------------
Total expenses absorbed by the portfolio 156 237 146
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 416 963 715
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments 1,467 2,248 956
- -----------------------------------------------------------------------------------------------------------
Futures -- -- --
- -----------------------------------------------------------------------------------------------------------
Options -- -- --
- -----------------------------------------------------------------------------------------------------------
Foreign currency related transactions (5) (5) (3)
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,462 2,243 953
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) on:
Investments 174 (420) (671)
- -----------------------------------------------------------------------------------------------------------
Futures -- -- --
- -----------------------------------------------------------------------------------------------------------
Options -- -- --
- -----------------------------------------------------------------------------------------------------------
Foreign currency related transactions (2) 1 1
- -----------------------------------------------------------------------------------------------------------
Net unrealized change in appreciation (depreciation) 172 (419) (670)
- -----------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,634 1,824 283
- -----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $2,050 2,787 998
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Less foreign taxes withheld of $6, $8, $2, $7, $5, $4 and $4 for the Kemper
Horizon 20+, Kemper Horizon 10+, Kemper Horizon 5, Kemper Blue Chip,
Kemper-Dreman High Return Equity, Global Blue Chip and the Kemper
International Growth and Income Portfolios, respectively.
(b) For the period from May 1, 1999 (commencement of operations) to June 30,
1999.
See accompanying Notes to Financial Statements.
18
<PAGE> 21
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER
KEMPER KEMPER-DREMAN KEMPER-DREMAN KEMPER INTERNATIONAL KEMPER KEMPER
KEMPER GLOBAL HIGH RETURN FINANCIAL GLOBAL GROWTH AGGRESSIVE TECHNOLOGY
BLUE CHIP INCOME EQUITY SERVICES BLUE CHIP AND INCOME GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(B) PORTFOLIO(B)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
534 -- 1,061 277 52 77 -- --
- -------------------------------------------------------------------------------------------------------------------
225 147 404 21 21 11 2 12
- -------------------------------------------------------------------------------------------------------------------
759 147 1,465 298 73 87 2 12
- -------------------------------------------------------------------------------------------------------------------
321 20 315 81 30 20 2 3
- -------------------------------------------------------------------------------------------------------------------
4 5 30 23 106 75 7 7
- -------------------------------------------------------------------------------------------------------------------
5 1 3 2 1 -- 2 2
- -------------------------------------------------------------------------------------------------------------------
17 1 8 3 2 1 1 1
- -------------------------------------------------------------------------------------------------------------------
1 -- 4 1 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
6 1 9 8 7 9 3 3
- -------------------------------------------------------------------------------------------------------------------
354 28 369 118 146 105 15 16
- -------------------------------------------------------------------------------------------------------------------
-- -- (4) (11) (99) (82) (13) (13)
- -------------------------------------------------------------------------------------------------------------------
354 28 365 107 47 23 2 3
- -------------------------------------------------------------------------------------------------------------------
405 119 1,100 191 26 64 -- 9
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
1,112 (119) 1,783 (32) (43) (30) (4) 24
- -------------------------------------------------------------------------------------------------------------------
-- -- 958 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
-- (1) -- -- (1) (7) -- --
- -------------------------------------------------------------------------------------------------------------------
1,112 (120) 2,741 (32) (44) (37) (4) 24
- -------------------------------------------------------------------------------------------------------------------
10,893 (393) 2,171 1,277 666 55 149 290
- -------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
-- 3 -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
-- 29 -- -- 1 -- -- --
- -------------------------------------------------------------------------------------------------------------------
10,893 (361) 2,171 1,277 667 55 149 290
- -------------------------------------------------------------------------------------------------------------------
12,005 (481) 4,912 1,245 623 18 145 314
- -------------------------------------------------------------------------------------------------------------------
12,410 (362) 6,012 1,436 649 82 145 323
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 22
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 (unaudited) and the year ended
December 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER
MONEY MARKET
PORTFOLIO
---------------------------
1999 1998
<S> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income (loss) $ 3,451 6,049
- -------------------------------------------------------------------------------------------
Net realized gain (loss) -- --
- -------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) -- --
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 3,451 6,049
- -------------------------------------------------------------------------------------------
Distribution from net investment income (3,451) (6,049)
- -------------------------------------------------------------------------------------------
Distribution from net realized gain -- --
- -------------------------------------------------------------------------------------------
Total dividends to shareholders (3,451) (6,049)
- -------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 32,904 51,787
- -------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 32,904 51,787
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of period 151,930 100,143
- -------------------------------------------------------------------------------------------
END OF PERIOD $184,834 151,930
- -------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF PERIOD $ -- --
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER
INTERNATIONAL
PORTFOLIO
---------------------------
1999 1998
<S> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------
Net investment income (loss) $ 716 2,029
- -------------------------------------------------------------------------------------------
Net realized gain (loss) 20,685 24,326
- -------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) (18,596) (6,982)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,805 19,373
- -------------------------------------------------------------------------------------------
Distribution from net investment income (2,325) (2,412)
- -------------------------------------------------------------------------------------------
Distribution from net realized gain (24,985) (7,437)
- -------------------------------------------------------------------------------------------
Total dividends to shareholders (27,310) (9,849)
- -------------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 2,123 3,629
- -------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (22,382) 13,153
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------
Beginning of period 213,199 200,046
- -------------------------------------------------------------------------------------------
END OF PERIOD $190,817 213,199
- -------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF PERIOD $ 147 1,756
- -------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER
TOTAL RETURN HIGH YIELD GROWTH GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO SECURITIES PORTFOLIO
- ------------------ ----------------- ----------------- ---------------------
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
14,037 27,359 23,046 40,669 14 1,675 3,757 6,436
- ----------------------------------------------------------------------------------
43,575 45,478 (6,307) 1,609 54,938 (4,560) (1,328) 1,541
- ----------------------------------------------------------------------------------
9,468 43,475 (4,382) (33,856) 6,107 85,608 (2,512) (1,055)
- ----------------------------------------------------------------------------------
67,080 116,312 12,357 8,422 61,059 82,723 (83) 6,922
- ----------------------------------------------------------------------------------
(27,964) (24,932) (42,416) (29,505) -- (1,863) (6,579) (5,813)
- ----------------------------------------------------------------------------------
(46,608) (110,813) -- -- -- (93,144) -- --
- ----------------------------------------------------------------------------------
(74,572) (135,745) (42,416) (29,505) -- (95,007) (6,579) (5,813)
- ----------------------------------------------------------------------------------
53,388 97,860 22,368 71,544 (46,549) 77,819 17,931 35,420
- ----------------------------------------------------------------------------------
45,896 78,427 (7,691) 50,461 14,510 65,535 11,269 36,529
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
865,423 786,996 442,125 391,664 628,551 563,016 123,211 86,682
- ----------------------------------------------------------------------------------
911,319 865,423 434,434 442,125 643,061 628,551 134,480 123,211
- ----------------------------------------------------------------------------------
13,320 27,247 20,784 40,154 2,248 2,234 3,908 6,730
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER
SMALL CAP INVESTMENT GRADE CONTRARIAN VALUE SMALL CAP
GROWTH PORTFOLIO BOND PORTFOLIO PORTFOLIO VALUE PORTFOLIO
- ----------------- ----------------- ----------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
(406) (16) 1,539 1,701 2,973 4,433 426 1,076
- -----------------------------------------------------------------------------
10,657 (1,589) (643) 286 32,520 15,335 74 (2,547)
- -----------------------------------------------------------------------------
(2,633) 31,648 (2,378) 402 (2,906) 17,408 4,837 (10,477)
- -----------------------------------------------------------------------------
7,618 30,043 (1,482) 2,389 32,587 37,176 5,337 (11,948)
- -----------------------------------------------------------------------------
-- -- (1,573) (587) (4,476) (1,327) (888) --
- -----------------------------------------------------------------------------
-- (25,813) (524) (199) (14,920) (5,308) -- (2,220)
- -----------------------------------------------------------------------------
-- (25,813) (2,097) (786) (19,396) (6,635) (888) (2,220)
- -----------------------------------------------------------------------------
(9,478) 66,690 14,962 35,048 28,176 70,854 (181) 40,069
- -----------------------------------------------------------------------------
(1,860) 70,920 11,383 36,651 41,367 101,395 4,268 25,901
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
208,335 137,415 52,155 15,504 263,775 162,380 102,009 76,108
- -----------------------------------------------------------------------------
206,475 208,335 63,538 52,155 305,142 263,775 106,277 102,009
- -----------------------------------------------------------------------------
-- 51 1,545 1,579 2,955 4,458 157 619
- -----------------------------------------------------------------------------
</TABLE>
21
<PAGE> 24
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 (unaudited) and the year ended
December 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER
VALUE+GROWTH
PORTFOLIO
---------------------------
1999 1998
<S> <C> <C>
- ----------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------
Net investment income (loss) $ 945 878
- ----------------------------------------------------------------------------------------
Net realized gain (loss) 5,241 3,282
- ----------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) 4,217 14,977
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 10,403 19,137
- ----------------------------------------------------------------------------------------
Distribution from net investment income (900) --
- ----------------------------------------------------------------------------------------
Distribution from net realized gain (3,152) (2,504)
- ----------------------------------------------------------------------------------------
Total dividends to shareholders (4,052) (2,504)
- ----------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 2,284 66,594
- ----------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,635 83,227
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------
Beginning of period 152,321 69,094
- ----------------------------------------------------------------------------------------
END OF PERIOD $160,956 152,321
- ----------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF PERIOD $ 925 880
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER-DREMAN
HIGH RETURN EQUITY
PORTFOLIO
---------------------------
1999 1998(A)
<S> <C> <C>
- ----------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------
Net investment income (loss) $ 1,100 464
- ----------------------------------------------------------------------------------------
Net realized gain (loss) 2,741 239
- ----------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) 2,171 2,597
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 6,012 3,300
- ----------------------------------------------------------------------------------------
Distribution from net investment income (889) --
- ----------------------------------------------------------------------------------------
Distribution from net realized gain (889) --
- ----------------------------------------------------------------------------------------
Total dividends to shareholders (1,778) --
- ----------------------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 49,598 55,993
- ----------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 53,832 59,293
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------
Beginning of period 59,294 1
- ----------------------------------------------------------------------------------------
END OF PERIOD $113,126 59,294
- ----------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF PERIOD $ 675 464
- ----------------------------------------------------------------------------------------
</TABLE>
(a) For the period from May 4, 1998 (commencement of operations) to December 31,
1998.
(b) For the period from May 5, 1998 (commencement of operations) to December 31,
1998.
(c) For the period from May 1, 1999 (commencement of operations) to June 30,
1999.
See accompanying Notes to Financial Statements.
22
<PAGE> 25
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5 BLUE CHIP GLOBAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ---------------- --------------- ---------------- -------------
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
416 512 963 1,084 715 894 405 558 119 178
- -------------------------------------------------------------------------------------------
1,462 173 2,243 18 953 12 1,112 (2,984) (120) 128
- -------------------------------------------------------------------------------------------
172 2,240 (419) 3,090 (670) 1,250 10,893 8,770 (361) 127
- -------------------------------------------------------------------------------------------
2,050 2,925 2,787 4,192 998 2,156 12,410 6,344 (362) 433
- -------------------------------------------------------------------------------------------
(491) (159) (1,329) (223) (861) (154) (588) (286) (217) (73)
- -------------------------------------------------------------------------------------------
(246) (637) -- (670) -- (460) -- -- (109) (36)
- -------------------------------------------------------------------------------------------
(737) (796) (1,329) (893) (861) (614) (588) (286) (326) (109)
- -------------------------------------------------------------------------------------------
(364) 19,477 7,404 31,559 7,955 16,941 36,096 53,835 1,708 2,554
- -------------------------------------------------------------------------------------------
949 21,606 8,862 34,858 8,092 18,483 47,918 59,893 1,020 2,878
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
38,265 16,659 57,411 22,553 32,741 14,258 78,314 18,421 5,023 2,145
- -------------------------------------------------------------------------------------------
39,214 38,265 66,273 57,411 40,833 32,741 126,232 78,314 6,043 5,023
- -------------------------------------------------------------------------------------------
398 473 827 1,193 847 993 182 365 84 182
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
KEMPER-DREMAN KEMPER INTERNATIONAL AGGRESSIVE TECHNOLOGY
FINANCIAL SERVICES GLOBAL BLUE CHIP GROWTH AND INCOME GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ----------------- ----------------- ---------- ----------
1999 1998(A) 1999 1998(B) 1999 1998(B) 1999(C) 1999(C)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
191 70 26 10 64 11 -- 9
- ----------------------------------------------------------------------------------------
(32) 3 (44) (53) (37) (110) (4) 24
- ----------------------------------------------------------------------------------------
1,277 305 667 147 55 53 149 290
- ----------------------------------------------------------------------------------------
1,436 378 649 104 82 (46) 145 323
- ----------------------------------------------------------------------------------------
(116) -- (17) -- (52) -- -- --
- ----------------------------------------------------------------------------------------
-- -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------
(116) -- (17) -- (52) -- -- --
- ----------------------------------------------------------------------------------------
10,296 15,137 5,550 3,479 1,824 3,048 1,552 3,925
- ----------------------------------------------------------------------------------------
11,616 15,515 6,182 3,583 1,854 3,002 1,697 4,248
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
15,516 1 3,584 1 3,003 1 -- --
- ----------------------------------------------------------------------------------------
27,132 15,516 9,766 3,584 4,857 3,003 1,697 4,248
- ----------------------------------------------------------------------------------------
145 70 17 8 23 11 -- 9
- ----------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Kemper Variable Series (the fund) (formerly known
as Investors Fund Series) is an open-end,
management investment company organized as a
business trust under the laws of Massachusetts. The
fund offers twenty-two portfolios.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at
value. The securities of the portfolios which are
traded on U.S. or foreign stock exchanges are
valued at the most recent sale price reported on
the exchange on which the security is traded most
extensively. If no sale occurred, the security is
then valued at the calculated mean between the most
recent bid and asked quotations. If there are no
such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the Nasdaq
Stock Market (Nasdaq), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. An exchange traded written option or
investment in a purchased option is valued at the
last sale price or, in the absence of a sale, the
mean between the closing bid and asked prices or at
the most recent asked price (bid for purchased
options) if no bid and asked price are available.
Over-the-counter written or purchased options are
valued using dealer supplied quotations. Forward
foreign currency exchange contracts are valued at
the prevailing forward exchange rate of the
underlying currencies on that day. Futures
contracts are valued at the most recent settlement
price.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
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-based values, 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.
All other securities are valued at their fair
market value as determined in good faith by the
Valuation Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The books and records
of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions. The portfolios include that portion
of the
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
results of operations resulting from changes in
foreign exchange rates with net realized and
unrealized gain (loss) on investments, as
appropriate.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses from sales and maturities of forward
foreign currency exchange contracts, dispositions
of foreign currencies, and the difference between
the amount of net investment income accrued and the
U.S. dollar amount actually received. That portion
of both realized and unrealized gains and losses on
investments that result from fluctuations in
foreign currency exchange rates is not separately
disclosed.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. 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. 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.
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 close
of regular trading on the Exchange for all
portfolios and at 11:00 a.m. (Central 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 portfolios
holding foreign securities does not take place
contemporaneously with the determination of the
foreign securities' prices.
FEDERAL INCOME TAXES. Each portfolio's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, each portfolio paid no federal income
taxes and no federal income tax provision was
required.
At December 31, 1998, Kemper High Yield, Kemper
Growth, Kemper Government Securities, Kemper Small
Cap Growth, Kemper Small Cap Value, Kemper Blue
Chip, Kemper Global Blue Chip, and Kemper
International Growth and Income Portfolios, had a
tax basis net capital loss carryforward
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
of approximately $16,910,000, $4,544,000,
$3,167,000, $1,588,000, $1,867,000, $3,062,000,
$34,000 and $72,000, respectively, which may be
applied against any realized net taxable gains of
each succeeding year until fully utilized or it
will expire during the period 1999 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.
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.
ORGANIZATIONAL COSTS. Costs incurred by the
Kemper-Dreman High Return Equity, Kemper-Dreman
Financial Services, Kemper Global Blue Chip, Kemper
International Growth and Income, Kemper Aggressive
Growth and Kemper Technology Growth Portfolios, in
connection with their organization and initial
registration of shares, have been deferred and are
being amortized on a straight-line basis over a
five year period.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. Under the fund's management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) the fund pays a monthly investment
management fee based on 1/12 of the 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, .75% for
the Kemper International, Kemper Contrarian Value,
Kemper Small Cap Value, Kemper Value+Growth and
Kemper Global Income Portfolios and 1.00% for
Kemper International Growth and Income Portfolio,
.75% of the first $250 million of average daily net
assets declining to .62% of average daily net
assets in excess of $12.5 billion for the
Kemper-Dreman High Return Equity, Kemper-Dreman
Financial Services, Kemper Aggressive Growth and
Kemper Technology Growth Portfolios and 1.00% of
the first $250 million of average daily net assets
declining to .90% of average daily net assets in
excess of $1 billion for the Kemper Global Blue
Chip Portfolio. For the six months ended June 30,
1999, the fund incurred aggregate management fees
of $11,036,000, after a fee waiver by Scudder
Kemper for the Kemper-Dreman High Return Equity,
Kemper-Dreman Financial Services, Kemper Global
Blue Chip, Kemper International Growth and Income,
Kemper Aggressive Growth and Kemper Technology
Growth Portfolios.
In addition, Scudder Kemper has agreed to
temporarily absorb certain operating expenses of
the Kemper-Dreman High Return Equity, Kemper-Dreman
Financial Services, Kemper Global Blue Chip, Kemper
International Growth and Income, Kemper Aggressive
Growth and Kemper Technology Growth
26
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
Portfolios. Under these arrangements, Scudder
Kemper waived and absorbed expenses of $222,000 for
the period ended June 30, 1999.
Scudder Investments Ltd. (U.K.), serves as
sub-adviser with respect to foreign securities
investments in the Kemper International and Kemper
Global Income Portfolios, and is paid by Scudder
Kemper for its services.
Dreman Value Management, L.L.C. serves as
sub-adviser with respect to the investment and
reinvestment of assets in the Kemper-Dreman High
Return Equity and Kemper-Dreman Financial Services
Portfolios, and is paid by Scudder Kemper for its
services.
FUND ACCOUNTING AGENT. Scudder Fund Accounting
Corporation (SFAC), is responsible for determining
the daily net asset value per share and maintaining
the portfolio and general accounting records of
each portfolio. SFAC receives no fee for its
services to each portfolio other than Kemper-Dreman
High Return Equity, Kemper-Dreman Financial
Services, Kemper Global Blue Chip, Kemper
International Growth and Income, Kemper Aggressive
Growth and Kemper Technology Growth Portfolios.
However, the portfolios incurred accounting fees of
$41,000 for the period ended June 30, 1999, after a
fee waiver by Scudder Kemper.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the fund are also officers or directors of
Scudder Kemper. For the six months ended June 30,
1999, the fund made no direct payments to its
officers and incurred trustees' fees of $206,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended June 30, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<CAPTION>
PROCEEDS
PORTFOLIO PURCHASES($) FROM SALES($)
--------- ------------ -------------
<S> <C> <C>
Kemper Total Return 323,811 330,245
Kemper High Yield 121,519 124,483
Kemper Growth 387,007 444,593
Kemper Government Securities 108,637 112,687
Kemper International 281,867 308,404
Kemper Small Cap Growth 242,399 252,718
Kemper Investment Grade Bond 27,274 19,458
Kemper Contrarian Value 175,736 159,456
Kemper Small Cap Value 16,991 20,332
Kemper Value+Growth 28,617 27,243
Kemper Horizon 20+ 11,578 12,095
Kemper Horizon 10+ 22,783 14,936
Kemper Horizon 5 14,214 6,159
Kemper Blue Chip 60,507 24,635
Kemper Global Income 8,833 7,697
Kemper-Dreman High Return Equity 53,050 10,068
Kemper-Dreman Financial Services 12,454 1,723
Kemper Global Blue Chip 6,872 1,690
Kemper International Growth and Income 4,930 3,313
Kemper Aggressive Growth(a) 1,545 127
Kemper Technology Growth(a) 1,698 44
(a) For the period from May 1, 1999 to June 30,
1999.
</TABLE>
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of each portfolio (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------
Shares sold 214,348 $ 214,348 232,701 $ 232,701
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 3,777 3,777 5,991 5,991
------------------------------------------------------------------------------
218,125 218,125 238,692 238,692
------------------------------------------------------------------------------
Shares redeemed (185,221) (185,221) (186,905) (186,905)
------------------------------------------------------------------------------
Net increase from capital
share transactions 32,904 $ 32,904 51,787 $ 51,787
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER TOTAL RETURN PORTFOLIO
------------------------------------------------------------------------------
Shares sold 20,816 $ 57,159 26,829 $ 107,163
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 27,724 74,572 52,164 135,745
------------------------------------------------------------------------------
48,540 131,731 78,993 242,908
------------------------------------------------------------------------------
Shares redeemed (28,471) (78,343) (41,381) (145,048)
------------------------------------------------------------------------------
Net increase from capital
share transactions 20,069 $ 53,388 37,612 $ 97,860
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER HIGH YIELD PORTFOLIO
------------------------------------------------------------------------------
Shares sold 57,013 $ 70,351 160,376 $ 196,674
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 36,157 42,416 23,375 29,505
------------------------------------------------------------------------------
93,170 112,767 183,751 226,179
------------------------------------------------------------------------------
Shares redeemed (75,976) (90,399) (125,724) (154,635)
------------------------------------------------------------------------------
Net increase from capital
share transactions 17,194 $ 22,368 58,027 $ 71,544
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER GROWTH PORTFOLIO
------------------------------------------------------------------------------
Shares sold 9,307 $ 29,549 23,253 $ 65,879
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends -- -- 31,338 95,007
------------------------------------------------------------------------------
9,307 29,549 54,591 160,886
------------------------------------------------------------------------------
Shares redeemed (24,466) (76,098) (29,621) (83,067)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions (15,159) $ (46,549) 24,970 $ 77,819
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER GOVERNMENT SECURITIES PORTFOLIO
------------------------------------------------------------------------------
Shares sold 26,677 $ 31,931 61,860 $ 71,335
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 5,674 6,579 5,053 5,813
------------------------------------------------------------------------------
32,351 38,510 66,913 77,148
------------------------------------------------------------------------------
Shares redeemed (17,253) (20,579) (36,729) (41,728)
------------------------------------------------------------------------------
Net increase from capital
share transactions 15,098 $ 17,931 30,184 $ 35,420
------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------
Shares sold 42,815 $ 66,622 25,667 $ 36,727
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 17,967 27,309 1,492 9,901
------------------------------------------------------------------------------
60,782 93,931 27,159 46,628
------------------------------------------------------------------------------
Shares redeemed (57,949) (91,808) (25,617) (42,999)
------------------------------------------------------------------------------
Net increase from capital
share transactions 2,833 $ 2,123 1,542 $ 3,629
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER SMALL CAP GROWTH PORTFOLIO
------------------------------------------------------------------------------
Shares sold 9,062 $ 17,073 31,582 $ 57,595
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends -- -- 13,797 25,813
------------------------------------------------------------------------------
9,062 17,073 45,379 83,408
------------------------------------------------------------------------------
Shares redeemed (14,216) (26,551) (9,476) (16,718)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions (5,154) $ (9,478) 35,903 $ 66,690
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER INVESTMENT GRADE BOND PORTFOLIO
------------------------------------------------------------------------------
Shares sold 11,530 $ 12,881 36,790 $ 41,663
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 9,080 10,459 715 785
------------------------------------------------------------------------------
20,610 23,340 37,505 42,448
------------------------------------------------------------------------------
Shares redeemed (7,473) (8,378) (6,587) (7,400)
------------------------------------------------------------------------------
Net increase from capital
share transactions 13,137 $ 14,962 30,918 $ 35,048
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER CONTRARIAN VALUE PORTFOLIO
------------------------------------------------------------------------------
Shares sold 14,974 $ 26,996 60,234 $ 98,369
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 10,957 19,397 3,981 6,635
------------------------------------------------------------------------------
25,931 46,393 64,215 105,004
------------------------------------------------------------------------------
Shares redeemed (10,288) (18,217) (21,099) (34,150)
------------------------------------------------------------------------------
Net increase from capital
share transactions 15,643 $ 28,176 43,116 $ 70,854
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER SMALL CAP VALUE PORTFOLIO
------------------------------------------------------------------------------
Shares sold 12,320 $ 13,092 41,702 $ 48,651
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 842 888 1,664 2,220
------------------------------------------------------------------------------
13,162 13,980 43,366 50,871
------------------------------------------------------------------------------
Shares redeemed (13,885) (14,161) (9,611) (10,802)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions (723) $ (181) 33,755 $ 40,069
------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER VALUE+GROWTH PORTFOLIO
------------------------------------------------------------------------------
Shares sold 8,165 $ 13,473 48,725 $ 74,841
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 2,443 4,052 1,557 2,504
------------------------------------------------------------------------------
10,608 17,525 50,282 77,345
------------------------------------------------------------------------------
Shares redeemed (9,220) (15,241) (7,607) (10,751)
------------------------------------------------------------------------------
Net increase from capital
share transactions 1,388 $ 2,284 42,675 $ 66,594
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
------------------------------------------------------------------------------
Shares sold 3,741 $ 5,633 14,868 $ 21,619
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 486 737 532 796
------------------------------------------------------------------------------
4,227 6,370 15,400 22,415
------------------------------------------------------------------------------
Shares redeemed (4,501) (6,734) (2,099) (2,938)
------------------------------------------------------------------------------
Net increase (decrease) from
capital share transactions (274) $ (364) 13,301 $ 19,477
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO
------------------------------------------------------------------------------
Shares sold 7,367 $ 10,209 26,145 $ 34,705
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 956 1,329 651 893
------------------------------------------------------------------------------
8,323 11,538 26,796 35,598
------------------------------------------------------------------------------
Shares redeemed (2,970) (4,134) (3,114) (4,039)
------------------------------------------------------------------------------
Net increase from capital
share transactions 5,353 $ 7,404 23,682 $ 31,559
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
------------------------------------------------------------------------------
Shares sold 7,411 $ 9,552 14,986 $ 18,592
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 669 861 486 614
------------------------------------------------------------------------------
8,080 10,413 15,472 19,206
------------------------------------------------------------------------------
Shares redeemed (1,839) (2,458) (2,036) (2,265)
------------------------------------------------------------------------------
Net increase from capital
share transactions 6,241 $ 7,955 13,436 $ 16,941
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER BLUE CHIP PORTFOLIO
------------------------------------------------------------------------------
Shares sold 29,665 $ 39,491 47,016 $ 55,283
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 426 587 232 286
------------------------------------------------------------------------------
30,091 40,078 47,248 55,569
------------------------------------------------------------------------------
Shares redeemed (3,063) (3,982) (1,595) (1,734)
------------------------------------------------------------------------------
Net increase from capital
share transactions 27,028 $ 36,096 45,653 $ 53,835
------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER GLOBAL INCOME PORTFOLIO
------------------------------------------------------------------------------
Shares sold 1,791 $ 1,896 4,043 $ 4,254
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 321 327 107 109
------------------------------------------------------------------------------
2,112 2,223 4,150 4,363
------------------------------------------------------------------------------
Shares redeemed (494) (515) (1,705) (1,809)
------------------------------------------------------------------------------
Net increase from capital
share transactions 1,618 $ 1,708 2,445 $ 2,554
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 4 TO
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO
------------------------------------------------------------------------------
Shares sold 48,250 $ 49,268 57,811 $ 56,148
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 1,719 1,778 -- --
------------------------------------------------------------------------------
49,969 51,046 57,811 56,148
------------------------------------------------------------------------------
Shares redeemed (1,364) (1,448) (161) (155)
------------------------------------------------------------------------------
Net increase from capital
share transactions 48,605 $ 49,598 57,650 $ 55,993
------------------------------------------------------------------------------
------------------------------------------------------------------------------
KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO
------------------------------------------------------------------------------
Shares sold 12,364 $ 12,790 16,660 $ 15,821
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 106 116 -- --
------------------------------------------------------------------------------
12,470 12,906 16,660 15,821
------------------------------------------------------------------------------
Shares redeemed (2,546) (2,610) (793) (684)
------------------------------------------------------------------------------
Net increase from capital
share transactions 9,924 $ 10,296 15,867 $ 15,137
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 5 TO
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER GLOBAL BLUE CHIP PORTFOLIO
------------------------------------------------------------------------------
Shares sold 5,889 $ 5,973 3,745 $ 3,561
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 17 17 -- --
------------------------------------------------------------------------------
5,906 5,990 3,745 3,561
------------------------------------------------------------------------------
Shares redeemed (434) (440) (85) (82)
------------------------------------------------------------------------------
Net increase from capital
share transactions 5,472 $ 5,550 3,660 $ 3,479
------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 5 TO
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO
------------------------------------------------------------------------------
Shares sold 8,705 $ 7,909 3,322 $ 3,073
------------------------------------------------------------------------------
Shares issued in reinvestment
of dividends 56 51 -- --
------------------------------------------------------------------------------
8,761 7,960 3,322 3,073
------------------------------------------------------------------------------
Shares redeemed (6,757) (6,136) (29) (25)
------------------------------------------------------------------------------
Net increase from capital
share transactions 2,004 $ 1,824 3,293 $ 3,048
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MAY 1 TO
JUNE 30, 1999
---------------------
SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C>
KEMPER AGGRESSIVE GROWTH PORTFOLIO
----------------------------------------------------------------------------
Shares sold 1,551 $ 1,552
----------------------------------------------------------------------------
----------------------------------------------------------------------------
KEMPER TECHNOLOGY GROWTH PORTFOLIO
----------------------------------------------------------------------------
Shares sold 3,890 $ 3,959
----------------------------------------------------------------------------
Shares redeemed (33) (34)
----------------------------------------------------------------------------
Net increase from capital share transactions 3,857 $ 3,925
----------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Kemper-Dreman High Return Equity 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 June
30, 1999, the market value of assets pledged by the
portfolios to cover margin requirements for open
futures positions was $844,000 and $299,000 for the
Kemper-Dreman High Return Equity and Kemper
Government Securities Portfolios, respectively. The
portfolios also held liquid securities in excess of
the face amount of the open futures contracts. At
June 30, 1999, the portfolios had the following
futures contracts open, which expire in September,
1999 (in thousands):
<TABLE>
<CAPTION>
UNREALIZED
FACE GAIN (LOSS)
PORTFOLIO TYPE AMOUNT POSITION AT 6/30/99
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper-Dreman High
Return Equity S & P 500 $15,500 Long $473
--------------------------------------------------------------------------------
Kemper Government U.S. Treasury Note 2,398 Long 12
Securities U.S. Treasury Bond 11,938 Long 76
--------------------------------------------------------------------------------
$ 88
--------------------------------------------------------------------------------
</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 June 30, 1999,
the portfolio had the following forward foreign
currency contracts outstanding with settlement
dates in July and August 1999 (in thousands):
<TABLE>
<CAPTION>
CONTRACTED UNREALIZED
FOREIGN CURRENCY AMOUNT IN GAIN (LOSS) AT
TO BE DELIVERED U.S. DOLLARS 6/30/99
------------------------------------------------------------
<C> <S> <C> <C>
(238) Canadian Dollars $ (163) $ 1
------------------------------------------------------------
(1,623) Eurodollars (1,716) 32
------------------------------------------------------------
(89) British Pounds (142) 2
------------------------------------------------------------
25,971 Japanese Yen 219 (4)
------------------------------------------------------------
(3,119) Norwegian Kroners (390) (6)
------------------------------------------------------------
(2,639) Swedish Kroners (318) 6
------------------------------------------------------------
NET UNREALIZED GAIN $31
------------------------------------------------------------
</TABLE>
33
<PAGE> 36
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------
KEMPER MONEY MARKET PORTFOLIO
----------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------
Net investment income .02 .05 .05 .05 .06 .04
- -----------------------------------------------------------------------------------------------------
Less dividends declared .02 .05 .05 .05 .06 .04
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.21% 5.15 5.25 5.03 5.66 3.96
- -----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------
Expenses .55% .54 .55 .60 .55 .53
- -----------------------------------------------------------------------------------------------------
Net investment income 4.40% 5.02 5.14 4.90 5.52 3.95
- -----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $184,834 151,930 100,143 70,601 61,078 83,821
- -----------------------------------------------------------------------------------------------------
</TABLE>
NOTE TO KEMPER MONEY MARKET PORTFOLIO
The total return for 1995 include the effect of a capital contribution from the
investment manager. Without the capital contribution, the total return would
have been 5.11%.
<TABLE>
<CAPTION>
-----------------------------------------------------------
KEMPER TOTAL RETURN PORTFOLIO
-----------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 2.735 2.822 2.815 2.579 2.112 2.586
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .040 .086 .090 .084 .084 .069
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .173 .317 .377 .322 .453 (.313)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .213 .403 .467 .406 .537 (.244)
- -----------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .090 .090 .090 .090 .070 .060
- -----------------------------------------------------------------------------------------------------------
Distribution from net realized gain .150 .400 .370 .080 -- .170
- -----------------------------------------------------------------------------------------------------------
Total dividends .240 .490 .460 .170 .070 .230
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 2.708 2.735 2.822 2.815 2.579 2.112
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.87% 15.14 19.96 16.76 25.97 (9.50)
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -----------------------------------------------------------------------------------------------------------
Expenses .61% .60 .60 .59 .60 .61
- -----------------------------------------------------------------------------------------------------------
Net investment income 3.18% 3.33 3.32 3.21 3.52 3.13
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $911,319 865,423 786,996 697,102 659,894 586,594
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 73% 81 122 90 118 128
- -----------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------
KEMPER HIGH YIELD PORTFOLIO
------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.227 1.296 1.281 1.259 1.185 1.338
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .054 .106 .116 .120 .125 .116
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.020) (.085) .019 .042 .069 (.149)
- -------------------------------------------------------------------------------------------------------
Total from investment operations .034 .021 .135 .162 .194 (.033)
- -------------------------------------------------------------------------------------------------------
Less distribution from net investment
income .110 .090 .120 .140 .120 .120
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.151 1.227 1.296 1.281 1.259 1.185
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.59% 1.45 11.61 14.06 17.40 (2.25)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------
Expenses .69% .65 .65 .65 .65 .65
- -------------------------------------------------------------------------------------------------------
Net investment income 9.97% 9.36 9.20 9.70 10.27 9.49
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $434,434 442,125 391,664 289,315 257,377 219,415
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 53% 74 90 98 90 98
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------
KEMPER GROWTH PORTFOLIO
------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 2.957 3.001 3.371 3.262 2.665 2.935
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .001 .007 .012 .030 .034 .018
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .299 .459 .448 .589 .793 (.138)
- -------------------------------------------------------------------------------------------------------
Total from investment operations .300 .466 .460 .619 .827 (.120)
- -------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- .010 .020 .040 .010 --
- -------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .500 .810 .470 .220 .150
- -------------------------------------------------------------------------------------------------------
Total dividends -- .510 .830 .510 .230 .150
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 3.257 2.957 3.001 3.371 3.262 2.665
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.16% 15.10 21.34 21.63 32.97 (4.02)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------
Expenses .67% .66 .65 .64 .64 .66
- -------------------------------------------------------------------------------------------------------
Net investment income .01% .28 .42 .94 1.15 .69
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $643,061 628,551 563,016 487,483 414,533 321.708
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 124% 109 170 175 88 106
- -------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------
KEMPER GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------
1999 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.208 1.207 1.207 1.269 1.142 1.267
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .028 .062 .084 .085 .084 .067
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.027) .019 .016 (.057) .123 (.102)
- ---------------------------------------------------------------------------------------------------
Total from investment operations .001 .081 .100 .028 .207 (.035)
- ---------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .060 .080 .100 .090 .080 .060
- ---------------------------------------------------------------------------------------------------
Distribution from net realized gain -- -- -- -- -- .030
- ---------------------------------------------------------------------------------------------------
Total dividends .060 .080 .100 .090 .080 .090
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.149 1.208 1.207 1.207 1.269 1.142
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .03% 7.03 8.96 2.56 18.98 (2.74)
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------
Expenses .74% .65 .64 .66 .65 .63
- ---------------------------------------------------------------------------------------------------
Net investment income 5.76% 6.27 7.12 7.09 7.08 5.69
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $134,480 123,211 86,682 84,314 95,185 95,782
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 195% 142 179 325 275 606
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------
KEMPER INTERNATIONAL PORTFOLIO
---------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1999 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.700 1.615 1.564 1.371 1.244 1.306
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .008 .017 .011 .011 .018 .009
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .015 .148 .130 .212 .139 (.056)
- -------------------------------------------------------------------------------------------------------
Total from investment operations .023 .165 .141 .223 .157 (.047)
- -------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .020 .020 .020 .020 .010 --
- -------------------------------------------------------------------------------------------------------
Distribution from net realized gain .215 .060 .070 .010 .020 .015
- -------------------------------------------------------------------------------------------------------
Total dividends .235 .080 .090 .030 .030 .015
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.488 1.700 1.615 1.564 1.371 1.244
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.13% 10.02 9.46 16.49 12.83 (3.59)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------
Expenses .94% .93 .91 .96 .92 .93
- -------------------------------------------------------------------------------------------------------
Net investment income .72% .96 .71 .89 1.39 .74
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $190,817 213,199 200,046 163,475 134,481 122,710
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 201% 90 79 87 126 107
- -------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 39
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------
KEMPER SMALL CAP GROWTH PORTFOLIO
----------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, MAY 2 TO
JUNE 30, ----------------------------------- DECEMBER 31,
1999 1998 1997 1996 1995 1994(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.971 1.969 1.677 1.346 1.039 1.000
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (.004) -- .004 .002 .005 .008
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .087 .342 .488 .369 .307 .031
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .083 .342 .492 .371 .312 .039
- ----------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income -- -- .010 -- .005 --
- ----------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .340 .190 .040 -- --
- ----------------------------------------------------------------------------------------------------------------
Total dividends -- .340 .200 .040 .005 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 2.054 1.971 1.969 1.677 1.346 1.039
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.15% 18.37 34.20 28.04 30.07 3.95
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses .74% .70 .71 .75 .87 1.25
- ----------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.42)% (.01) .20 .15 .42 .91
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $206,475 208,335 137,415 69,137 35,373 12,909
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 259% 276 330 156 81 58
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------
KEMPER INVESTMENT GRADE BOND PORTFOLIO
----------------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED ------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.165 1.118 1.036 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .021 .032 .066 .031
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.049) .055 .026 .005
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations (.028) .087 .092 .036
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .030 .030 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .010 .010 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .040 .040 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.097 1.165 1.118 1.036
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (2.42)% 7.93 9.04 3.57
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .65% .67 .80 .87
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 5.13% 5.50 6.23 4.93
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $63,538 52,155 15,504 1,998
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 116% 130 311 75
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
37
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------
KEMPER CONTRARIAN VALUE PORTFOLIO
--------------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED --------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.757 1.518 1.174 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .018 .026 .031 .015
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .196 .263 .323 .159
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .214 .289 .354 .174
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .030 .010 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .100 .040 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .130 .050 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.841 1.757 1.518 1.174
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.49% 19.26 30.38 17.36
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .81% .78 .80 .90
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.13% 2.02 2.38 2.42
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .81% .78 .80 .92
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.13% 2.02 2.38 2.40
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $305,142 263,775 162,380 21,305
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 130% 57 46 57
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
KEMPER SMALL CAP VALUE PORTFOLIO
------------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED -------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.065 1.227 1.019 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .005 .009 .012 .013
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .058 (.141) .206 .006
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .063 (.132) .218 .019
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .010 -- .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .030 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .010 .030 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.118 1.065 1.227 1.019
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.98% (11.25) 21.73 1.86
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .80 .84 .90
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .88% 1.15 1.18 2.25
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .80 .84 .92
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .88% 1.15 1.18 2.23
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $106,277 102,009 76,108 13,307
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 38% 43 22 61
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
38
<PAGE> 41
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------------------------------
KEMPER VALUE+GROWTH PORTFOLIO
------------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED -------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.671 1.425 1.146 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .010 .008 .012 .008
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .103 .278 .277 .138
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .113 .286 .289 .146
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .010 -- .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .035 .040 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .045 .040 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.739 1.671 1.425 1.146
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 6.91% 20.17 25.47 14.60
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .78 .84 .90
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 1.23% .80 .95 .97
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .78 .84 1.01
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 1.23% .80 .95 .86
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $160,956 152,321 69,094 10,196
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 37% 102 50 25
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
------------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED ------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.507 1.378 1.154 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .056 .019 .020 .012
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .028 .160 .214 .142
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .084 .179 .234 .154
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .020 .010 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .010 .040 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .030 .050 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.561 1.507 1.378 1.154
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.65% 13.01 20.48 15.37
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .67 .93 .81
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.21% 1.84 1.58 1.71
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .83% .67 .93 1.13
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 2.21% 1.84 1.58 1.39
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $39,214 38,265 16,659 3,759
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 62% 55 75 60
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
39
<PAGE> 42
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO
-----------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED ------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.394 1.289 1.114 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .019 .020 .034 .018
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .041 .125 .151 .096
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .060 .145 .185 .114
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .030 .010 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .030 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .030 .040 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.424 1.394 1.289 1.114
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.36% 11.30 16.77 11.37
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .77% .64 .83 .78
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.14% 2.84 2.77 2.69
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .77% .64 .83 1.01
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.14% 2.84 2.77 2.46
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $66,273 57,411 22,553 5,727
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 50% 35 67 76
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
-----------------------------------------------------------------
YEAR ENDED DEC. 31,
SIX MONTHS ENDED ------------------- MAY 1 TO
JUNE 30, 1999 1998 1997 DEC. 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.305 1.224 1.096 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .018 .028 .043 .023
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .007 .093 .095 .073
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .025 .121 .138 .096
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .030 .010 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain -- .030 -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .030 .040 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.303 1.305 1.224 1.096
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.45% 10.00 12.70 9.59
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .81% .66 .97 .83
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.96% 3.85 3.63 3.60
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .81% .66 .97 1.01
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 3.96% 3.85 3.63 3.42
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $40,833 32,741 14,258 2,534
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 35% 42 89 13
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
40
<PAGE> 43
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------
KEMPER BLUE CHIP PORTFOLIO
-----------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MAY 1 TO
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.260 1.115 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .004 .010 .017
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .159 .145 .098
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .163 .155 .115
- ---------------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .008 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.415 1.260 1.115
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 12.90% 13.84 11.54
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses .72% .76 .95
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .82% 1.18 2.07
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $126,232 78,314 5,023
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 54% 102 78
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
KEMPER GLOBAL INCOME PORTFOLIO
-----------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MAY 1 TO
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997(A)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.109 1.029 1.000
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .013 .024 .036
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.079) .086 (.007)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations (.066) .110 .029
- ---------------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .040 .020 --
- ---------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .020 .010 --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends .060 .030 --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ .983 1.109 1.029
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (6.13)% 10.98 2.87
- ---------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Expenses 1.02% 1.08 1.10
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 4.25% 4.32 5.36
- ---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $6,043 5,023 2,145
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 306% 330 290
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
41
<PAGE> 44
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------
KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO
---------------------------------------------------
SIX MONTHS ENDED MAY 4 TO
JUNE 30, 1999 DEC. 31, 1998(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.028 1.000
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .008 .008
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .049 .020
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .057 .028
- ----------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .010 --
- ----------------------------------------------------------------------------------------------------------------
Distribution from net realized gain .010 --
- ----------------------------------------------------------------------------------------------------------------
Total dividends .020 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.065 1.028
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.51% 2.80
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses .87% .87
- ----------------------------------------------------------------------------------------------------------------
Net investment income 2.62% 2.77
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses .88% 1.20
- ----------------------------------------------------------------------------------------------------------------
Net investment income 2.61% 2.44
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $113,126 59,294
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 30% 5
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO
---------------------------------------------------
SIX MONTHS ENDED MAY 4 TO
JUNE 30, 1999 DEC. 31, 1998(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ .978 1.000
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .006 .004
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .073 (.026)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .079 (.022)
- ----------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .005 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.052 .978
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.05% (2.20)
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses .99% .99
- ----------------------------------------------------------------------------------------------------------------
Net investment income 1.76% 1.29
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses 1.09% 1.73
- ----------------------------------------------------------------------------------------------------------------
Net investment income 1.66% .55
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $27,132 15,516
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 16% 6
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
42
<PAGE> 45
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------------
KEMPER GLOBAL BLUE CHIP PORTFOLIO
---------------------------------------------------
SIX MONTHS ENDED MAY 5 TO
JUNE 30, 1999 DEC. 31, 1998(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ .979 1.000
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .025 .003
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .068 (.024)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .093 (.021)
- ----------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .003 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.069 .979
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.50% (2.10)
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses 1.56% 1.56
- ----------------------------------------------------------------------------------------------------------------
Net investment income .86% .91
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses 4.83% 12.32
- ----------------------------------------------------------------------------------------------------------------
Net investment income (2.41)% (9.85)
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $9,766 3,584
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 59% 67
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO
---------------------------------------------------
SIX MONTHS ENDED MAY 5 TO
JUNE 30, 1999 DEC. 31, 1998(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ .912 1.000
- ----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .001 .003
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .009 (.091)
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations .010 (.088)
- ----------------------------------------------------------------------------------------------------------------
Less distribution from net investment income .005 --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ .917 .912
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.11% (8.80)
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses 1.12% 1.13
- ----------------------------------------------------------------------------------------------------------------
Net investment income 3.24% 1.13
- ----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------------------
Expenses 5.19% 19.55
- ----------------------------------------------------------------------------------------------------------------
Net investment income (.83)% (17.29)
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $4,857 3,003
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 182% 100
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
43
<PAGE> 46
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------
KEMPER AGGRESSIVE GROWTH PORTFOLIO
----------------------------------
MAY 1 TO
JUNE 30, 1999(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $1.000
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .215
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .121
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .094
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.094
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.41%
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .95%
- ------------------------------------------------------------------------------------------------------------
Net investment income (.14)%
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 6.06%
- ------------------------------------------------------------------------------------------------------------
Net investment income (5.25)%
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $1,697
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 17%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
KEMPER TECHNOLOGY GROWTH PORTFOLIO
----------------------------------
MAY 1 TO
JUNE 30, 1999(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.000
- ------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 2.266
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (2.165)
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .101
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.101
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.14%
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AFTER EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses .95%
- ------------------------------------------------------------------------------------------------------------
Net investment income 2.30%
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS BEFORE EXPENSE ABSORPTION (ANNUALIZED)
- ------------------------------------------------------------------------------------------------------------
Expenses 4.28%
- ------------------------------------------------------------------------------------------------------------
Net investment income (1.03)%
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $ 4,248
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 6%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations
NOTE TO ALL PORTFOLIOS: Data for the period ended June 30, 1999 is unaudited.
44
<PAGE> 47
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER MONEY MARKET PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
VALUE
<S> <C>
COMMERCIAL PAPER
AES Hawaii,
4.92%, 7/8/99 $ 4,995
American Home Products Corp.,
4.96%, 8/23/99 4,964
Amsterdam Funding Corp.,
4.96%, 7/12/99 4,992
(a) Anheuser-Busch Cos., Inc.,
4.90%, 7/16/99 2,997
Atlantis One Funding Corp.,
4.99%, 8/10/99 4,589
Banque National de Paris,
5.29% - 5.46%, 12/15/99 - 12/20/99 4,116
(a) Bear Stearns Cos., Inc.,
4.99%, 7/18/99 2,000
California, Pollution Control Financing
Authority,
4.92%, 8/2/99 5,000
Chrysler Financial Corp.,
4.97%, 6/9/00 4,000
Commercial Credit Co.,
4.90%, 7/12/99 1,997
(a) Countrywide Home Loans, Inc.,
5.00%, 7/26/99 3,000
(a) CS First Boston,
4.86%, 7/22/99 3,000
Den Danske Corp.,
4.91%, 8/16/99 4,969
Dresdner U.S. Finance, Inc.,
4.87%, 8/11/99 4,973
Eastman Kodak Co.,
5.11%, 7/8/99 2,997
Enterprise Funding Corp.,
4.96%, 7/22/99 4,986
Eureka Securitization, Inc.,
4.88%, 7/7/99 2,498
FCAR Owner Trust,
4.86%, 7/8/99 3,996
(a) FINOVA Capital Corp.,
5.15%, 9/13/99 3,000
Giro Funding Corp.,
4.96%, 7/21/99 2,992
(a) Heller Financial, Inc.,
5.22%, 7/7/99 3,003
Household Finance Corp.,
4.92%, 8/18/99 1,490
International Securitization Corp.,
4.96%, 8/30/99 4,959
(a) Merrill Lynch & Co.,
5.00%, 7/21/99 3,000
Moat Funding LLC,
5.29%, 9/19/99 2,968
National Rural Utilities Cooperative
Finance Corp.,
4.87%, 8/27/99 3,473
</TABLE>
<TABLE>
<CAPTION>
COMMERCIAL PAPER--CONTINUED
VALUE
<S> <C>
Nordebanken, NA,
4.90%, 8/9/99 $ 4,974
Pemex Capital, Inc.,
5.27%, 9/20/99 3,064
Petroleo Brasileiro SA,
4.93%, 7/6/99 2,498
Prudential Funding Corp.,
4.92%, 8/24/99 4,964
Societe Generale,
4.94%, 8/17/99 1,987
Svenska Handelsbanken,
4.89%, 7/12/99 2,996
Swedbank, Inc.,
4.91%, 8/16/99 4,969
Texas, Brazos River Authority,
5.00%, 8/17/99 5,000
Thunder Bay Funding, Inc.,
5.04%, 8/6/99 4,975
Wood Street Funding Corp.,
4.97%, 7/23/99 4,985
---------------------------------------------------
TOTAL COMMERCIAL PAPER--72.8%
(AVERAGE MATURITY: 47 DAYS) 135,366
---------------------------------------------------
CERTIFICATES OF DEPOSIT
(a) Barclays Bank, PLC,
4.89%, 7/1/99 2,499
(a) Comerica Bank,
4.90% - 4.91%, 7/1/99 - 7/23/99 4,999
(a) Commerzbank AG,
4.87%, 7/12/99 2,998
(a) CS First Boston,
4.97%, 7/1/99 3,000
(a) Deutsche Bank,
4.89%, 7/1/99 1,499
(a) First Union National Bank,
5.23%, 8/17/99 3,000
(a) Huntington National Bank,
4.97%, 7/7/99 3,000
(a) J.P. Morgan & Co., Inc.,
5.03%, 8/3/99 3,000
(a) John Deere,
4.90%, 7/1/99 4,999
(a) MBNA America,
5.12%, 8/9/99 4,999
(a) National City Bank,
5.08%, 7/7/99 3,003
(a) Northern Trust Corp.,
4.84%, 7/8/99 3,000
(a) Old Kent Bank,
4.94%, 7/1/99 2,499
(a) PNC Bank NA,
5.12%, 7/28/99 2,000
</TABLE>
45
<PAGE> 48
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
VALUE
<S> <C>
CERTIFICATES OF DEPOSIT--CONTINUED
(a) Toronto-Dominion Bank,
4.83%, 7/14/99 $ 3,000
(a) Wells Fargo & Co.,
5.17%, 9/29/99 2,998
-----------------------------------------------------
TOTAL CERTIFICATES OF DEPOSITS--27.2%
(AVERAGE MATURITY: 20 DAYS) 50,493
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(AVERAGE MATURITY: 40 DAYS) $185,859
-----------------------------------------------------
</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 June 30,
1999. The dates shown represent the demand date or next interest rate change
date.
See accompanying Notes to Financial Statements.
46
<PAGE> 49
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER TOTAL RETURN PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER OF
GOVERNMENT OBLIGATIONS SHARES VALUE
<S> <C> <C>
U.S. TREASURY BONDS
11.875%, 11/15/2003 $16,585 $ 20,384
10.75%, 02/15/2003 4,265 4,969
10.375%, 11/15/2009 4,865 5,811
9.125%, 05/15/2009 4,870 5,491
12.75%, 11/15/2010 15,400 20,761
13.875%, 05/15/2011 16,180 23,165
12.00%, 08/15/2013 15,710 22,058
13.25%, 05/15/2014 11,700 17,767
8.75%, 08/15/2020 4,000 5,145
6.00%, 02/15/2026 1,030 1,005
6.625%, 02/15/2027 1,900 2,007
---------------------------------------------------------
128,563
U.S. TREASURY NOTES
8.75%, 08/15/2000 12,500 12,951
7.75%, 01/31/2000 6,000 6,090
6.375%, 01/15/2000 1,000 1,007
7.875%, 08/15/2001 7,000 7,319
7.75%, 02/15/2001 9,000 9,314
6.625%, 04/30/2002 3,340 3,429
5.50%, 03/31/2003 8,000 7,949
7.25%, 05/15/2004 1,750 1,858
10.75%, 08/15/2005 16,495 20,505
7.50%, 02/15/2005 7,005 7,541
5.625%, 05/15/2008 3,530 3,458
---------------------------------------------------------
81,421
PROVINCE OF QUEBEC, CANADA
8.625%, 01/19/2005 1,500 1,633
---------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--23.3%
(Cost: $221,227) 211,617
---------------------------------------------------------
COMMON STOCKS
COMMUNICATIONS--5.8%
Ameritech Corp. 80,000shs. 5,880
AT&T Corp. 112,500 6,279
Bell Atlantic Corp. 145,000 9,479
BellSouth Corp. 145,000 6,797
Frontier Corp. 72,000 4,248
GTE Corp. 50,000 3,788
(a) MCI WorldCom, Inc. 102,500 8,841
SBC Communications, Inc. 120,000 6,960
---------------------------------------------------------
52,272
CONSUMER DISCRETIONARY--5.3%
CVS Corp. 120,000 6,090
Dayton Hudson Corp. 116,000 7,540
Dollar General Corp. 178,750 5,184
Home Depot, Inc. 123,000 7,926
McDonald's Corp. 145,000 5,990
(a) Mirage Resorts, Inc. 288,100 4,826
Wal-Mart Stores, Inc. 218,900 10,562
---------------------------------------------------------
48,118
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
SHARES VALUE
<S> <C> <C>
CONSUMER STAPLES--4.0%
Albertson's, Inc. 100,000 $ 5,156
H.J. Heinz Co. 98,000 4,912
Pepsi Bottling Group, Inc. 260,000 5,996
PepsiCo, Inc. 245,000 9,478
Procter & Gamble Co. 115,000 10,264
---------------------------------------------------------
35,806
DURABLES--.6%
Dana Corp. 123,000 5,666
---------------------------------------------------------
ENERGY--4.4%
Anadarko Petroleum Corp. 79,000 2,908
Chevron Corp. 43,000 4,093
Conoco, Inc. "A" 130,000 3,624
Exxon Corp. 70,200 5,414
Mobil Corp. 70,000 6,930
Royal Dutch Petroleum Co. 105,000 6,326
Schlumberger, Ltd. 47,000 2,993
Texaco, Inc. 58,000 3,625
Unocal Corp. 100,000 3,963
---------------------------------------------------------
39,876
FINANCIAL--10.5%
American Express Credit Corp. 49,000 6,376
American International Group,
Inc. 62,500 7,316
Bank of America Corp. 110,000 8,064
Capital One Finance Corp. 98,600 5,491
Chase Manhattan Corp. 75,000 6,497
CIGNA Corp. 65,000 5,785
Citigroup, Inc. 197,500 9,381
First Tennessee National Corp. 95,000 3,640
Household International, Inc. 129,662 6,143
J.P. Morgan & Co., Inc. 35,000 4,917
Jefferson Pilot Corp. 67,900 4,494
Merrill Lynch & Co., Inc. 38,000 3,038
Morgan Stanley, Dean Witter &
Co. 35,000 3,588
St. Paul Companies, Inc. 188,000 5,981
Summit Bancorp 75,000 3,136
UNUM Corp. 103,000 5,639
Wells Fargo Co. 145,000 6,199
---------------------------------------------------------
95,685
</TABLE>
47
<PAGE> 50
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
HEALTH--7.3%
Abbott Laboratories 150,000 $ 6,825
American Home Products Corp. 95,000 5,462
Baxter International, Inc. 94,100 5,705
Bristol-Myers Squibb Co. 120,000 8,452
Eli Lilly & Co. 60,000 4,298
Medtronic, Inc. 79,353 6,180
Pfizer, Inc. 70,000 7,682
Schering-Plough Corp. 130,000 6,890
SmithKline Beecham, PLC 70,000 4,624
Warner-Lambert Co. 86,000 5,966
(a) Wellpoint Health Networks,
Inc. 50,000 4,244
---------------------------------------------------------
66,328
MANUFACTURING--7.2%
Air Products & Chemicals, Inc. 132,000 5,313
Emerson Electric Co. 116,000 7,294
Federal-Mogul Corp. 121,700 6,328
General Electric Co. 180,000 20,340
Parker-Hannifin Corp. 140,000 6,405
Tyco International, Ltd. 120,823 11,448
Xerox Corp. 132,800 7,843
---------------------------------------------------------
64,971
MEDIA--5.7%
(a) AT&T Corp. -- Liberty Media
Group 188,000 6,909
CBS Corp. 127,300 5,530
(a) Clear Channel Communications,
Inc. 105,000 7,238
(a) Infinity Broadcasting Corp. 172,900 5,144
(a) Media One Group, Inc. 36,000 2,678
Omnicom Group, Inc. 60,300 4,824
Time Warner, Inc. 95,000 6,983
Tribune Co. 69,000 6,012
(a) Univision Communication, Inc. 96,900 6,395
---------------------------------------------------------
51,713
SERVICE INDUSTRIES--.8%
Waste Management, Inc. 135,000 7,256
---------------------------------------------------------
TECHNOLOGY--13.1%
(a) Applied Materials, Inc. 80,000 5,910
Automatic Data Processing,
Inc. 146,000 6,424
(a) Cisco Systems, Inc. 163,000 10,513
(a) EMC Corp. 65,000 3,575
Hewlett-Packard Co. 90,000 9,045
Intel Corp. 194,000 11,543
International Business
Machines Corp. 93,000 12,020
(a) Intuit, Inc. 49,800 4,488
(a) Microsoft Corp. 150,000 13,528
Motorola, Inc. 130,000 12,317
(a) Oracle Systems Corp. 112,500 4,177
Raytheon Co. "B" 110,000 7,741
(a) Solectron Corp. 100,000 6,669
(a) Sun Microsystems, Inc. 75,000 5,166
(a) Xilinx, Inc. 101,000 5,782
---------------------------------------------------------
118,898
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TRANSPORTATION--.6%
Canadian National Railway Co. 80,000 $ 5,398
---------------------------------------------------------
TOTAL COMMON STOCK--65.3%
(Cost: $446,499) 591,987
---------------------------------------------------------
CORPORATE OBLIGATIONS
COMMUNICATIONS--2.0%
American Cellular Corp.,
10.50%, 05/15/2008 $ 1,120 1,142
Esprit Telecom Group, PLC,
11.50%, 12/15/2007 630 665
Intermedia Communications,
8.60%, 06/01/2008 1,930 1,795
McLeod USA, Inc.,
Step-up Coupon,
0% to 03/01/2002
10.50%, 03/01/2007 2,800 2,142
MetroNet Communications Corp.,
Step-up Coupon,
0% to 06/15/2003,
9.95%, 06/15/2008 3,700 2,738
Nextel Communications, Inc.,
Step-up Coupon,
0% to 02/15/2003
9.95%, 02/15/2008 3,575 2,476
Rogers Cantel, Inc.,
8.80%, 10/01/2007 2,100 2,100
TeleWest Communications, PLC,
Step-up Coupon,
0% to 10/01/2000,
11.00%, 10/01/2007 4,020 3,578
WorldCom, Inc.
7.75%, 04/01/2007 225 236
7.75%, 04/01/2027 825 871
---------------------------------------------------------
17,743
CONSTRUCTION--.3%
Del Webb Corp.,
9.75%, 01/15/2008 2,450 2,389
Kevco, Inc.,
10.375%, 12/01/2007 545 379
Nortek, Inc.,
9.875%, 03/01/2004 90 90
---------------------------------------------------------
2,858
</TABLE>
48
<PAGE> 51
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CONSUMER DISCRETIONARY--1.1%
AFC Enterprises,
10.25%, 05/15/2007 $ 700 $ 710
AMF Bowling, Inc.
10.875%, 03/15/2006 2,100 1,733
Step-up Coupon, 0% to
03/15/2001,
12.25%, 03/15/2006 542 336
Cinemark USA, Inc.,
9.625%, 08/01/2008 1,360 1,353
Cole National Group, Inc.,
9.875%, 12/31/2006 2,640 2,323
Dayton Hudson Corp.,
7.50%, 07/15/2006 600 615
Dillards, Inc.,
6.17%, 08/01/2001 1,500 1,491
Royal Caribbean Cruises, Ltd.,
8.25%, 04/01/2005 1,250 1,307
---------------------------------------------------------
9,868
CONSUMER STAPLES--.1%
Pathmark Stores, Inc.,
9.625%, 05/01/2003 935 951
---------------------------------------------------------
ENERGY--.7%
Benton Oil & Gas Co.,
11.625%, 05/01/2003 420 283
Conoco, Inc.,
6.35%, 04/15/2009 4,000 3,839
Gulf Canada Resources, Inc.,
9.25%, 01/15/2004 1,500 1,515
Gulfmark Offshore, Inc.,
8.75%, 06/01/2008 1,120 1,056
---------------------------------------------------------
6,693
FINANCIAL--1.2%
Abbey National, PLC,
6.69%, 10/17/2005 775 762
ABN AMRO,
8.25%, 08/01/2009 1,250 1,307
AB Spintab,
7.50%, 08/14/2049 800 782
Crestar Financial Corp.,
8.25%, 07/15/2002 600 630
Den Danske Bank,
6.375%, 06/15/2008 1,250 1,184
FINOVA Capital Corp.,
6.50%, 07/28/2002 550 550
Ford Motor Credit Co.,
7.75%, 03/15/2005 600 628
General Electric Capital Corp.
8.75%, 05/21/2007 400 454
8.625%, 06/15/2008 1,100 1,247
NationsBank Corp.,
9.50%, 06/01/2004 600 669
Repsol International Finance,
7.00%, 08/01/2005 1,000 986
Scotland International,
8.80%, 01/27/2004 $ 250 $ 269
Svenska Handelsbanken,
7.125%, 03/29/2049 300 286
Wells Fargo & Co.,
6.875%, 04/01/2006 750 753
---------------------------------------------------------
10,507
HEALTH--.2%
Magellan Health Services,
Inc.,
9.00%, 02/15/2008 2,500 2,150
---------------------------------------------------------
MANUFACTURING--1.2%
Delco Remy International,
10.625%, 08/01/2006 860 886
Gaylord Container Corp.,
9.875%, 02/15/2008 2,500 2,188
Hayes Wheels International,
Inc.,
11.00%, 07/15/2006 1,500 1,627
Neenah Corp.,
11.125%, 05/01/2007 1,000 985
Plainwell, Inc.,
11.00%, 03/01/2008 1,020 816
Riverwood International Corp.,
10.25%, 04/01/2006 2,650 2,690
Stone Container Corp.,
12.58%, 08/01/2016 1,000 1,060
Stone Container Finance Corp.,
11.50%, 08/15/2006 500 540
---------------------------------------------------------
10,792
MEDIA--1.8%
American Radio Systems,
9.00%, 02/01/2006 810 862
Big Flower Press,
8.875%, 07/01/2007 2,500 2,363
Chancellor Media Corp.,
9.00%, 10/01/2008 1,240 1,265
Comcast Cable Communications,
8.50%, 05/01/2027 325 357
Comcast Corp.,
9.375%, 05/15/2005 1,500 1,589
CSC Holdings, Inc.,
9.25%, 11/01/2005 1,820 1,888
Diamond Cable
Communications, PLC
Step-up Coupon, 0% to
12/15/2000,
11.75%, 12/15/2005 260 234
Step-up Coupon, 0% to
02/15/2002,
10.75%, 02/15/2007 740 577
K-III Communications Corp.,
8.50%, 02/01/2006 750 754
News America Holdings, Inc.,
9.25%, 02/01/2013 405 455
</TABLE>
49
<PAGE> 52
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MEDIA--CONTINUED
NTL, Inc.
11.50%, 10/01/2008 $ 95 $ 104
NTL, Inc., Step-up Coupon,
0% to 10/01/2003
12.375%, 10/01/2008 150 101
NTL, Inc., Step-up Coupon,
0% to 02/01/2001,
10.50%, 02/01/2009 2,270 1,975
Sinclair Broadcasting Group, Inc.,
8.75%, 12/15/2007 850 833
Tele-Communications, Inc.,
9.80%, 02/01/2012 1,100 1,344
Time Warner, Inc.
9.125%, 01/15/2013 425 481
9.15%, 02/01/2023 450 516
United Artists Theatre Circuit,
Inc., 9.75%, 04/15/2008 1,605 1,204
---------------------------------------------------------
16,902
METALS AND MINERALS--.6%
Euramax International, PLC,
11.25%, 10/01/2006 2,850 2,893
MMI Products, Inc.,
11.25%, 04/15/2007 400 410
Renco Steel Holdings Co.,
10.875%, 02/01/2005 2,500 2,163
---------------------------------------------------------
5,466
SERVICE INDUSTRIES--.4%
Kindercare Learning Centers, Inc.,
9.50%, 02/15/2009 500 477
PSINet, Inc.,
10.00%, 02/15/2005 810 802
PSINet, Inc.,
11.50%, 11/01/2008 1,040 1,092
United Rentals, Inc.,
9.25%, 01/15/2009 760 752
---------------------------------------------------------
3,123
TECHNOLOGY--.5%
Raytheon Co.
6.15%, 11/01/2001 $ 4,000 $ 3,776
6.75%, 08/15/2007 650 643
---------------------------------------------------------
4,419
TRANSPORTATION--.3%
Continental Airlines, Inc.
7.75%, 07/02/2014 465 479
6.90%, 01/02/2017 400 388
TFM, SA de CV,
10.25%, 06/15/2007 2,100 1,869
---------------------------------------------------------
2,736
UTILITIES--.3%
Commonwealth Edison Co.
7.375%, 01/15/2004 850 872
7.00%, 07/01/2005 250 250
GTE North, Inc.,
6.90%, 11/01/2008 1,350 1,360
Yorkshire Power Finance,
6.496%, 02/25/2008 450 427
---------------------------------------------------------
2,909
---------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--10.7%
(Cost: $101,079) 97,117
---------------------------------------------------------
MONEY MARKET INSTRUMENT--.7%
Yield--5.15%
Due--July 1999
(Cost: $6,487) 6,487 6,487
---------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $775,292) $907,208
---------------------------------------------------------
</TABLE>
NOTES TO KEMPER TOTAL RETURN PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $775,292,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $149,057,000, the gross
unrealized depreciation was $17,141,000 and the net unrealized appreciation on
investments was $131,916,000.
See accompanying Notes to Financial Statements.
50
<PAGE> 53
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER HIGH YIELD PORTFOLIO
Portfolio of Investments at June 30, 1999 (Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
CORPORATE OBLIGATIONS AMOUNT VALUE
<S> <C> <C>
COMMUNICATIONS--24.1%
21st Century
Telecommunications, Step-up
Coupon, 0% to 02/15/2003,
12.250% to 02/15/2008 $ 1,130 $ 486
Allegiance Telecom, Inc.,
Step-up Coupon, 0% to
2/15/2003, 11.750% to
2/15/2008 1,790 1,101
Allegiance Telecom, Inc.,
12.875%, 05/15/2008 1,900 2,042
American Cellular Corp.,
10.500%, 05/15/2008 2,240 2,285
Bresnan Communications
Company, 8.002%, 02/01/2009 330 327
Call-Net Enterprises, Step-up
Coupon, 0% to 08/15/2002,
9.270% to 08/15/2007 1,050 667
Call-Net Enterprises, Inc.,
Step-up Coupon, 0% to
8/15/2003, 8.940% to
8/15/2008 1,360 775
Call-Net Enterprises, Inc.,
9.375%, 05/15/2009 710 671
Call-Net Enterprises, Inc.,
Step-up Coupon, 0% to
5/15/2004, 10.800% to
5/15/2009 840 462
ComCast Cellular Holdings
Corp., 9.500%, 05/01/2007 1,870 2,094
Communications Cellular,
warrants 2,200 143
Communications Cellular, Step-
up Coupon, 0% to 09/29/2000,
14.125% to 03/01/2005 2,400 1,440
Crown Castle International
Corp., Step-up Coupon, 0% to
11/15/2002, 10.625% to
11/15/2007 2,500 1,750
Crown Castle International
Corp., 9.000%, 05/12/2011 300 293
Dobson Communication Corp.,
11.750%, 04/15/2007 2,520 2,665
Dolphin Telecom, PLC, Step-up
Coupon, 0% to 05/15/2004,
14.000% to 05/15/2009 1,240 595
Econophone, Inc., Step-up
Coupon, 0% to 02/15/2003,
11.000%, to 02/15/2008 680 360
Econophone, Inc., warrants 1,260 107
Esprit Telecom Group, PLC,
11.500%, 12/15/2007 1,625 1,714
Esprit Telecom Group, PLC,
10.875%, 06/15/2008 800 832
Global Crossing, Ltd., 9.625%,
05/15/2008 990 1,030
Global Telesystems Group,
9.875%, 02/15/2005 930 902
ICG Holdings, Inc., Step-up
Coupon, 0% to 09/15/2000,
13.500% to 09/15/2005 6,380 5,678
Impsat Corp., 12.375%,
06/15/2008 1,805 1,489
Intermedia Communications,
Step-up Coupon, 0% to
07/15/2002, 11.250% to
07/15/2007 $ 2,570 $ 1,838
Intermedia Communications of
Florida, Inc., Step-up
Coupon, 0% to 05/15/2001,
12.500% to 05/15/2006 2,180 1,798
Intermedia Communications of
Florida, Inc., 11.250%,
08/01/2006 1,300 1,446
Intermedia Communications of
Florida, Inc., warrants 1,140 74
IPC Information Systems, Inc.,
Step-up Coupon, 05/01/2001,
10.875% to 05/01/2008 3,840 2,803
KMC Telecom Holdings, Inc.,
Step-up Coupon, 0% to
02/15/2003, 12.500% to
02/15/2008 3,280 1,706
KMC Telecom Holdings, Inc.,
13.500%, 05/15/2009 1,280 1,280
KMC Telecom Holdings, Inc.,
warrants 1,950 8
Level 3 Communications,
9.125%, 05/01/2008 2,690 2,656
Long Distance Direct Holdings,
Inc., 12.250%, 04/15/2008 1,300 715
McLeod USA, Inc., Step-up
Coupon, 0% to 03/01/2002,
10.500% to 03/01/2007 2,420 1,851
McLeodUSA, Inc., 9.250%,
07/15/2007 1,040 1,022
McLeodUSA, Inc., 9.500%,
11/01/2008 1,400 1,393
Metromedia Fiber Network,
Inc., 10.000%, 11/15/2008 2,000 2,050
MetroNet Communications Corp.,
Step-up Coupon, 0% to
12/15/2003, 9.950% to
6/15/2008 2,390 1,769
Metronet Communications,
08/15/2007, warrant 550 44
Metronet Communications,
12.000%, 08/15/2007 550 635
Metronet Communications,
Step-up Coupon, 0% to
11/01/2002, 10.750% to
11/01/2007 780 608
Metronet Communications,
10.625%, 11/01/2008 1,410 1,590
MGC Communications, 13.000%,
10/01/2004 2,000 1,820
Millicom International
Cellular, SA, Step-up
Coupon, 0% to 06/01/2001,
13.500%, 06/01/2006 2,960 2,161
Netia Holdings, 10.250%,
11/01/2007 1,125 967
Netia Holdings, Step-up
Coupon, 0% to 11/01/2001,
11.250% to 11/01/2007 1,395 865
</TABLE>
51
<PAGE> 54
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMUNICATIONS--CONTINUED
Nextel Communications, 9.750%,
08/15/2004 $ 3,100 $ 3,147
Nextel Communications, Step-up
Coupon, 0% to 09/15/2002,
10.650% to 09/15/2007 1,225 897
Nextel Communications, Step-up
Coupon, 0% to 10/31/2002,
9.750% to 10/31/2007 940 656
Nextel Communications, Inc.,
Step-up Coupon, 0%,
02/15/2003, 9.950% to
02/15/2008 2,760 1,911
Nextlink Communications, Inc.,
12.500%, 04/15/2006 950 1,017
NEXTLINK Communications, Inc.,
Step-up Coupon, 0% to
4/15/2003, 9.450% to
4/15/2008 920 559
Nextlink Communications,
10.750%, 11/15/2008 2,000 2,050
Nextlink Communications,
Step-up Coupon, 0% to
06/01/2004, 12.250% to
06/01/2009 4,000 2,350
PSINet, Inc., 11.500%,
11/01/2008 1,670 1,754
PTC International Finance,
Step-up Coupon, 0% to
07/01/2002, 10.750% to
07/01/2007 1,810 1,312
Pinnacle Holdings, Inc.,
Step-up Coupon, 0% to
3/1/2003, 10.000% to
3/15/2008 540 316
Price Communications Wireless,
9.125%, 12/15/2006 2,490 2,515
Primus Telecommunications
Group, Inc., warrants 1,000 20
Primus Telecommunications
Group, Inc. 11.750%,
08/01/2004 1,460 1,482
Primus Telecommunications
Group, Inc. 9.875%,
05/15/2008 160 151
Primus Telecommunications
Group, Inc., 11.250%,
01/15/2009 680 690
RCN Corp., 10.000%, 10/15/2007 1,080 1,091
RCN Corp., Step-up Coupon, 0%
to 07/01/2003, 11.000% to
07/01/2008 900 558
Rogers Cantel, 9.750%,
06/01/2016 2,000 2,220
Rogers Cantel Mobile
Communications, Inc.,
9.375%, 06/01/2008 1,120 1,159
Rogers Communications, Inc.,
8.875%, 07/15/2007 630 635
SBA Communications Corp.,
Step-up Coupon, 0% to
03/01/2003, 12.000% to
03/01/2008 1,500 863
Tele1 Europe, BV, 13.000%,
05/15/2009 360 377
Telecorp PCS, Inc., Step-up
Coupon, 0% to 04/01/2004,
11.625% to 04/15/2009 610 342
TeleWest Communications PLC,
Step-up Coupon, 0% to
10/01/2000, 11.000% to
10/01/2007 $ 2,895 $ 2,576
Teligent, Inc., 11.500%,
12/01/2007 800 790
Teligent, Inc., Step-up
Coupon, 0% to 03/01/2003,
11.500% to 03/01/2008 1,000 590
TriTel Pcs, Inc., Step-up
Coupon, 0% to 05/15/2004,
12.750% to 05/15/2009 1,090 594
Triton Communications, LLC,
Step-up Coupon, 05/01/2003,
11.000% to 05/01/2008 3,520 2,279
U.S. Xchange, LLC, 15.000%,
07/01/2008 1,140 1,174
USA Mobile Communications
Holdings, Inc., 14.000%,
11/01/2004 1,190 1,136
Versatel Telecom, 13.250%,
05/15/2008 1,430 1,484
Versatel Telecom, warrants 1,430 72
Viatel, Inc., 11.250%,
04/15/2008 880 898
Viatel, Inc., Step-Up Coupon,
0% to 04/15/2003, 12.500% to
04/15/2008 1,880 1,184
Western Wireless Corp.,
10.500%, 02/01/2007 1,200 1,287
Winstar Equipment II, 12.500%,
03/15/2004 760 790
-----------------------------------------------------
103,933
CONSTRUCTION--4.3%
Building Materials, 8.000%,
12/01/2008 1,490 1,389
Capital Pacific Holdings,
warrants 3,634 2
Del Webb Corp., 9.750%,
01/15/2008 1,300 1,267
Desa International, 9.875%,
12/15/2007 1,440 1,066
Dimac Corp., 12.500%,
10/01/2008 1,540 924
Falcon Building Products,
Inc., 9.500%, 06/15/2007 1,670 1,586
Falcon Building Products,
Inc., Step-up Coupon, 0% to
06/15/2002, 10.500% to
06/15/2007 140 94
Forecast Group, LP, 11.375%,
12/15/2000 1,025 1,017
Fortress Group, 13.750%,
05/15/2003 880 660
Hovnanian Enterprises, 9.750%,
06/01/2005 560 546
Hovnanian Enterprises, Inc.,
9.125%, 05/01/2009 1,090 1,041
Kevco, Inc., 10.375%,
12/01/2007 1,765 1,227
Nortek, Inc., 9.875%,
03/01/2004 1,430 1,434
Nortek, Inc., 9.125%,
09/01/2007 1,300 1,297
</TABLE>
52
<PAGE> 55
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CONSTRUCTION--CONTINUED
Ryland Group, Inc., 8.250%,
04/01/2008 $ 1,170 $ 1,100
Terex Corp., 8.875%,
04/01/2008 3,180 2,957
Waxman Industries, Inc.,
warrants 52,274 3
Werner Holdings, Inc.,
10.000%, 11/15/2007 850 842
-----------------------------------------------------
18,452
CONSUMER DISCRETIONARY--14.0%
Advantica Restaurant Co.,
11.250%, 01/15/2008 3,185 3,057
AFC Enterprises, 10.250%,
05/15/2007 3,900 3,958
AMF Bowling, Inc., 10.875%,
06/15/2006 2,370 1,955
AMF Bowling, Inc., Step-up
Coupon, 0% to 03/15/2001,
12.250%, 03/15/2006 2,320 1,438
Ameriking, 10.750%, 12/01/2006 1,020 1,020
Avis Rent A Car, 11.000%,
05/01/2009 1,050 1,062
Avondale Mills, 10.250%,
05/01/2006 1,310 1,271
Carrols Corporation, 9.500%,
12/01/2008 1,390 1,317
Cinemark USA, Inc., 8.500%,
08/01/2008 1,300 1,222
Cinemark USA, Inc., Series D,
9.625%, 08/01/2008 260 259
Cole National Group, Inc.,
8.625%, 08/15/2007 910 783
Corporate Express, Inc.,
4.500%, 07/01/2000 2,770 2,583
Eldorado Resorts, 10.500%,
08/15/2006 2,010 2,080
Finlay Enterprises, Inc.,
9.000%, 05/01/2008 550 525
Finlay Fine Jewelry Co.,
8.375%, 05/01/2008 1,240 1,197
Florida Panthers Holdings,
9.900%, 04/15/2009 710 674
Galey & Lord, Inc., 9.125%,
03/01/2008 1,960 1,254
Guitar Center Management,
11.000%, 07/01/2006 880 893
Harvey's Casino Resorts,
10.625%, 06/01/2006 960 1,001
Hedstrom Corp., 10.000%,
06/01/2007 1,010 879
Herff Jones, Inc., 11.000%,
08/15/2005 900 959
Hines Horticulture, Inc.,
11.750%, 10/15/2005 2,096 2,232
Hollywood Entertainment Corp.,
10.625%, 08/15/2004 1,060 1,039
Imperial Home Decor Group,
Inc., 11.000%, 03/15/2008 $ 1,050 $ 756
Iron Age Holdings Corp.,
9.875%, 05/01/2008 1,000 780
Iron Age Holdings Corp., Step-
up Coupon, 0% to 05/01/2003,
12.125% to 05/01/2009 570 177
J. Crew Group, 10.375%,
10/15/2007 2,185 2,141
J. Crew Group, Step-up Coupon,
0% to 10/15/2002, 13.125% to
10/15/2008 3,200 1,824
Krystal, Inc., 10.250%,
10/01/2007 2,210 2,315
Mohegan Tribal Gaming
Authority, 8.750%,
01/01/2009 1,600 1,592
National Vision Association,
Ltd., 12.750%, 10/15/2005 2,180 2,158
Pamida Holdings, 11.750%,
03/15/2003 1,610 1,674
Perkins Finance, LP, 10.125%,
12/15/2007 2,250 2,340
Phillips-Van Heusen Corp.,
9.500%, 05/01/2008 1,380 1,366
Pillowtex Corp., 9.000%,
12/15/2007 500 471
Players International,
10.875%, 04/15/2005 880 926
Premier Parks, Inc., 12.000%,
08/15/2003 780 835
Regal Cinemas, Inc., 9.500%,
06/01/2008 1,850 1,739
Regal Cinemas, Inc., 8.625%,
12/15/2010 600 546
Restaurant Co., Step-up
Coupon, 0% to 05/15/2003,
11.250% to 05/15/2008 1,420 923
Sealy Mattress Co., 9.875%,
12/15/2007 542 531
Sealy Mattress Co., Step-up
Coupon, 0% to 12/15/2002,
10.875% to 12/15/2007 910 592
Specialty Retailers, Inc.,
8.500%, 07/15/2005 540 400
Specialty Retailers, Inc.,
9.000%, 07/15/2007 2,200 1,364
Station Casinos, Inc.,
10.125%, 03/15/2006 860 892
Station Casinos, Inc., 9.750%,
04/15/2007 680 699
Vail Resorts, Inc., 8.750%,
05/15/2009 680 661
-----------------------------------------------------
60,360
</TABLE>
53
<PAGE> 56
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CONSUMER STAPLES--1.3%
Agrilink Foods, Inc., 11.875%,
11/01/2008 $ 1,630 $ 1,683
BWAY Corp., 10.250%,
04/15/2007 870 905
Dyersburg Corp., 9.750%,
09/01/2007 1,260 517
Jafra Cosmetics International,
Inc.,
11.750%, 05/01/2008 1,620 1,393
Mastellone Hermonos, 11.750%,
04/01/2008 550 390
Pathmark Stores, Inc., 9.625%,
05/01/2003 760 773
-----------------------------------------------------
5,661
DURABLES--1.4%
Accuride Corp., 9.250%,
02/01/2008 760 747
Airxcel, 11.000%, 11/15/2007 1,350 1,333
BE Aerospace, Inc., 9.500%,
11/01/2008 770 781
Decrane Aircraft, 12.000%,
09/30/2008 1,350 1,357
L-3 Communications Corp.,
10.375%, 05/01/2007 450 475
Transdigm, Inc., 10.375%,
12/01/2008 1,420 1,406
-----------------------------------------------------
6,099
ENERGY--2.4%
Benton Oil & Gas Co., 11.625%,
05/01/2003 1,275 861
Continental Resources, Inc.,
10.250%, 08/01/2008 1,660 1,216
Gulfmark Offshore, Inc.,
8.750%, 2008 770 726
Key Energy Services, Inc.,
14.000%, 01/15/2009 690 714
Ocean Energy, 9.750%,
10/01/2006 300 312
Ocean Energy, Inc., 10.375%,
10/15/2005 850 901
Pen Holdings, Inc., 9.875%,
06/15/2008 1,205 1,205
Pride International, Inc.,
10.000%, 06/01/2009 690 700
R&B Falcon Corp., 11.000%,
03/15/2006 720 742
R&B Falcon Corp., 9.500%,
12/15/2008 1,420 1,278
RAM Energy, 11.500%,
02/15/2008 600 312
Stone Energy Corp., 8.750%,
09/15/2007 1,290 1,264
-----------------------------------------------------
10,231
FINANCIAL--.7%
Intertek Finance, PLC,
10.250%, 11/01/2006 940 897
Spectrasite Holdings, Step-up
Coupon, 0% to 07/15/2003,
12.000% to 07/15/2008 2,290 1,443
Spectrasite Holdings, Step-up
Coupon, 0% to 04/01/2004,
11.250% to 04/15/2009 1,230 698
-----------------------------------------------------
3,038
HEALTH--2.3%
Abbey Healthcare Group, Inc.,
9.500%, 11/01/2002 1,640 1,624
ALARIS Medical Systems, Inc.,
Step-up Coupon, 0% to
8/01/2003, 11.125% to
08/01/2008 1,150 621
Dade International, Inc.,
11.125%, 05/01/2006 1,730 1,825
Magellan Health Services,
Inc., 9.000%, 02/15/2008 2,410 2,073
Mariner Post-Acute Network,
Inc., 10.500%, 08/01/2006 2,060 1,885
Mariner Post-Acute Network,
Inc., Step-up Coupon, 0% to
11/01/2002, 10.500% to
11/01/2007 4,340 542
MEDIQ, Inc., 11.000%,
06/01/2008 780 608
(a) Vencor, Inc., 9.875%,
05/01/2005 1,850 555
-----------------------------------------------------
9,733
MANUFACTURING--16.0%
Agriculture, Mining and
Chemicals, Inc., 10.750%,
09/30/2003 2,070 2,008
American Standard Companies,
Inc., 9.250%, 12/01/2016 1,190 1,214
Atlantis Group, Inc., 11.000%,
02/15/2003 1,735 1,770
Berry Plastics Corp., 12.250%,
04/15/2004 1,330 1,370
BPC Holdings Corp., 12.500%,
06/15/2006 750 731
Consolidated Container Capital,
Inc., 10.125%, 07/15/2009 480 487
Consumers International,
10.250%, 04/01/2005 1,330 1,347
Day International Group, Inc.,
11.125%, 06/01/2005 1,480 1,573
Delco Remy International,
10.625%, 08/01/2006 1,380 1,421
Doman Industries, Ltd.,
8.750%, 03/15/2004 390 242
Doman Industries, Ltd.,
9.250%, 11/15/2007 480 274
Eagle-Picher Holdings, Inc.,
9.375%, 03/01/2008 1,810 1,733
Fairchild Corp., 10.750%,
04/09/2007 3,030 2,985
Foamex, LP, 13.500%,
08/15/2005 1,240 1,178
Foamex, LP, warrants 940 2
</TABLE>
54
<PAGE> 57
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MANUFACTURING--CONTINUED
Fonda Group, 9.500%,
03/01/2007 $ 1,120 $ 974
Gaylord Container Corp.,
9.750%, 06/15/2007 2,360 2,266
Gaylord Container Corp.,
9.875%, 02/15/2008 1,770 1,549
Golden Northwest Aluminum, Inc.,
12.000%, 12/15/2006 1,090 1,128
Graham Packaging Co., 8.750%,
01/15/2008 580 551
Graham Packaging Co., Step-up
Coupon, 0% to 01/15/2003,
10.750% to 01/15/2009 580 383
Grove Holdings LLC, Step-Up
Coupon, 0% to 05/01/2003,
11.625% to 05/01/2009 340 102
Grove Investors, PIK, 14.500%,
05/01/2010 750 375
GS Technologies, 12.000%,
09/01/2004 1,090 899
GS Technologies, 12.250%,
10/01/2005 1,340 1,099
Hayes Wheels International,
Inc., 11.000%, 07/15/2006 1,750 1,899
Huntsman Package, 11.750%,
12/01/2004 2,650 2,822
Knoll, Inc.,
10.875%, 03/15/2006 1,456 1,602
Millar Western Forest Products,
Ltd., 9.875%, 05/15/2008 2,590 2,505
Motors and Gears, Inc.,
10.750%, 11/15/2006 640 643
NL Industries, Inc., Senior
Note, 11.750%, 10/15/2003 5,780 6,040
Norampac, Inc., 9.500%,
02/01/2008 1,750 1,794
Plainwell, Inc., 11.000%,
03/01/2008 4,445 3,556
Printpack, Inc., 10.625%,
08/15/2006 1,440 1,339
Riverwood International Corp.,
10.250%, 04/01/2006 810 822
Riverwood International Corp.,
10.875%, 04/01/2008 7,990 7,790
SF Holdings Group, Inc., Step-
up Coupon, 0% to 03/15/2003,
12.750% to 03/15/2008 1,430 472
Spinnaker Industries, 10.750%,
10/15/2006 1,450 1,044
Stone Container Corp.,
12.250%, 04/01/2002 1,550 1,554
Stone Container Corp.,
10.750%, 10/01/2002 1,000 1,035
Stone Container Corp.,
11.500%, 08/15/2006 1,585 1,712
Terex Corp., 8.875%,
04/01/2008 1,110 1,032
Terra Industries, Inc.,
10.500%, 06/15/2005 870 844
Texas Petrochemicals, 11.125%,
07/01/2006 710 639
U.S. Can Corp., 10.125%,
10/15/2006 $ 1,845 $ 1,928
Venture Holdings,
11.000%, 2007 250 255
-----------------------------------------------------
68,988
MEDIA--16.5%
21st Century Telecom Group,
Inc., warrants 200 4
Adelphia Communications Corp.,
7.875%, 05/01/2009 550 510
American Lawyer Media, Inc.,
Step-up Coupon, 0% to
12/15/2002, 12.250% to
12/15/2008 1,020 671
Australis Holdings, Step-up
Coupon, 0% to 14.000%,
11/01/2000 114 87
(a) Australis Holdings, Step-up
Coupon, 0% to 11/01/2000,
15.000%, 11/01/2002 3,660 55
Avalon Cable Holdings, 9.375%,
12/01/2008 280 285
Avalon Cable Holdings, Step-up
Coupon, 0% to 12/01/2003,
11.875%, 12/01/2008 1,870 1,234
Big Flower Press, 8.875%,
07/01/2007 2,390 2,258
Bresnan Communications Co.,
Step-up Coupon, 0% to
02/01/2004, 9.500% to
02/01/2009 690 448
Cablevision Systems Corp.,
7.875%, 12/15/2007 2,700 270
Cablevision Systems Corp.,
8.125%, 08/15/2009 1,010 1,028
Capstar Broadcasting, Step-up
Coupon, 0% to 02/01/2002,
12.70% to 02/01/2009 2,570 2,159
Century Communications Corp.,
9.500%, 03/01/2005 300 307
Century Communications Corp.,
8.375%, 12/15/2007 550 535
Chancellor Media Corp.,
8.125%, 12/15/2007 1,180 1,145
Chancellor Media Corp.,
9.000%, 10/01/2008 480 490
Chancellor Media Corp.,
8.000%, 11/01/2008 1,900 1,862
Charter Communication
Holdings, LLC, 8.250%,
04/01/2007 4,370 4,162
Charter Communication
Holdings, LLC, Step-up
Coupon, 0% to 4/1/2004,
9.920% to 4/1/2011 4,590 2,823
Comcast UK Cable Partners,
Ltd., Step-up Coupon, 0% to
11/15/2000, 11.200% to
11/15/2007 3,130 2,809
CSC Holdings, Inc., 9.250%,
11/01/2005 1,000 1,037
CSC Holdings, Inc., Senior
Note, 7.250%, 07/15/2008 500 480
</TABLE>
55
<PAGE> 58
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MEDIA--CONTINUED
CSC Holdings, Inc., 9.875%,
02/15/2013 $ 1,145 $ 1,242
CSC Holdings, Inc., 10.500%,
05/15/2016 1,640 1,872
Diamond Cable Communications,
PLC, Step-up Coupon, 0% to
09/30/1999, 13.250% to
09/30/2004 1,990 2,080
Diva Systems Corp., Step-up
Coupon, 0% to 03/01/2003,
11.625% to 03/01/2008 2,080 562
EchoStar DBS Corp., 9.250%,
02/01/2006 1,300 1,316
EchoStar DBS Corp., 9.375%,
02/01/2009 2,230 2,263
Falcon Holding Group, Step-up
Coupon, 0% to 4/15/2003,
9.285% to 4/15/2010 1,840 1,293
Falcon Holding Group, LP,
8.375%, 04/15/2010 3,360 3,326
Frontiervision, 11.000%,
10/15/2006 860 952
Frontiervision, 11.875%, Step-
up Coupon, 0% to 09/15/2001,
11.875% to 09/15/2007 1,110 966
Interep National Radio Sales,
Inc., 10.000%, 07/01/2008 1,060 1,079
NTL, Inc., 11.500%, 10/01/2008 4,540 4,960
NTL, Inc., Step-up coupon,
0% to 10/01/2003, 12.375% to
10/01/2008 620 418
NTL, Inc., Step-up Coupon,
0% to 02/01/2001, 10.500% to
02/01/2009 680 592
Ono Financial, PLC, 13.000%,
05/01/2009 1,650 1,699
Outdoor Systems, Inc., 9.375%,
10/15/2006 2,395 2,548
Outdoor Systems, Inc., 8.875%,
06/15/2007 1,130 1,179
Radio Unica Corp., Step-up
Coupon, 0% to 08/01/2002,
11.750% to 08/01/2006 1,500 863
Renaissance Media Group,
Step-Up, 0%, 04/15/2003
10.000%, 04/15/2008 1,020 724
Salem Communications Corp.,
9.500%, 10/01/2007 770 808
SFX Entertainment, Inc.,
9.125%, 02/01/2008 3,245 3,140
SFX Entertainment, Inc.,
9.125%, 12/01/2008 2,300 2,225
Sinclair Broadcast Corp.,
Inc., 9.000%, 07/15/2005 350 344
Sinclair Broadcasting Group,
Inc., 8.750%, 12/15/2007 940 921
Star Choice, 13.000%,
12/15/2005 750 780
TeleWest Communications, PLC,
9.625%, 10/01/2006 710 724
TeleWest Communications, PLC,
11.250%, 11/01/2008 1,650 1,864
Telewest Communications, PLC,
Step-up Coupon, 0% to
04/15/2004, 9.250% to
04/15/2009 $ 500 $ 335
Transwestern Publishing,
9.625%, 11/15/2007 950 931
Transwestern Publishing,
Step-up Coupon, 0% to
11/15/2002, 11.875% to
11/15/2008 420 290
UIH Australia Pacific, Inc.,
warrants 750 1
United Artists Theatre
Circuit, Inc., 9.750%,
04/15/2008 3,320 2,490
United International Holdings,
Step-up Coupon, 0% to
02/15/2003, 10.750% to
02/15/2008 2,900 1,929
-----------------------------------------------------
71,375
METALS AND MINERALS--2.8%
Bar Technologies, 13.500%,
04/01/2001 1,060 1,092
Bar Technologies, warrants 750 15
Euramax International, PLC,
11.250%, 10/01/2006 1,470 1,492
Metal Management, Inc.,
10.000%, 05/15/2008 1,560 1,264
Metals USA, Inc., 8.625%,
02/15/2008 1,430 1,330
MMI Products, Inc., 11.250%,
04/15/2007 1,025 1,051
Renco Metals, Inc., Senior
Note, 11.500%, 07/01/2003 725 736
Renco Steel Holdings Co.,
Series B, 10.875%,
02/01/2005 2,330 2,015
United Rentals, Inc., 9.250%,
01/15/2009 1,940 1,920
Wells Aluminum Corp., 10.125%,
06/01/2005 1,400 1,393
-----------------------------------------------------
12,308
SERVICE INDUSTRIES--4.4%
Coinmach Corp., 11.750%,
11/15/2005 4,890 5,269
(a) Color Tile, Inc., 10.750%,
12/15/2001 1,470 15
Doskocil Manufacturing Co.,
10.125%, 09/15/2007 730 372
ImPac Group, Inc.,
10.125%,03/15/2008 4,630 4,398
Integrated Electrical
Services, Inc., 9.375%,
02/01/2009 1,950 1,926
Kindercare Learning Centers,
Inc., 9.500%, 02/15/2009 2,550 2,435
La Petite Academy, Inc.,
10.000%, 05/15/2008 2,260 2,153
PSINet, Inc., 10.000%,
02/15/2005 1,160 1,148
Spincycle, Inc., Step-up
Coupon, 0% to 05/01/2001,
12.750% to 05/01/2005 1,520 441
United Rentals, Inc.,
9.000%, 04/01/2009 980 963
-----------------------------------------------------
19,120
</TABLE>
56
<PAGE> 59
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER
OF SHARES VALUE
<S> <C> <C>
TECHNOLOGY--1.0%
Axiohm Transaction Solutions,
Inc.,
9.750%, 10/01/2007 $ 620 $ 403
Cherokee International Corp.,
10.500%, 05/01/2009 710 699
Panavision Inc., Step-Up
Coupon, 0% to 2/1/2002,
9.625% to 2/1/06 2,680 1,635
Verio, Inc.,
11.250%, 12/01/2008 310 325
Viasystems, Inc., 9.750%,
06/01/2007 1,380 1,208
-----------------------------------------------------
4,270
TRANSPORTATION--1.5%
Petro Stopping Centers,
10.500%, 02/01/2007 2,520 2,646
TFM, S.A. de C.V., 10.250%,
06/15/2007 1,130 1,006
Trans World Airlines, Inc.,
11.375%, 03/01/2006 960 576
Transtar Holdings, Inc.,
Step-up Coupon, 0% to
12/15/1999, 13.375% to
12/15/2003 631 623
Travelcenters America,
10.250%, 04/01/2007 1,790 1,794
-----------------------------------------------------
6,645
TOTAL CORPORATE OBLIGATIONS--92.7%
(Cost: $426,763) 400,213
COMMON AND PREFERRED STOCK
21st Century Telecom Group,
Inc., preferred 235shs 117
Benedek Communications Corp.,
warrants 5,000 10
Clark USA, PIK, preferred 3,056 199
Crown American Realty Trust,
preferred 25,070 1,181
Diva Systems Corp., warrants,
expire, 03/01/2008 6,240 75
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMON AND PREFERRED STOCK--CONTINUED
Dobson Communications, PIK,
preferred 858 $ 781
(a) Eagle-Picher Holdings, Inc.,
preferred 170 863
(a) Gaylord Container Corp. 92,250 732
Intermedia, warrants 4,851 78
Long Distance Direct Holdings,
Inc., warrants 1,300 3
(a) MGC Communications 6,954 181
Nextel Communications, PIK,
preferred 1,686 1,673
(a) SF Holdings Group, PIK,
preferred 3 7
(a) SF Holdings Group, PIK,
preferred 30 66
Sinclair Capital, preferred 13,000 1,359
Star Choice Communications,
Inc., warrants (expire
12/15/05) 17,370 42
(a) Viatel, Inc 11,268 633
-----------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK--1.9%
(Cost: $7,299) 8,000
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99 $ 1,224 1,224
Commercial paper
Yield--5.07% to 5.09%
Due--July 1999
Countrywide Home Loan 7,000 6,993
Other 14,900 14,882
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--5.4%
(Cost: $23,099) 23,099
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $457,161) $431,312
-----------------------------------------------------
</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) Repurchase agreements are fully collateralized by the U.S. Treasury or
Government securities. The collateral is monitored daily by the portfolio so
that its market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $457,161,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $7,676,000, the gross
unrealized depreciation was $33,525,000 and the net unrealized depreciation on
investments was $25,849,000.
See accompanying Notes to Financial Statements.
57
<PAGE> 60
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER GROWTH PORTFOLIO
Portfolio Of Investments At June 30, 1999 (Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--2.4%
Frontier Corp. 126,100 $ 7,440
(a) MCI WorldCom, Inc. 128,400 11,074
----------------------------------------------------
18,514
CONSUMER DISCRETIONARY--15.2%
(a) Consolidated Stores Corp. 428,600 11,572
Costco Companies, Inc. 118,700 9,503
Dayton Hudson Corp. 129,600 8,424
(a) Electronic Arts, Inc. 154,200 8,365
Gap, Inc. 151,500 7,632
Hasbro, Inc. 194,100 5,423
Home Depot, Inc. 334,200 21,535
McDonald's Corp. 215,500 8,903
Wal-Mart Stores, Inc. 330,900 15,966
----------------------------------------------------
97,323
CONSUMER STAPLES--10.3%
Albertson's, Inc. 50,000 2,578
Coca-Cola Co., Inc. 203,800 12,738
Colgate-Palmolive Co. 118,400 11,692
Estee Lauder Companies "A" 222,800 11,168
Kroger Co. 207,600 5,800
PepsiCo, Inc. 164,400 6,360
Philip Morris Companies,
Inc. 89,500 3,597
Procter & Gamble Co. 131,600 11,745
----------------------------------------------------
65,678
DURABLES--7.2%
(a) Cisco Systems, Inc. 427,100 27,548
Lucent Technologies, Inc. 182,100 12,280
Nokia AB Oy "A" 66,700 6,107
----------------------------------------------------
45,935
FINANCIAL--5.6%
American International
Group, Inc. 119,400 13,977
Federal Home Loan Mortgage
Corp. 104,300 6,049
Federal National Mortgage
Association 133,100 9,101
Morgan Stanley, Dean Witter
Discover Co. 69,100 7,083
----------------------------------------------------
36,210
HEALTH--16.4%
Eli Lilly & Co. 131,700 9,433
IMS Health, Inc. 173,100 5,409
Johnson & Johnson 72,000 7,056
Medtronic, Inc. 207,635 16,170
Merck & Co., Inc. 233,200 17,257
Pfizer, Inc. 189,000 20,743
Schering-Plough Corp. 173,000 9,169
SmithKline Beecham, PLC 135,400 8,945
Warner-Lambert Co. 153,000 10,614
----------------------------------------------------
104,796
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
MANUFACTURING--8.7%
General Electric Co. 241,400 $ 27,278
(a) QUALCOMM, Inc. 45,800 6,572
Textron, Inc. 118,300 9,737
Tyco International, Ltd. 127,430 12,074
----------------------------------------------------
55,661
MEDIA--8.2%
(a) AT&T Corp.--Liberty Media
Group 181,600 6,674
(a) Clear Channel
Communications, Inc. 215,700 14,870
(a) Infinity Broadcasting Corp. 253,700 7,548
Omnicom Group, Inc. 124,600 9,968
(a) Outdoor Systems, Inc. 98,500 3,595
Time Warner, Inc. 36,200 2,662
(a) Univision Communication,
Inc. 114,300 7,544
----------------------------------------------------
52,861
SERVICE INDUSTRIES--4.7%
(a) America Online, Inc. 146,400 16,177
Charles Schwab Corp. 74,200 8,153
Galileo International, Inc. 109,900 5,873
----------------------------------------------------
30,203
TECHNOLOGY--18.3%
(a) Applied Materials, Inc. 139,000 10,269
(a) EMC Corp. 178,200 9,801
Intel Corp. 369,600 21,991
International Business
Machines Corp. 99,600 12,873
Linear Technology Corp. 95,600 6,429
(a) Microsoft Corp. 399,200 36,003
(a) Momentum Business
Applications, Inc. 3,428 24
Motorola, Inc. 67,200 6,367
(a) Sun Microsystems, Inc. 191,900 13,217
----------------------------------------------------
116,974
----------------------------------------------------
TOTAL COMMON STOCKS--97.5%
(Cost: $493,374) 624,155
----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement State
Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99 $ 1,409 1,409
Commercial paper
Yield--5.07% to 5.09%
Due--July 1999 14,500 14,480
----------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--2.5%
(Cost: $15,889) 15,889
----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $509,263) $640,044
----------------------------------------------------
</TABLE>
58
<PAGE> 61
PORTFOLIO OF INVESTMENTS
NOTES TO KEMPER GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreements are fully collateralized by the U.S. Treasury or
Government securities. The collateral is monitored daily by the portfolio so
that its market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $509,263,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $140,648,000, the gross
unrealized depreciation was $9,867,000 and the net unrealized appreciation on
investments was $130,781,000.
See accompanying Notes to Financial Statements.
59
<PAGE> 62
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER GOVERNMENT SECURITIES PORTFOLIO
(Portfolio of Investments at June 30, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COUPON PRINCIPAL
GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOVERNMENT Pass-through Certificates 6.50% 2024-2029 $24,348 $ 23,492
NATIONAL MORTGAGE 7.00 2011-2029 18,056 17,873
ASSOCIATION--50.2% 7.50 2022-2029 13,462 13,625
(Cost: $67,946) 8.00 2016-2025 9,474 9,774
8.50 2016-2027 894 938
9.00 2016-2027 733 780
9.50 2013-2022 302 324
10.00 2016 266 294
----------------------------------------------------------------------------
67,100
- -----------------------------------------------------------------------------------------------------------------------
FEDERAL HOME Pass-through Certificates 6.50 2029 2,198 2,129
LOAN MORTGAGE 7.00 2024-2029 11,336 11,257
CORPORATION--11.2% 7.50 2022-2028 976 988
(Cost: $15,027) 8.00 2017-2022 549 566
8.50 2026 21 22
----------------------------------------------------------------------------
14,962
- -----------------------------------------------------------------------------------------------------------------------
U.S. TREASURY Notes 5.25 2001 4,400 4,379
SECURITIES--10.9% Bonds 10.375 2009 750 896
(Cost: $14,740) 12.50 2014 1,300 1,914
11.25 2015 4,900 7,335
----------------------------------------------------------------------------
14,524
- -----------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE Pass-through Certificates 6.00 2028-2029 1,689 1,591
ASSOCIATION--4.3% 6.375 2009 500 498
(Cost: $5,845) 6.50 2028-2029 2,435 2,352
7.00 2013 700 704
7.50 2025 261 264
8.00 2024 358 368
----------------------------------------------------------------------------
5,777
- -----------------------------------------------------------------------------------------------------------------------
CANADIAN PROVINCIAL Province of Ontario 7.625 2004 500 527
OBLIGATIONS--.8% Province of Quebec 8.625 2005 500 544
(Cost: $1,094) ----------------------------------------------------------------------------
1,071
----------------------------------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--77.4%
(Cost: $104,652) 103,434
----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
(A)CORPORATE American Express Master Trust 7.60 2002 2,500 2,567
OBLIGATIONS--5.3% Chase Credit Co. 5.55 2003 2,500 2,485
(Cost: $7,113) Equitable Life 6.95 2005 500 499
Ford Motor Credit 8.00 2002 500 521
Sears Roebuck Acceptance Corp. 6.75 2005 500 499
Southwestern Bell Telephone 6.625 2005 500 503
----------------------------------------------------------------------------
7,074
</TABLE>
60
<PAGE> 63
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
TYPE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET (b)Repurchase agreement
INSTRUMENTS State Street Bank and Trust Company,
(Cost: $23,097) dated 6/30/99, 4.75%, due 7/1/99 $ 616 $ 616
Commercial paper
Yield--4.60% to 4.83%
Due--July 1999
Federal Home Loan Mortgage Corp. 22,481 22,481
----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--17.3%
(Cost: $23,097) 23,097
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $134,862) $133,605
----------------------------------------------------------------------------
</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.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $134,862,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $649,000, the gross
unrealized depreciation was $1,906,000 and the net unrealized depreciation on
investments was $1,257,000.
See accompanying Notes to Financial Statements.
61
<PAGE> 64
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER INTERNATIONAL PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
EUROPE
UNITED KINGDOM--20.4%
BBA Group, PLC
(MANUFACTURER OF
AUTOMOTIVE COMPONENTS AND
INDUSTRIAL MATERIALS) 3,246 $ 25
BOC Group, PLC
(PRODUCER OF INDUSTRIAL
GASES) 96,254 1,886
BP Amoco, PLC
(MAJOR INTEGRATED WORLD
OIL COMPANY) 120,394 2,158
British Telecom, PLC
(TELECOMMUNICATION
SERVICES) 165,687 2,776
Carlton Communications, PLC
(TELEVISION POST
PRODUCTION PRODUCTS AND
SERVICES) 163,947 1,361
General Electric Co., PLC
(MANUFACTURER OF POWER,
COMMUNICATIONS AND DEFENSE
EQUIPMENT) 185,257 1,884
Glaxo Wellcome, PLC
(PHARMACEUTICAL COMPANY) 49,701 1,382
J Sainsbury, PLC
(RETAIL DISTRIBUTOR OF
FOOD THROUGH SUPERMARKETS) 300,000 1,893
Marks & Spencer, PLC
(RETAILER OF CONSUMER
GOODS AND FOODS) 360,000 2,079
National Westminster Bank
(PROVIDER OF BANKING AND
FINANCIAL SERVICES) 70,578 1,498
(a) Orange, PLC
(OPERATOR OF DIGITAL
MOBILE TELEPHONE NETWORK) 146,200 2,147
Prudential Corporation, PLC
(PROVIDER OF BROAD RANGE
OF FINANCIAL SERVICES) 79,273 1,169
Reed International, PLC
(PUBLISHER OF SCIENTIFIC,
PROFESSIONAL AND BUSINESS
TO BUSINESS MATERIALS) 210,441 1,401
Rentokil Initial, PLC
(ENVIRONMENTAL SERVICES
COMPANY) 409,178 1,588
Reuters Group, PLC
(INTERNATIONAL NEWS
AGENCY) 227,137 2,990
Rio Tinto, PLC
(MINING COMPANY) 188,849 3,167
(a) Royal & Sun Alliance
Insurance Group, PLC
(INSURANCE COMPANY) 118,847 1,066
Select Appointments
Holdings, PLC
(RECRUITMENT SERVICES
COMPANY) 75,615 903
Shell Transport & Trading,
PLC
(PETROLEUM COMPANY) 327,709 2,461
SmithKline Beecham, PLC
(MANUFACTURER OF ETHICAL
DRUGS AND HEALTHCARE
PRODUCTS) 102,306 $ 1,332
Vodafone Group, PLC
(TELECOMMUNICATION
SERVICES) 139,826 2,753
-----------------------------------------------------
37,919
FRANCE--13.5%
Accor SA
(PROVIDER OF CATERING,
HOTEL AND TRAVEL SERVICES) 7,227 1,821
AXA SA
(INSURANCE GROUP PROVIDING
INSURANCE, FINANCE AND
REAL ESTATE SERVICES) 10,975 1,344
Carrefour SA
(HYPERMARKET OPERATOR AND
FOOD RETAILER) 6,881 1,015
Christian Dior
(LEADING FASHION HOUSE) 10,418 1,704
Club Mediterranee SA
(OPERATOR OF VACATION
RESORTS) 3,464 369
Elf Aquitaine SA
(PETROLEUM COMPANY) 25,202 3,712
Etablissements Economiques
du Casino Guichard-
Perrachon SA
(OPERATOR OF SUPERMARKETS
AND CONVENIENCE STORES) 21,300 1,171
(a) Eurotunnel SA
(CHANNEL TUNNEL
CONSORTIUM) 1,619,174 2,396
Lagardere SCA
(HOLDING COMPANY WITH
INTERESTS IN PUBLISHING,
DEFENSE, AUDIOVISUAL
PRODUCTION AND SERVICES,
TELECOMMUNICATIONS AND
MEDIA) 23,290 870
LVMH (Louis Vuitton Moet
Hennessy)
(PRODUCER OF WINES,
SPIRITS AND LUXURY
PRODUCTS) 3,266 960
(a) LVMH (Louis Vuitton Moet
Hennessy) (Rights)
(PRODUCER OF WINES,
SPIRITS AND LUXURY
PRODUCTS) 3,266 96
Pinault-Printemps-Redoute SA
(OPERATOR OF DEPARTMENT
STORES) 5,716 984
Renault SA
(MANUFACTURER OF
AUTOMOBILES, BUSES,
INDUSTRIAL AND
AGRICULTURAL VEHICLES) 21,165 924
Rhone-Poulenc SA "A"
(PHARMACEUTICAL COMPANY) 49,852 2,286
Societe BIC SA
(MANUFACTURER OF OFFICE
SUPPLIES) 34,037 1,802
</TABLE>
62
<PAGE> 65
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
FRANCE--CONTINUED
Suez Lyonnaise des Eaux
(WATER AND ELECTRIC
UTILITY) 10,421 $ 1,886
Total SA "B"
(INTERNATIONAL OIL AND GAS
EXPLORATION, DEVELOPMENT
AND PRODUCTION) 6,771 877
Union des Assurances
Federales
(INSURANCE GROUP) 7,942 945
-----------------------------------------------------
25,162
GERMANY--11.2%
BASF AG
(INTERNATIONAL CHEMICAL
PRODUCER) 48,673 2,159
Bayerische Vereinsbank AG
(COMMERCIAL BANK) 40,177 2,620
Gehe AG
(PHARMACEUTICALS
DISTRIBUTOR) 39,682 1,832
Hoechst AG
(CHEMICAL PRODUCER) 50,358 2,288
Karstadt AG
(OPERATOR OF DEPARTMENT
STORE CHAIN) 2,617 1,262
Mannesmann AG
(DIVERSIFIED CONSTRUCTION
AND TECHNOLOGY COMPANY) 18,138 2,716
Metro AG
(OPERATOR OF BUILDING,
CLOTHING DEPARTMENT,
ELECTRONIC AND FOOD
STORES) 28,246 1,760
SAP AG (pfd.)
(COMPUTER SOFTWARE
MANUFACTURER) 4,416 1,771
Siemens AG
(ELECTRICAL ENGINEERING
AND ELECTRONICS COMPANY) 31,289 2,422
VEBA AG
(ELECTRIC UTILITY,
DISTRIBUTOR OF OIL AND
CHEMICALS) 33,864 1,998
-----------------------------------------------------
20,828
NETHERLANDS--7.5%
Akzo Nobel NV
(PRODUCER AND MARKETER OF
HEALTHCARE PRODUCTS,
COATINGS, CHEMICALS AND
FIBERS) 28,970 1,223
DSM NV
(PLASTICS PRODUCER) 6,120 659
(a) Equant NV
(PROVIDER OF INTERNATIONAL
DATA NETWORK SERVICES) 17,792 1,646
Gucci Group
(DESIGNER AND PRODUCER OF
PERSONAL LUXURY
ACCESSORIES AND APPAREL) 24,400 1,708
Heineken Holding NV "A"
(PRODUCER AND DISTRIBUTOR
OF BEERS, SPIRITS, WINES,
SOFT DRINKS) 35,260 1,332
ING Groep NV
(INSURANCE AND FINANCIAL
SERVICES) 20,621 $ 1,120
Koninklijke Ahold NV
(INTERNATIONAL FOOD
RETAILER) 28,400 982
STMicroelectronics
(MANUFACTURER OF
SEMICONDUCTOR INTEGRATED
CIRCUITS) 17,748 1,187
Unique International NV
(OPERATOR OF RETAIL
CLOTHING STORES,
EMPLOYMENT AGENCIES,
TECHNICAL TRADE SCHOOLS,
ENGINEERING SERVICES) 68,036 1,665
(a) United Pan-Europe
Communications NV
(PROVIDER OF TELEVISION
AND TELECOMMUNICATION
SERVICES) 12,450 678
Vedior NV CVA
(TEMPORARY EMPLOYMENT
SERVICES) 15,161 259
VNU NV
(INTERNATIONAL PUBLISHING
COMPANY) 35,960 1,442
-----------------------------------------------------
13,901
ITALY--5.9%
Arnoldo Mondadori Editore
SpA
(BOOK PUBLISHER) 43,000 748
Assicurazioni Generali
(LIFE AND PROPERTY
INSURANCE COMPANY) 53,250 1,852
Class Editori SpA
(PUBLISHING HOUSE) 46,100 370
Finmeccanica SpA
(DESIGNER AND DEVELOPER OF
COMMERCIAL AND MILITARY
AIRCRAFT, SPACE SYSTEMS
AND AIR DEFENSE SYSTEMS) 1,182,300 1,093
Gruppo Editoriale L'Espresso
(PUBLISHER) 35,200 572
Mediaset SpA
(BROADCASTING AND
TELEVISION NETWORKS) 110,300 984
Seat Pagine Gialle SpA
(PUBLISHER OF
TELECOMMUNICATION
DIRECTORIES AND PROVIDER
OF ADVERTISING SERVICES) 1,299,000 1,781
Telecom Italia SpA
(PROVIDER OF
TELECOMMUNICATIONS,
ELECTRONICS AND NETWORK
CONSTRUCTION) 336,000 3,505
-----------------------------------------------------
10,905
</TABLE>
63
<PAGE> 66
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
SWITZERLAND--4.3%
Nestle SA (Registered)
(FOOD MANUFACTURER) 989 $ 1,790
Novartis AG (Registered)
(PHARMACEUTICAL COMPANY) 1,616 2,370
Swisscom AG
(OPERATOR OF
TELECOMMUNICATION NETWORKS
AND NETWORK APPLICATION
SERVICES) 3,297 1,246
UBS AG-Registered
(PROVIDER OF BANKING AND
ASSET MANAGEMENT SERVICES) 8,690 2,606
-----------------------------------------------------
8,012
FINLAND--1.8%
Nokia Oyj
(MANUFACTURER OF
TELECOMMUNICATION NETWORKS
AND EQUIPMENT) 38,000 3,343
-----------------------------------------------------
SPAIN--1.3%
Compania Telefonica Nacional
de Espana SA
(TELECOMMUNICATION
SERVICES) 49,437 2,396
(a) Telefonica Publicidad e
Informacion, SA
(PUBLISHER OF TELEPHONE
DIRECTORIES) 5,467 109
-----------------------------------------------------
2,505
IRELAND--.9%
CRH, PLC
(MANUFACTURER AND SUPPLIER
OF BUILDING MATERIALS) 97,830 1,742
-----------------------------------------------------
TOTAL EUROPEAN 124,317
COUNTRIES--66.8%
-----------------------------------------------------
PACIFIC REGION
JAPAN--23.9%
Advantest Corp.
(PRODUCER OF MEASURING
INSTRUMENTS AND
SEMICONDUCTOR TESTING
DEVICES) 8,700 956
Asahi Glass Co., Ltd.
(MANUFACTURER OF GLASS
PRODUCTS) 136,000 882
Benesse Corp.
(PROVIDER OF EDUCATIONAL
SERVICES) 9,000 978
(a) Canon, Inc.
(LEADING PRODUCER OF
VISUAL IMAGE AND
INFORMATION EQUIPMENT) 27,000 777
Daiwa Securities Co., Ltd.
(PROVIDER OF BROKERAGE AND
OTHER FINANCIAL SERVICES) 303,000 2,003
Fuji Bank, Ltd.
(COMMERCIAL BANK) 196,000 1,367
Fujisawa Pharmaceutical Co.
(MANUFACTURER OF MARKETER
OF ANTIBIOTICS) 120,000 1,954
Fujitsu, Ltd.
(MANUFACTURER OF
COMPUTERS) 97,000 $ 1,952
Fujitsu Support and Service,
Inc.
(PROVIDER OF INFORMATION
SERVICES) 19,000 2,877
Hitachi, Ltd.
(GENERAL ELECTRONICS
MANUFACTURER) 109,000 1,023
Komatsu, Ltd.
(MANUFACTURER OF
CONSTRUCTION MACHINERY) 95,000 607
Matsushita Electric
Industrial Co., Ltd.
(MANUFACTURER OF CONSUMER
ELECTRONIC PRODUCTS) 90,000 1,748
Murata Manufacturing Co.,
Ltd.
(LEADING MANUFACTURER OF
CERAMIC APPLIED ELECTRONIC
COMPUTERS) 27,000 1,776
NEC Corp.
(MANUFACTURER OF
TELECOMMUNICATION AND
COMPUTER EQUIPMENT) 153,000 1,903
Nikko Securities Co., Ltd.
(SECURITIES BROKER AND
DEALER) 332,000 2,143
Nippon Telegraph & Telephone
Corp.
(TELECOMMUNICATION
SERVICES) 210 2,447
Nissan Motor Co., Ltd.
(MANUFACTURER OF MOTOR
VEHICLES) 202,000 965
NSK, Ltd.
(LEADING MANUFACTURER OF
BEARINGS AND MOTOR VEHICLE
MACHINE PARTS) 166,000 911
NTT Mobile Communication
Network, Inc.
(PROVIDER OF VARIOUS
TELECOMMUNICATION SERVICES
AND EQUIPMENT) 40 542
(a) NTT Mobile Communications
Network, Inc.
(PROVIDER OF VARIOUS
TELECOMMUNICATION SERVICES
AND EQUIPMENT) 160 2,142
Sakura Bank, Ltd.
(PROVIDER OF BANKING
SERVICES) 354,000 1,343
Sanwa Bank, Ltd.
(BANK) 127,000 1,250
Shin-Etsu Chemical Co., Ltd.
(PRODUCER AND DISTRIBUTOR
OF SYNTHETIC RESINS AND
CHEMICALS) 28,000 937
Sony Corp.
(MANUFACTURER OF CONSUMER
ELECTRONIC PRODUCTS) 28,200 3,042
Sumitomo Trust & Banking
Co., Ltd.
(COMMERCIAL BANK) 278,000 1,337
</TABLE>
64
<PAGE> 67
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
JAPAN--CONTINUED
TDK Corp.
(MANUFACTURER OF MAGNETIC
TAPES AND FLOPPY DISCS) 11,000 $ 1,007
Teijin, Ltd.
(MANUFACTURER OF POLYESTER
PRODUCTS) 177,000 717
Tokyo Electron, Ltd.
(LEADING SEMICONDUCTOR
PRODUCTION EQUIPMENT
MANUFACTURER) 29,000 1,968
Toshiba Corp.
(MANUFACTURER OF ELECTRIC
MACHINERY) 273,000 1,947
Yamanouchi Pharmaceutical
Co., Ltd.
(LEADING MANUFACTURER OF
ETHICAL DRUGS) 29,000 1,110
-----------------------------------------------------
44,611
HONG KONG--3.5%
Cheung Kong Holdings, Ltd.
(REAL ESTATE COMPANY) 175,000 1,556
Citic Pacific, Ltd.
(DIVERSIFIED HOLDING
COMPANY) 467,000 1,490
Dao Heng Bank Group, Ltd.
(COMMERCIAL BANK HOLDING
COMPANY) 152,000 682
New World Development Co.,
Ltd.
(PROPERTY INVESTMENT AND
DEVELOPMENT) 422,000 1,265
Sun Hung Kai Properties,
Ltd.
(REAL ESTATE DEVELOPER AND
FINANCE COMPANY) 162,000 1,477
-----------------------------------------------------
6,470
SINGAPORE--1.3%
City Developments, Ltd.
(DEVELOPER OF RESIDENTIAL,
INDUSTRIAL, RETAIL AND
INVESTMENT PROPERTIES,
OWNER AND OPERATOR OF
HOTELS) 219,000 1,404
Development Bank of
Singapore (Foreign
Registered)
(BANKING AND FINANCIAL
SERVICES) 46,000 563
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SINGAPORE--CONTINUED
Oversea-Chinese Banking
Corp., Ltd. (Foreign
registered)
(COMMERCIAL BANK) 58,000 $ 484
-----------------------------------------------------
2,451
-----------------------------------------------------
TOTAL PACIFIC REGION--28.7% 53,532
-----------------------------------------------------
COMMONWEALTH COUNTRIES
AUSTRALIA--2.2%
Broken Hill Proprietary Co.,
Ltd.
(PETROLEUM AND MINERAL
EXPLORATION AND STEEL
PRODUCTION) 173,200 2,018
WMC, Ltd.
(MINERAL EXPLORATION AND
PRODUCTION) 307,300 1,328
Woodside Petroleum, Ltd.
(MAJOR OIL AND GAS
PRODUCER) 109,600 746
-----------------------------------------------------
4,092
CANADA--.9%
Canadian National Railway
Co.
(RAILROAD OPERATOR) 25,100 1,694
-----------------------------------------------------
NEW ZEALAND--.2%
Restaurant Brands
(FAST FOOD RESTAURANT
CHAIN) 485,400 349
-----------------------------------------------------
TOTAL COMMONWEALTH COUNTRIES
--3.3% 6,135
-----------------------------------------------------
TOTAL COMMON STOCKS--98.8%
(Cost: $173,287) 183,984
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--
1.2%
(b) Repurchase agreement
Chase Manhattan Bank,
dated 6/30/99, 4.62%, due
7/1/99
(Cost: $2,255) $ 2,255 2,255
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--
100%
(Cost: $175,542) $186,239
-----------------------------------------------------
</TABLE>
65
<PAGE> 68
PORTFOLIO OF INVESTMENTS
At June 30, 1999, the Kemper International Portfolio had the following industry
diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
<S> <C> <C>
---------------------------------------------------------------------------------------------
Finance $ 32,584 17.6
---------------------------------------------------------------------------------------------
Manufacturing 27,126 14.6
---------------------------------------------------------------------------------------------
Communications 24,086 12.9
---------------------------------------------------------------------------------------------
Service Industries 17,707 9.5
---------------------------------------------------------------------------------------------
Technology 15,913 8.5
---------------------------------------------------------------------------------------------
Consumer Discretionary 12,474 6.7
---------------------------------------------------------------------------------------------
Consumer Staples 10,021 5.4
---------------------------------------------------------------------------------------------
Health Care 9,980 5.4
---------------------------------------------------------------------------------------------
Energy 9,954 5.3
---------------------------------------------------------------------------------------------
Metals and Minerals 6,513 3.5
---------------------------------------------------------------------------------------------
Media 4,904 2.6
---------------------------------------------------------------------------------------------
Construction 4,138 2.2
---------------------------------------------------------------------------------------------
Utilities 3,884 2.1
---------------------------------------------------------------------------------------------
Durables 3,007 1.6
---------------------------------------------------------------------------------------------
Transportation 1,693 0.9
---------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 183,984 98.8
---------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 2,255 1.2
---------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO $186,239 100.0
---------------------------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER INTERNATIONAL PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $175,542,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $18,077,000, the gross
unrealized depreciation was $7,380,000 and the net unrealized appreciation on
investments was $10,697,000.
See accompanying Notes to Financial Statements.
66
<PAGE> 69
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--5.0%
(a) Pinnacle Holdings, Inc. 200,000 $ 4,900
Pittway Corp. 151,000 5,162
-----------------------------------------------------
10,062
CONSUMER DISCRETIONARY--17.7%
(a) BJ's Wholesale Club, Inc. 75,000 2,255
(a) Cinar Corp. 163,400 4,003
(a) Cost Plus, Inc. 73,000 3,321
(a) CSK Auto Corp. 85,000 2,295
(a) David's Bridal, Inc. 94,500 1,471
(a) Foodmaker, Inc. 147,200 4,177
(a) Linens 'n Things, Inc. 55,000 2,406
(a) Men's Wearhouse, Inc. 126,600 3,228
(a) Pacific Sunwear of California 79,800 1,945
Regis Corp. 140,500 2,696
(a) Station Casinos, Inc. 175,000 3,566
(a) Zale Corp. 101,700 4,068
-----------------------------------------------------
35,431
CONSUMER STAPLES--.7%
(a) American Italian Pasta Co. 46,300 1,406
-----------------------------------------------------
DURABLES--2.7%
(a) Dura Automotive Systems, Inc. 90,000 2,992
(a) Gilat Satellite Networks Ltd. 45,100 2,368
-----------------------------------------------------
5,360
ENERGY--.8%
(a) Cal Dive International, Inc. 53,400 1,595
-----------------------------------------------------
FINANCIAL--8.6%
American Heritage Life
Investment Corp. 100,000 2,450
(a) Hambrecht & Quist Group 53,000 1,968
Legg Mason, Inc. 55,000 2,117
National Commerce Bancorp 80,700 1,765
(a) NCO Group, Inc. 62,100 2,360
People's Heritage Financial
Group, Inc. 95,600 1,798
Texas Regional Bancshares,
Inc. 75,000 2,039
U.S. Trust Corp. 30,000 2,775
-----------------------------------------------------
17,272
HEALTH--12.3%
(a) Advance Paradigm, Inc. 43,700 2,666
(a) Hanger Orthopedic Group, Inc. 114,700 1,627
(a) IDEC Pharmaceuticals Corp. 45,000 3,468
(a) MedQuist, Inc. 105,000 4,594
(a) Priority Health Corp. 54,600 1,884
(a) Res-Care, Inc. 93,100 2,118
(a) ResMed, Inc. 50,000 1,659
(a) VISX, Inc. 34,000 2,692
(a) Xomed Surgical Products, Inc. 82,500 4,017
-----------------------------------------------------
24,725
MANUFACTURING--14.5%
(a) Applied Micro Circuits Corp. 70,000 $ 5,757
(a) Astec Industries 58,400 2,380
(a) DII Group, Inc. 165,000 6,156
(a) Dril-Quip, Inc. 95,000 2,179
(a) Jacobs Engineering Group, Inc. 75,000 2,850
(a) MotivePower Industries, Inc. 100,000 1,775
(a) Novellus Systems 14,600 996
Spartech Corp. 155,000 4,902
(a) Techne Corp. 79,100 2,007
-----------------------------------------------------
29,002
MEDIA--2.8%
(a) Nielsen Media Research, Inc. 55,400 1,620
(a) Speedway Motorsports, Inc. 70,000 2,759
(a) Westwood One, Inc. 37,000 1,320
-----------------------------------------------------
5,699
SERVICE INDUSTRIES--12.7%
(a) Concord EFS, Inc. 160,000 6,770
(a) Dycom Industries, Inc. 81,200 4,547
(a) Education Management Corp. 119,100 2,471
(a) Lason, Inc. 30,200 1,499
Metris Companies, Inc. 120,000 4,890
Select Appointments Holdings 100,100 2,402
(a) United Rentals, Inc. 100,000 2,950
-----------------------------------------------------
25,529
TECHNOLOGY--19.1%
(a) Alpha Industries 86,800 4,134
(a) Atmel Corp. 100,000 2,619
(a) Business Objects SA 42,700 1,558
(a) Computer Network Technology
Corp. 114,400 2,474
(a) Comverse Technologies, Inc. 69,950 5,281
(a) Conexant Systems, Inc. 65,000 3,774
(a) Cree Research, Inc. 26,600 2,046
(a) L-3 Communications Holdings,
Inc. 85,000 4,106
(a) Mercury Interactive Corp. 76,500 2,706
(a) New Era Networks, Inc. 40,000 1,757
(a) Transwitch Corp. 29,500 1,397
(a) Verity, Inc. 49,700 2,693
(a) Vitesse Semiconductor Corp. 32,500 2,192
(a) Webtrends Corp. 31,800 1,467
-----------------------------------------------------
38,204
TRANSPORTATION--1.5%
(a) Cheap Tickets, Inc. 32,200 1,175
Expeditors Int'l of
Washington, Inc. 64,000 1,744
-----------------------------------------------------
2,919
-----------------------------------------------------
TOTAL COMMON STOCKS--98.4%
(Cost: $157,434) 197,204
-----------------------------------------------------
</TABLE>
67
<PAGE> 70
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement
State Street Bank and Trust
Company dated 6/30/99,
4.75%, due 7/1/99 $ 341 $ 341
Commercial paper
Yield--5.07% to 5.09%
Due--July 1999 2,800 2,796
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--1.6%
(Cost: $3,137) 3,137
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $160,571) $200,341
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER SMALL CAP GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $160,571,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $42,390,000, the gross
unrealized depreciation was $2,620,000 and the net unrealized appreciation on
investments was $39,770,000.
See accompanying Notes to Financial Statements.
68
<PAGE> 71
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER INVESTMENT GRADE BOND
PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
GOVERNMENT OBLIGATIONS AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES
4.625%, 11/30/2000 $12,000 $11,871
5.500%, 01/31/2003 75 75
5.250%, 08/15/2003 650 639
7.875%, 11/15/2004 2,100 2,297
4.750%, 11/15/2008 940 863
5.500%, 05/15/2009 540 527
-----------------------------------------------------
16,272
U.S. TREASURY BONDS
10.750%, 05/15/2003 2,450 2,867
6.375%, 08/15/2027 350 359
6.125%, 11/15/2027 180 179
5.500%, 08/15/2028 460 421
5.250%, 02/15/2029 2,000 1,797
-----------------------------------------------------
5,623
GOVERNMENT AGENCY
FNMA, 5.75%,
with various maturities to
02/15/2008 1,000 956
FNMA, 7.00%,
with various maturities to
12/01/2027 841 833
FNMA, 6.00%,
with various maturities to
04/01/2029 6,748 6,484
Tennessee Valley Authority,
6.250%, 12/15/2017 100 95
-----------------------------------------------------
8,368
CANADIAN PROVINCIAL OBLIGATION
Province of Quebec, 8.625%,
01/19/2005 500 544
-----------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--48.6%
(Cost: $31,775) 30,807
-----------------------------------------------------
CORPORATE BONDS
COMMUNICATIONS--5.7%
AT&T Corp., 6.000%, 03/15/2009 500 470
BellSouth Telecommunications,
Inc.,
6.375%, 06/01/2028 500 444
Cable & Wireless Communications,
6.750%, 12/01/2008 400 385
Intermedia Communications, Inc.,
8.875%, 11/01/2007 750 711
Level 3 Communications, 9.125%,
05/01/2008 750 741
Sprint Capital Corp., 6.875%,
11/15/2028 800 725
WorldCom, Inc.
7.750%, 04/01/2007 50 52
7.750%, 04/01/2027 100 106
-----------------------------------------------------
3,634
CONSUMER DISCRETIONARY--3.1%
Dayton Hudson Corp., 7.500%,
07/15/2006 $ 100 $ 102
Dillards, Inc.,
6.170%, 08/01/2001 500 497
Federated Department Stores,
6.125%, 09/01/2001 500 498
Harrah's Operating Co., Inc.,
7.875%, 12/15/2005 750 724
May Department Stores Co.,
6.875%, 11/01/2005 50 51
Royal Caribbean Cruises, Ltd.,
8.250%, 04/01/2005 120 125
-----------------------------------------------------
1,997
CONSUMER STAPLES--.9%
Phillip Morris Companies, Inc.,
7.200%, 02/01/2007 150 150
Safeway Inc.,
6.050%, 11/15/2003 250 245
Sony Corp.,
6.125%, 03/04/2003 150 149
-----------------------------------------------------
544
DURABLES--4.0%
Delphi Automotive Systems Corp.,
6.500%, 05/01/2009 500 472
Lear Corp.,
7.960% 05/15/2005 750 727
Lockheed Martin Corp.
6.750%, 03/15/2003 400 402
7.250%, 05/15/2006 150 150
TRW, Inc.,
7.125%, 06/01/2009 800 770
-----------------------------------------------------
2,521
ENERGY--3.1%
Conoco, Inc.,
6.350%, 04/15/2009 1000 960
Petroleum Geo-Services,
7.500%, 03/31/2007 1000 998
-----------------------------------------------------
1958
FINANCIAL--6.0%
Abbey National, PLC,
6.690%, 10/17/2005 25 25
ABN AMRO
8.250%, 08/01/2009 100 105
Associates Corp. of North
America,
6.625%, 05/15/2001 200 202
Capital One Bank,
8.125%, 03/01/2000 100 101
Crestar Financial Corp.,
8.250%, 07/15/2002 100 105
Den Danske Bank,
6.375%, 06/15/2008 350 331
FINOVA Capital Corp.,
6.500%, 07/28/2002 100 100
</TABLE>
69
<PAGE> 72
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
FINANCIAL--CONTINUED
Ford Motor Credit,
7.750%, 03/15/2005 $ 100 $ 105
General Electric Capital Corp.
8.750%, 05/21/2007 50 57
8.625%, 06/15/2008 50 57
Household Finance Corp.,
6.500%, 11/15/2008 1000 953
Kansallis Osake Bank,
10.000%, 05/01/2002 100 108
NationsBank Corp.,
9.500%, 06/01/2004 200 223
Northern Trust Co.,
6.250%, 06/02/2008 500 474
Riggs National Corp.,
8.500%, 02/01/2006 100 104
Scotland International,
8.800%, 01/27/2004 50 54
Sears Roebuck Acceptance Corp.,
7.000%, 06/15/2007 150 150
Svenska Handelsbanken,
7.125%, 03/29/2049 50 48
Wells Fargo & Co.,
6.875%, 04/01/2006 500 502
-----------------------------------------------------
3,804
MEDIA--5.6%
Cablevision Systems Corp.,
7.875%, 12/15/2007 1000 1000
Chancellor Media Corp.,
8.000%, 11/01/2008 750 735
Comcast Cable Communications,
8.500%, 05/01/2027 100 110
News America Holdings, Inc.
9.250%, 02/01/2013 75 84
8.150%, 10/17/2036 300 299
Tele-Communications, Inc.,
9.800%, 02/01/2012 350 428
Time Warner, Inc.
9.125%, 01/15/2013 350 396
6.875%, 06/15/2018 300 279
9.150%, 02/01/2023 200 229
-----------------------------------------------------
3,560
TECHNOLOGY--1.0%
Raytheon Co.,
6.150%, 11/01/2001 500 472
6.750%, 08/15/2007 150 148
-----------------------------------------------------
620
TRANSPORTATION--.3%
Continental Airlines, Inc.
7.750%, 07/02/2014 $ 46 $ 48
6.900%, 01/02/2017 50 48
Delta Air Lines, Inc.,
9.750%, 05/20/2005 100 118
-----------------------------------------------------
214
UTILITIES--1.6%
Cincinnati Bell, Inc.,
6.300%, 12/01/2028 300 259
Cleveland Electric Illumination
Co.,
7.670%, 07/01/2004 100 102
Commonwealth Edison Co.
7.375%, 01/15/2004 50 51
7.000%, 07/01/2005 100 100
El Paso Electric Co. First
Mortgage,
8.900%, 02/01/2006 350 380
GTE North, Inc.,
6.900%, 11/01/2008 100 101
-----------------------------------------------------
993
-----------------------------------------------------
TOTAL CORPORATE OBLIGATIONS--31.3%
(Cost: $20,700) 19,845
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(a) Repurchase agreement
State Street Bank and Trust
Company dated 6/30/99, 4.75%,
due 7/1/99 747 747
Commercial paper
Yield--5.07% to 5.09%
Due--July 1999
ConAgra 2,500 2,497
Countrywide Home Loans, Inc. 2,500 2,497
Federal National Mortgage
Association 2,500 2,493
IBM Credit Corp. 2,500 2,496
Sara Lee Corp. 2,000 2,000
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--20.1%
(Cost: $12,730) 12,730
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $65,205) $63,382
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER INVESTMENT GRADE BOND PORTFOLIO OF INVESTMENTS
(a) Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities. The collateral is monitored daily by the portfolio so
that its market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $65,205,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $6,000, the gross
unrealized depreciation was $1,829,000 and the net unrealized depreciation on
investments was $1,823,000.
See accompanying Notes to Financial Statements.
70
<PAGE> 73
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER CONTRARIAN VALUE PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
CONSTRUCTION--4.8%
BRE Properties, Inc. 60,000 $ 1,556
Georgia Pacific Timber Group 136,200 3,439
Louisiana-Pacific Corp. 240,000 5,700
Meditrust Corp. SBI 39,652 518
Post Properties, Inc. 90,000 3,690
-----------------------------------------------------
14,903
CONSUMER DISCRETIONARY--10.7%
J.C. Penney Co., Inc. 148,800 7,226
Liz Claiborne, Inc. 122,800 4,482
May Department Stores 175,000 7,153
Newell Rubbermaid, Inc. 145,000 6,743
Sears, Roebuck & Co. 168,000 7,487
-----------------------------------------------------
33,091
CONSUMER STAPLES--15.1%
Albertson's, Inc. 70,000 3,609
Campbell Soup Co. 106,600 4,944
H.J. Heinz Co. 105,000 5,263
Hershey Foods Corp. 80,000 4,750
International Flavors &
Fragrances, Inc. 69,500 3,084
Philip Morris Companies,
Inc. 322,500 12,960
Sara Lee Corp. 140,000 3,176
Unilever NV 60,714 4,235
VF Corporation 110,000 4,703
-----------------------------------------------------
46,724
DURABLES--2.5%
Ford Motor Co. 104,500 5,898
Superior Industries
International, Inc. 69,000 1,885
-----------------------------------------------------
7,783
ENERGY--5.9%
Atlantic Richfield Co. 85,000 7,103
BP Amoco, PLC 38,972 4,228
Exxon Corp. 90,000 6,941
-----------------------------------------------------
18,272
FINANCIAL--23.9%
Allstate Corp. 198,100 7,107
Bank of America Corp. 98,006 7,185
BANK ONE 105,320 6,273
Chubb Corp. 59,400 4,128
Federal Home Loan Mortgage
Corp. 224,600 13,027
Federal National Mortgage
Association 153,600 10,502
First Union Corp. 170,000 7,990
KeyCorp 265,000 8,513
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL--CONTINUED
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
Wachovia Corp. 20,000 $ 1,711
Washington Mutual, Inc. 164,304 5,812
Wells Fargo Co. 43,200 1,847
-----------------------------------------------------
74,095
MANUFACTURING--22.1%
Air Products & Chemicals,
Inc. 136,700 5,502
Crown Cork & Seal Co., Inc. 43,500 1,240
E.I. du Pont de Nemours &
Co. 23,000 1,571
Emerson Electric Co. 70,000 4,401
Lubrizol Corp. 155,000 4,224
Minnesota Mining &
Manufacturing Co. 153,000 13,301
Pitney Bowes, Inc. 68,000 4,369
Praxair, Inc. 111,400 5,452
Sigma-Aldrich Corp. 75,000 2,583
Sonoco Products Co. 338,200 10,125
Thomas & Betts Corp. 148,600 7,021
Tyco International, Ltd. 24,489 2,320
Xerox Corp. 110,000 6,497
-----------------------------------------------------
68,606
TECHNOLOGY--2.8%
Diebold, Inc. 190,000 5,463
Raytheon Co. 46,500 3,272
-----------------------------------------------------
8,735
TRANSPORTATION--1.5%
CSX Corp. 100,800 4,568
-----------------------------------------------------
UTILITIES--.4%
ONEOK, Inc. 35,200 1,118
-----------------------------------------------------
TOTAL COMMON STOCKS--89.7%
(Cost: $248,401) 277,895
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(a) Repurchase agreement State
Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99 $11,995 11,995
Commercial paper
Yield--4.84%
Due--July 1999
Ameritech Corp. 20,000 19,978
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--10.3%
(Cost: $31,973) 31,973
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $280,374) $309,868
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER CONTRARIAN VALUE PORTFOLIO OF INVESTMENTS
(a) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $280,374,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $34,086,000, the gross
unrealized depreciation was $4,592,000 and the net unrealized appreciation on
investments was $29,494,000.
See accompanying Notes to Financial Statements.
71
<PAGE> 74
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER SMALL CAP VALUE PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--1.3%
(a) MasTec, Inc. 48,500 $ 1,370
----------------------------------------------------
CONSTRUCTION--4.1%
Blount International, Inc. 42,000 1,142
(a) Del Webb Corp. 26,200 626
Elcor Corp. 34,450 1,505
Lone Star Industries, Inc. 13,800 518
Southdown, Inc. 8,200 527
----------------------------------------------------
4,318
CONSUMER DISCRETIONARY--3.7%
(a) Anchor Gaming 10,500 505
(a) Carmike Cinemas, Inc. 17,500 279
(a) Columbia Sportswear Co. 53,600 824
Herbalife International, Inc 3,933 34
(a) Pacific Sunwear of California 51,900 1,265
Wolverine World Wide, Inc. 76,300 1,068
----------------------------------------------------
3,975
CONSUMER STAPLES--4.6%
(a) Fresh Del Monte Produce, Inc. 55,000 777
Harman International
Industries, Inc. 26,600 1,170
(a) Nautica Enterprises, Inc. 37,700 636
(a) Performance Food Group Co. 18,000 489
(a) Sola International, Inc. 52,200 1,015
Springs Industries, Inc. 18,200 794
----------------------------------------------------
4,881
DURABLES--4.6%
Borg-Warner Automotive, Inc. 16,300 897
(a) Coltec Industries, Inc. 38,100 826
(a) Dollar Thrifty Automotive
Group, Inc. 80,300 1,867
Inter-Tel, Inc. 27,700 506
Stewart & Stevenson Services,
Inc. 51,100 779
----------------------------------------------------
4,875
ENERGY--5.9%
ATMOS Energy Corp. 17,300 432
(a) Basin Exploration, Inc. 50,200 1,007
Cross Timbers Oil Company 69,000 1,026
(a) Giant Industries, Inc. 18,500 184
(a) Newpark Resources, Inc. 108,100 959
(a) Nuevo Energy Co. 33,700 447
(a) Seitel, Inc. 33,800 547
(a) Tesoro Petroleum Corp. 59,500 948
USEC, Inc. 51,500 766
----------------------------------------------------
6,316
FINANCIAL--16.5%
(a) Acceptance Insurance Cos.,
Inc. 33,700 508
Apartment Investment &
Management Co. 28,126 1,202
Associated Banc-Corp. 22,445 931
Chartwell Re Corp. 24,000 447
Commercial Federal Corp. 38,250 887
Compass Bancshares, Inc. 35,225 $ 960
Cullen\Frost Bankers, Inc. 26,000 717
Fremont General Corp. 73,000 1,378
HCC Insurance Holdings, Inc. 24,300 551
Health Care Property
Investment, Inc. 27,700 800
Hudson United Bancorp 24,158 740
(a) Imperial Bancorp 42,700 846
LandAmerica Financial Group,
Inc. 10,000 287
Nationwide Health Properties,
Inc. 47,500 905
North Fork Bancorporation,
Inc. 33,600 716
Pacific Bank, NA 15,000 286
People's Heritage Financial
Group, Inc. 49,100 924
Prentiss Properties Trust 46,500 1,093
(a) Redwood Trust, Inc. 26,000 431
Reliance Group Holdings, Inc. 58,300 434
Resource Bancshares Mortgage
Group, Inc. 73,715 756
UST Corporation 8,500 257
W.R. Berkley Corp. 28,000 700
Webster Financial Corp. 28,100 762
----------------------------------------------------
17,518
HEALTH--3.8%
(a) Conmed Corp. 48,500 1,485
(a) Genesis Health Ventures, Inc. 87,000 261
(a) PAREXEL International
Corporation 100,000 1,331
(a) Quorom Health Group, Inc. 80,700 1,014
----------------------------------------------------
4,091
MANUFACTURING--15.5%
(a) Albany International Corp. 53,358 1,107
(a) Alliant Techsystems, Inc. 10,400 900
(a) American Axle & Manufacturing
Holdings, Inc. 66,800 935
Apogee Enterprises, Inc. 84,100 1,130
Applied Power, Inc. 28,200 770
Ball Corporation 13,500 570
Belden, Inc. 45,700 1,094
Briggs & Stratton Corp. 12,500 722
(a) Buckeye Technologies, Inc. 50,500 767
Fleetwood Enterprises 30,000 793
Flowserve Corp. 43,826 830
General Cable Corp. 66,100 1,058
(a) Hologic, Inc. 46,300 260
(a) Lydall, Inc. 37,200 428
Intermet Corp. 83,900 1,269
Mississippi Chemical Corp. 74,300 729
Myers Industries, Inc. 44,720 894
(a) Shaw Group, Inc. 35,800 568
Watts Industries, Inc. "A" 51,000 979
(a) Wyman-Gordon Co. 34,100 659
----------------------------------------------------
16,462
</TABLE>
72
<PAGE> 75
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
MEDIA--5.9%
(a) AMC Entertainment, Inc. 41,500 $ 794
(a) Jones Intercable, Inc. 29,500 1,445
True North Communications,
Inc. 21,600 648
(a) Valassis Communications, Inc. 46,200 1,692
(a) Young Broadcasting, Inc. 40,900 1,741
----------------------------------------------------
6,320
METALS AND MINERALS--4.4%
AK Steel Holding Corp. 28,700 646
AMCOL International Corp. 100,350 1,443
Carpenter Technology Corp. 26,200 748
(a) CONSOL Energy, Inc. 30,400 365
(a) Lone Star Technologies 41,500 737
Quanex Corp. 26,100 744
----------------------------------------------------
4,683
SERVICE INDUSTRIES--3.6%
(a) Complete Business Solutions,
Inc. 60,600 1,087
(a) Group Maintenance America Corp. 79,100 1,023
(a) Keane, Inc. 26,000 588
(a) Modis Professional Services,
Inc. 80,700 1,110
----------------------------------------------------
3,808
TECHNOLOGY--6.7%
(a) Benchmark Electronics, Inc. 32,100 1,154
(a) Burr-Brown Corp. 29,925 1,096
(a) Cabletron Systems, Inc. 53,000 689
CTS Corp. 6,800 476
(a) Etec Systems, Inc. 18,600 618
Furon Corp. 56,100 1,066
(a) HMT Technology Corp. 106,700 267
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TECHNOLOGY--CONTINUED
(a) Hutchinson Technology, Inc. 26,300 $ 730
Technitrol, Inc. 19,900 642
(a) Tech-Sym Corp. 14,500 344
----------------------------------------------------
7,082
TRANSPORTATION--5.7%
Airborne Freight Corp. 29,900 828
(a) America West Holdings Corp. 75,500 1,425
NedLloyd Group NV ADR 57,700 714
Teekay Shipping Corp. 44,100 777
Trinity Industries, Inc. 26,500 888
(a) Wisconsin Central
Transportation Co. 76,400 1,442
----------------------------------------------------
6,074
UTILITIES--3.1%
(a) El Paso Electric Co. 150,000 1,341
MCN Energy Group, Inc. 21,200 440
New England Electric System 9,200 461
TNP Enterprises, Inc. 30,300 1,098
----------------------------------------------------
3,340
----------------------------------------------------
TOTAL COMMON STOCKS--89.4%
(Cost: $94,694) 95,113
----------------------------------------------------
MONEY MARKET INSTRUMENTS--10.6%
(b) Repurchase agreement State
Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99
(Cost: $11,222) $11,222 11,222
----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $105,916) $106,335
----------------------------------------------------
</TABLE>
NOTES TO KEMPER SMALL CAP VALUE PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by the U.S. Treasury or
Government securities. The collateral is monitored daily by the portfolio so
that its market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $105,916,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $13,155,000, the gross
unrealized depreciation was $12,736,000 and the net unrealized appreciation on
investments was $419,000.
See accompanying Notes to Portfolios of Investments.
73
<PAGE> 76
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER VALUE+GROWTH PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--1.4%
SBC Communications, Inc. 3,300 $ 191
Vodafone Group PLC 8,750 1,724
(a) Xircom, Inc. 11,700 352
-----------------------------------------------------
2,267
CONSTRUCTION--1.5%
Centex Construction Products,
Inc. 9,500 324
D.R. Horton, Inc. 13,300 221
Georgia Pacific Timber Group 12,400 313
LaFarge Corp. 13,200 468
Lone Star Industries, Inc. 7,000 263
Pulte Corp. 10,500 242
USG Corp. 11,300 633
-----------------------------------------------------
2,464
CONSUMER DISCRETIONARY--13.8%
(a) American Eagle Outfitters,
Inc. 23,200 1,056
(a) Bed Bath & Beyond, Inc. 5,000 193
(a) Burlington Coat Factory
Warehouse Corp. 25,600 494
Carnival Corp. "A" 28,800 1,397
CBRL Group, Inc. 11,600 201
CKE Restaurants, Inc. 15,950 259
CVS Corp. 7,400 376
Dillard's, Inc. 32,000 1,124
Family Dollar Stores, Inc. 30,000 720
(a) Federated Department Stores,
Inc. 12,400 656
(a) Furniture Brands
International, Inc. 5,300 148
Gap, Inc. 14,625 737
Harley-Davidson, Inc. 13,200 718
Home Depot, Inc. 17,000 1,095
Kellwood Co. 24,500 665
(a) Kohl's Corp. 11,700 903
Lancaster Colony Corp. 5,700 197
Liz Claiborne, Inc. 6,300 230
Lowe's Companies, Inc. 9,000 510
(a) Mohawk Industries, Inc. 25,800 784
(a) Neiman Marcus Group, Inc. 5,100 131
Newell Rubbermaid, Inc. 15,000 698
(a) O'Reilly Automotive 10,700 539
(a) Premier Parks, Inc. 20,300 746
Regis Corp. 34,650 665
(a) Saks, Inc. 12,300 355
(a) Scotts Company "A" 3,900 186
Sotheby's Holdings, Inc. "A" 15,000 572
(a) Staples, Inc. 13,050 404
TJX Companies, Inc. 12,800 426
(a) Tommy Hilfiger Corp. 16,700 1,227
Walgreen Co. 10,800 317
Wal-Mart Stores, Inc. 60,800 2,934
WestPoint Stevens, Inc. 9,400 280
(a) Williams-Sonoma, Inc. 15,000 522
-----------------------------------------------------
22,465
CONSUMER STAPLES--3.5%
American Greeting Corp. "A" 21,000 $ 633
Dexter Corp. 6,600 269
Harman International
Industries, Inc. 17,900 788
IMC Global, Inc. 15,200 268
(a) Safeway, Inc. 8,200 406
Springs Industries, Inc. "A" 14,100 615
Tootsie Roll Industries, Inc. 5,871 227
Universal Corp. 48,500 1,379
UST, Inc. 36,500 1,068
-----------------------------------------------------
5,653
DURABLES--7.2%
AlliedSignal, Inc. 10,000 630
Arvin Industries, Inc. 20,200 765
Bandag, Inc. 15,100 524
Borg-Warner Automotive, Inc. 7,100 391
(a) Cisco Systems, Inc. 43,150 2,783
Cooper Tire & Rubber Co. 7,300 172
Ford Motor Co. 20,300 1,146
(a) Jacobs Engineering Group,
Inc. 14,100 536
Lucent Technologies, Inc. 19,965 1,346
Manitowoc Company, Inc. 15,000 624
NACCO Industries, Inc. "A" 5,800 426
Northrop Grumman Corp. 7,300 484
Scientific-Atlanta, Inc. 9,100 328
Superior Industries
International, Inc. 14,000 382
United Technologies Corp. 13,542 971
-----------------------------------------------------
11,508
ENERGY--1.9%
Ashland, Inc. 28,000 1,124
Fluor Corp. 10,700 433
Helmerich & Payne, Inc. 23,300 555
K. N. Energy, Inc. 12,450 167
Sunoco, Inc. 23,600 712
-----------------------------------------------------
2,991
FINANCIAL--16.5%
Aetna, Inc. 2,800 250
Allamerica Financial Corp. 8,400 511
AMBAC Financial Group, Inc. 13,500 771
AMERICAN FINANCIAL GROUP,
Inc. 12,900 439
American National Insurance
Co. 19,400 1,382
AmerUS Life Holdings, Inc. 12,200 329
(a) BISYS Group, Inc. 26,900 1,574
Capital One Finance Corp. 13,200 735
Chubb Corp. 10,800 751
(a) CNA FINANCIAL Corp. 4,900 198
Commerce Group, Inc. 13,700 334
Conseco, Inc. 5,700 173
(a) Delphi Financial Group, Inc.
"A" 13,317 478
Doral Financial Corp. 38,100 657
Downey Financial Corp. 17,000 373
Enhance Financial Service
Group, Inc. 13,700 271
</TABLE>
74
<PAGE> 77
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
FINANCIAL--CONTINUED
Everest Reinsurance Holdings,
Inc. 3,800 $ 124
Executive Risk, Inc. 1,900 162
FBL Financial Group, Inc. 11,300 220
Federal National Mortgage
Association 15,200 1,039
Financial Security Assurance
Holdings, Ltd. 8,700 452
First American Financial Co. 3,800 68
Fremont General Corp. 19,000 359
GreenPoint Financial Corp. 6,500 213
Harleysville Group, Inc. 11,500 236
Hartford Financial Services
Group, Inc. 30,000 1,749
LandAmerica Financial Group,
Inc. 16,400 472
Liberty Financial Companies,
Inc. 20,400 594
(a) Markel Corp. 8,000 1,496
MBIA, Inc. 8,400 544
Mercury General Corp. 6,000 204
Ohio Casualty Corp. 17,300 625
Orion Capital Corp. 14,100 506
Providian Financial Corp. 6,900 645
Radian Group, Inc. 15,533 758
ReliaStar Financial Corp. 3,000 131
Safeco Corp. 16,300 719
Selective Insurance Group,
Inc. 8,300 158
St. Paul Cos., Inc. 14,000 445
TCF Financial Corp. 5,500 153
Torchmark Corp. 14,500 495
Transamerica Corp. 14,600 1,095
Transatlantic Holdings, Inc. 11,800 884
UNUM Corp. 6,000 329
Waddell & Reed Financial,
Inc. 3,551 96
Washington Federal, Inc. 5,390 121
XL Capital Ltd. "A" 37,789 2,135
-----------------------------------------------------
26,453
HEALTH--9.7%
(a) ALZA Corp. "A" 16,300 829
(a) Amgen, Inc. 11,400 694
Ballard Medical Products 5,700 133
(a) Biogen, Inc. 9,800 630
Bristol-Myers Squibb Co. 6,400 451
Cardinal Health, Inc. 14,250 914
(a) Crescendo Pharmaceuticals
Corp 1,050 18
DENTSPLY International, Inc. 12,900 361
(a) Express Scripts Inc. "A" 6,400 385
(a) Forest Laboratories, Inc. 7,200 333
(a) ICOS Corp. 16,400 669
McKesson HBOC, Inc. 9,000 289
(a) MedImmune, Inc. 18,800 1,274
(a) MedQuist, Inc. 13,600 595
Merck & Co., Inc. 9,000 666
(a) MiniMed, Inc. 17,600 1,354
(a) Patterson Dental Co. 11,400 $ 396
Pfizer, Inc. 7,000 768
(a) Quintiles Transnational Corp. 16,900 710
(a) Sepracor, Inc. 8,700 707
(a) Serologicals Corp. 11,800 96
(a) Sierra Health Services, Inc. 16,600 240
(a) Universal Health Services,
Inc. 5,000 239
(a) VISX, Inc. 29,200 2,312
Warner-Lambert Co. 5,700 395
(a) Wellpoint Health Networks,
Inc. 1,700 144
-----------------------------------------------------
15,602
MANUFACTURING--8.5%
(a) Alliant Techsystems, Inc. 6,600 571
(a) American Power Conversion
Corp. 10,600 213
Arch Chemicals, Inc. 10,050 244
B.F. Goodrich Co., Inc. 6,600 280
Barnes Group, Inc. 21,200 461
Carlisle Companies, Inc. 11,300 544
Cordant Technologies, Inc. 6,700 303
Hillenbrand Industries, Inc. 4,400 190
Honeywell, Inc. 3,400 394
Hughes Supply, Inc. 17,700 525
Kaydon Corp. 7,400 249
Kennametal, Inc. 20,700 642
(a) Lexmark International Group,
Inc. "A" 12,400 819
Loews Corp. 5,300 419
Lubrizol Corp. 20,000 545
M.A. Hanna Co. 60,200 990
Millennium Chemicals, Inc. 10,100 238
Modine Manufacturing Co. 46,800 1,524
(a) Mueller Industries, Inc. 15,400 523
OM Group, Inc. 9,200 317
PE Corp-PE Biosystems Group 5,100 585
Pentair, Inc. 5,800 265
Praxair, Inc. 10,000 489
Teleflex, Inc. 8,500 369
Thomas & Betts Corp. 8,400 397
Timken Co. 18,700 365
Tyco International, Ltd. 10,279 974
(a) UNOVA, Inc. 13,800 219
-----------------------------------------------------
13,654
MEDIA--.2%
Gannett Co., Inc. 4,400 314
-----------------------------------------------------
METALS AND MINERALS--.7%
AK Steel Holding Corp. 12,000 270
Nucor Corp. 7,000 332
Ryerson Tul, Inc. 5,700 129
USX-US Steel Group, Inc. 17,200 464
-----------------------------------------------------
1,195
</TABLE>
75
<PAGE> 78
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
SERVICE INDUSTRIES--7.8%
ABM Industries, Inc. 12,500 $ 384
(a) Affiliated Computer Services 32,300 1,635
(a) America Online, Inc. 12,000 1,326
Banta Corp. 11,500 242
Charles Schwab Corp. 21,600 2,373
(a) Concord EFS, Inc. 17,700 749
(a) Consolidated Graphics, Inc. 30,000 1,500
(a) DeVry, Inc. 16,200 362
HARSCO Corp. 5,300 170
(a) Interim Services, Inc. 7,800 161
John Wiley & Sons, Inc. "A" 23,600 416
Kelly Services, Inc. "A" 13,000 418
Paychex, Inc. 11,100 354
SEI Investments Co. 6,800 600
Service Corp. International 6,900 133
Standard Register Co. 18,100 557
(a) Swift Transportation Co.,
Inc. 19,200 422
Total System Services, Inc. 14,100 268
Wallace Computer Services,
Inc. 19,000 475
-----------------------------------------------------
12,545
TECHNOLOGY--15.7%
(a) BMC Software, Inc. 13,500 729
(a) Citrix Systems, Inc. 27,400 1,548
(a) Computer Sciences Corp. 15,300 1,059
(a) Compuware Corp. 23,400 744
Dallas Semiconductor Corp. 15,300 773
(a) Dell Computer Corp. 33,400 1,236
(a) EMC Corp. 9,800 539
(a) Gateway, Inc. 10,100 596
Intel Corp. 45,000 2,678
(a) Intuit, Inc. 8,800 793
(a) Jabil Circuit 26,000 1,173
Jack Henry & Associates, Inc. 12,300 483
(a) Legato Systems, Inc. 14,500 837
(a) Microsoft Corp. 31,800 2,868
National Computer Corp. 13,700 462
(a) Network Appliance, Inc. 8,800 492
(a) Orbital Sciences Corp. 4,400 104
(a) PE Corp.-Celera Genomics 2,550 41
(a) QLogic Corp. 8,200 1,082
Reynolds and Reynolds Co. 34,500 804
(a) Smart Modular Technologies 12,800 222
(a) Solectron Corp. 18,400 1,227
(a) Sun Microsystems, Inc. 16,000 1,102
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TECHNOLOGY--CONTINUED
Symbol Technologies, Inc. 18,150 $ 669
(a) Tech Data Corp. 22,000 841
(a) Veritas Software 12,900 1,225
(a) Xilinx, Inc. 16,000 916
-----------------------------------------------------
25,243
TRANSPORTATION--2.3%
Alexander & Baldwin, Inc. 22,700 505
Comair 11,700 244
CSX Corp. 21,500 974
Delta Air Lines, Inc. 16,600 957
Trinity Industries, Inc. 14,900 499
Werner Enterprises, Inc. 25,000 519
-----------------------------------------------------
3,698
UTILITIES--6.6%
Allegheny Energy, Inc. 11,500 369
Carolina Power & Light Co. 35,600 1,524
Consolidated Edison, Inc. 15,700 710
FirstEnergy Corp. 49,600 1,538
Florida Progress Corp. 53,600 2,214
KeySpan Corp. 12,500 330
New England Electric System 22,600 1,133
ONEOK, Inc. 32,600 1,035
Western Resources, Inc. 65,500 1,744
-----------------------------------------------------
10,597
-----------------------------------------------------
TOTAL COMMON STOCKS--97.4%
(Cost: $133,233) 156,649
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99 $ 143 143
Commercial paper
Yield--4.99% to 5.07%
Due--July 1999 4,000 3,995
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--2.6%
(Cost: $4,137) 4,138
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $137,370) $160,787
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER VALUE+GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by the U.S. Treasury or
Government securities. The collateral is monitored daily by the portfolio so
that its market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $137,370,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $30,961,000, the gross
unrealized depreciation was $7,544,000 and the net unrealized appreciation on
investments was $23,417,000.
See accompanying Notes to Financial Statements.
76
<PAGE> 79
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER HORIZON 20+ PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
GOVERNMENT NUMBER
OBLIGATIONS OF SHARES VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES--19.2%
Notes 7.50%, 1999 $ 100 $ 101
8.875%, 2000 250 258
8.50%, 2000 800 829
6.75%, 2000 799 808
5.50%, 2000 875 875
6.50%, 2001 1,560 1,587
6.625%, 2001 1,900 1,939
6.25%, 2002 580 589
7.875%, 2004 261 286
-----------------------------------------------------
7,272
MORTGAGE BACKED SECURITIES--.8%
FNMA 6.01%, 2000 150 151
FHLMC 6.00%, 2006 32 32
FHLMC 6.50%, 2014 107 108
GNMA 7.00%, 2015 20 20
-----------------------------------------------------
311
-----------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--20.0%
(Cost: $7,661) 7,583
-----------------------------------------------------
</TABLE>
<TABLE>
COMMON STOCKS
<S> <C> <C>
COMMUNICATIONS--3.2%
ADC Telecommunications, Inc. 11,300shs. 515
Alcatel Sel AG 369 59
Ameritech Corp. 1,300 96
AT&T Corp. 750 42
BellSouth Corp. 7,600 356
British Telecom PLC 7,600 127
(a) Telecom Italia SpA 2,700 28
-----------------------------------------------------
1,223
CONSUMER DISCRETIONARY--8.7%
(a) American Eagle Outfitters,
Inc. 1,000 46
Ames Department Stores, Inc. 3,700 169
(a) AutoZone, Inc. 1,800 54
Avis Rent A Car, Inc. 1,400 41
Best Buy Co., Inc. 3,000 203
Brown Shoe Company, Inc. 1,360 30
(a) Burlington Coat Factory
Warehouse Corp. 5,500 106
(a) Cellstar Corp. 6,000 47
Coachmen Industries, Inc. 200 5
Dillard's, Inc. 4,300 151
Douglas Holding AG 200 9
(a) Electronic Arts, Inc. 1,000 54
Family Dollar Stores, Inc. 5,000 120
(a) Friedman's Inc. "A" 1,400 12
(a) Genesco, Inc. 13,500 197
(a) Hartmarx Corp. 10,000 42
Home Depot, Inc 1,200 77
(a) Jones Apparel Group, Inc. 7,756 266
Kingfisher, PLC 17,200 201
(a) Kmart Corp. 3,800 62
Liz Claiborne, Inc. 1,500 55
(a) Lone Star Steakhouse/Saloon 1,340 13
Longs Drug Stores, Inc. 600 21
May Department Stores 900 37
(a) Men's Wearhouse, Inc. 2,100 54
(a) Neiman Marcus Group, Inc. 2,000 51
Newell Rubbermaid, Inc. 3,200 149
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
CONTINUED
Pillowtex Corp. 1,300 $ 21
(a) Ryan's Family Steak Houses,
Inc. 19,200 222
(a) The Finish Line, Inc. "A" 3,700 42
W.H. Smith Group, PLC 11,600 111
Wal-Mart Stores, Inc. 8,600 415
(a) Wet Seal, Inc. "A" 7,200 206
-----------------------------------------------------
3,289
CONSUMER STAPLES--5.2%
Adolph Coors Company 900 45
American Greeting Corp. "A" 2,400 72
Bass PLC 5,200 75
(a) Chattem, Inc. 2,800 89
ConAgra, Inc. 5,000 133
Farmer Brothers Co. 600 120
IBP, Inc. 2,000 48
Imperial Tobacco Group, PLC 28,900 317
Koninklijke Ahold NV 4,298 149
Michael Foods, Inc. 2,700 63
Philip Morris Companies, Inc. 6,000 241
Seaboard Corp. 100 34
SEITA 2,600 151
(a) Sola International, Inc. 2,300 45
Supervalue, Inc. 2,100 54
Universal Corp. 5,000 142
UST, Inc. 6,200 181
-----------------------------------------------------
1,959
DURABLES--2.9%
Borg-Warner Automotive, Inc. 450 25
(a) Ducommun, Inc. 5,200 62
Ford Motor Co. 2,900 164
GenCorp, Inc. 3,500 88
GKN PLC 29,900 511
Honda Motor Co., Ltd. 2,000 85
(a) Tower Automotive, Inc. 600 15
United Technologies Corp. 2,400 172
-----------------------------------------------------
1,122
ENERGY--2.1%
Ashland, Inc. 900 36
Compania Espanola de
Petroleos SA 400 12
El Paso Energy Corporation 1,500 53
Ente Nazionale Idrocarburi
SpA 48,600 291
Repsol SA 9,660 199
(a) Veritas DGC, Inc. 10,800 198
-----------------------------------------------------
789
FINANCIAL--20.1%
A.G. Edwards, Inc. 6,600 213
ABN AMRO Holding NV 3,500 76
Aetna, Inc. 3,200 286
AFLAC, Inc. 1,800 86
AMBAC Financial Group, Inc. 2,500 143
American General Corp. 1,000 75
Assicurazioni Generali 700 24
AXA SA 2,000 245
Banc One Corp. 1,094 65
</TABLE>
77
<PAGE> 80
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
Bank of America Corp. 7,514 $ 551
Bank of Nova Scotia 2,100 48
Banque Nationale de Paris 2,200 184
Bear Stearns Companies, Inc. 2,520 118
Capital One Finance Corp. 1,200 67
Chase Manhattan Corp. 2,300 199
China Resources Enterprises,
Ltd. 35,000 62
Christiania Bank og
Kreditkasse 15,200 55
Cigna Corp. 600 53
Citigroup, Inc. 12,750 606
Compagnie Financiere de
Paribas 1,200 135
Compagnie Financiere
Richemont AG 200 386
Dah Sing Financial Group 18,000 69
Dime Bancorp, Inc. 2,100 42
Dresdner Bank AG 900 35
Executive Risk, Inc. 300 26
Federal Home Loan Mortgage
Corp. 1,500 87
Federal National Mortgage
Association 4,500 307
Fleet Financial Group, Inc. 4,000 178
Golden West Financial Corp. 400 39
GreenPoint Financial Corp. 3,500 115
Hang Seng Bank, Ltd. 1,400 16
Hartford Financial Services
Group, Inc. 2,200 128
Heller Financial, Inc. 7,600 211
ING Groep NV 2,820 153
Jefferson Pilot Corp. 1,325 88
KeyCorp 600 19
Legg Mason, Inc. 3,200 122
Merrill Lynch & Co., Inc. 1,200 96
Morgan Stanley, Dean Witter
Discover Co. 2,000 205
National Bank of Canada 5,800 76
PNC Bank Corp. 800 46
Protective life Corp. 1,700 56
Raymond James Financial, Inc. 15,600 373
Resource Bancshares Mortgage
Group, Inc. 1,890 19
Sakura Bank, Ltd. 66,000 250
SLM Holding Corp. 5,600 257
Societe Generale 200 35
St. George Bank, Ltd. 41,000 286
Stewart Information Services
Corp. 1,400 30
The Mitsui Trust & Banking
Co., Ltd. 154,000 246
Torchmark Corp. 2,100 72
Washington Mutual, Inc. 2,184 77
XL Capital Ltd. "A" 3,751 212
-----------------------------------------------------
7,648
HEALTH--8.9%
Abbott Laboratories 3,000 137
(a) Amgen, Inc. 2,700 164
(a) Biogen, Inc. 2,200 141
C.R. Bard, Inc. 7,300 349
Cardinal Health, Inc. 2,900 186
(a) Express Scripts, Inc. "A" 1,300 78
(a) Hanger Orthopedic Group, Inc. 8,900 126
(a) HealthSouth Corp. 7,100 106
Johnson & Johnson 2,600 255
McKesson HBOC, Inc. 800 $ 26
Medtronic, Inc. 4,672 364
Merck & Co., Inc. 5,400 400
(a) NBTY, Inc. 8,600 56
Suzuken Co., LTD 4,000 112
(a) Trigon Healthcare, Inc. 3,000 109
(a) Universal Health Services,
Inc. 1,700 81
(a) VISX, Inc. 7,100 562
(a) Wellpoint Health Networks,
Inc. 1,400 119
-----------------------------------------------------
3,371
MANUFACTURING--8.5%
Akzo Nobel NV 1,600 68
(a) Albany International Corp.
"A" 102 2
(a) Alliant Techsystems, Inc. 500 43
Ball Corporation 3,600 152
BASF AG 9,400 417
Carlisle Companies, Inc. 1,700 82
Columbus McKinnon Corp. 3,800 91
Cooper Industries, Inc. 1,100 57
Dow Chemical Co. 500 63
(a) Fairchild Corp. "A" 8,000 102
FPB Holding AG 966 162
General Binding Corp. 2,500 59
Hillenbrand Industries, Inc. 2,100 91
Hon Industries, Inc. 13,500 394
Man AG 2,000 69
Minnesota Mining &
Manufacturing Co. 800 70
MotivePower Industries, Inc. 1,500 27
(a) MSC Industrial Direct Co.,
Inc. 2,800 29
(a) Mueller Industries, Inc. 8,700 295
Okuma Corp. 28,000 130
Praxair, Inc. 1,600 78
Reliance Steel & Aluminum Co. 1,700 66
Rohm & Haas Co. 2,000 86
RTI International Metals,
Inc. 4,400 65
Scana Corp. 3,700 87
(a) Shaw Group, Inc. 1,100 17
(a) SLI, Inc. 4,300 116
Teleflex Incorporated 1,300 56
(b) UPM-Kymmene OYJ 4,300 134
Valhi, Inc. 10,100 112
(a) Wyman-Gordon Co. 400 8
-----------------------------------------------------
3,228
MEDIA--.1%
(a) Viacom, Inc. "B" 1,200 53
-----------------------------------------------------
METALS AND MINERALS--3.1%
AK Steel Holding Corp. 910 20
Alcan Aluminium, Ltd. 5,500 175
Allegheny Teledyne, Inc. 2,100 48
AMCOL International Corp. 1,815 26
Bethlehem Steel Corp. 9,400 72
Blount International, Inc. 1,460 40
(a) Boliden Limited 4,767 11
(a) Del Webb Corp. 1,230 29
Elcor Corp. 500 22
Genlyte Group, Inc. 1,900 43
Grupo Dragados SA 2,100 25
Holderbank Financiere Glaris
AG 100 119
</TABLE>
78
<PAGE> 81
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
LaFarge Corp. 2,000 $ 71
Maeda Road Construction Co.,
Ltd. 7,000 47
Standard Pacific Corp. 25,000 323
Sumitomo Osaka Cement Co.,
Ltd. 9,000 18
Taiheiyo Cement Corp. 27,000 77
-----------------------------------------------------
1,166
SERVICE INDUSTRIES--2.4%
(a) Affiliated Computer Services 4,300 218
Granada Group, PLC 3,700 69
Hanson, PLC 7,800 70
Kelly Services, Inc. "A" 2,700 87
(a) Mail-Well, Inc. 6,900 112
(a) Personnel Group of America,
Inc. 7,000 70
(a) Pomeroy Computer Resources,
Inc. 5,400 75
(a) Thermo Ecotek Corporation 3,200 26
United Utilities, PLC 7,100 86
(a) US Oncology, Inc. 7,000 84
-----------------------------------------------------
897
TECHNOLOGY--6.5%
(a) CHS Electronics, Inc. 7,800 34
Computer Associates
International, Inc. 2,000 110
(a) Computer Sciences Corp. 2,800 194
(a) Compuware Corp. 5,500 175
(a) Comverse Technologies, Inc. 5,550 419
(a) Gateway, Inc. 1,000 59
Intel Corp. 6,800 405
Linear Technology Corp. 6,000 404
(a) MTI Technology Corp. 10,900 142
(a) Quantum Corp. 2,400 58
Raytheon Co. "B" 900 63
Reynolds and Reynolds Company 6,300 147
SAP AG (pfd.) 100 40
(a) Synopsys, Inc. 4,300 237
-----------------------------------------------------
2,487
TRANSPORTATION--1.5%
Air New Zealand, Ltd. "B" 51,100 $ 106
Comair 3,800 79
Roadway Express, Inc. 4,700 91
SAirGroup 300 63
Tranz Rail Holdings, (ADR) 52,000 89
Trinity Industries, Inc. 3,470 116
(a) U.S. Xpress Enterprises, Inc.
"A" 3,200 34
-----------------------------------------------------
578
UTILITIES--6.8%
(a) AES Corp. 2,100 122
Aquarion Co. 2,850 99
Black Hills Corp. 2,600 60
(a) Calpine Corporation 7,000 378
Central Hudson Gas & Electric
Co. 900 38
Chugoku Electric Power Co.,
Inc. 14,400 219
Columbia Energy Group 1,150 72
(a) El Paso Electric Co. 10,500 94
Electrabel NPV 400 130
Empire District Electric
Company 7,100 185
FPL Group, Inc. 1,200 66
Northwestern Corp. 14,800 358
Scottish Power, PLC 2,300 20
Shikoku Electric Power Co.,
Inc. 19,300 291
Texas Utilities Co., Inc. 2,100 87
TNP Enterprises, Inc. 700 25
Tohoku Electric Power Co.,
Inc. 19,300 292
WPS Resources Corp. 1,700 51
-----------------------------------------------------
2,587
-----------------------------------------------------
TOTAL COMMON STOCKS--80.0%
(Cost: $26,774) 30,397
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $34,435) $37,980
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER HORIZON 20+ PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $134,000 (0.34% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at June 30, 1999 aggregated $117,000.
Based on the cost of investments of $34,435,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $4,841,000, the gross
unrealized depreciation was $1,296,000 and the net unrealized appreciation on
investments was $3,545,000.
See accompanying Notes to Financial Statements.
79
<PAGE> 82
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER HORIZON 10+ PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
GOVERNMENT NUMBER
OBLIGATIONS OF SHARES VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES--36.7%
Notes 8.50%, 2000 $ 870 $ 888
6.75%, 2000 3,165 3,202
8.875%, 2000 1,178 1,214
8.50%, 2000 1,100 1,144
5.50%, 2000 1,700 1,701
5.375%, 2001 1,200 1,198
8.00%, 2001 1,000 1,043
6.50%, 2001 4,040 4,111
6.625%, 2001 2,650 2,705
6.25%, 2002 5,920 6,009
7.875%, 2004 750 820
----------------------------------------------------
24,035
MORTGAGE BACKED SECURITIES--1.3%
FNMA 6.01%, 2000 500 502
FHLMC 6.00%, 2006 104 105
FHLMC 6.50%, 2014 230 231
GNMA 7.00%, 2015 51 51
----------------------------------------------------
889
TOTAL GOVERNMENT OBLIGATIONS--38.0%
(Cost: 25,263) 24,924
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS
<S> <C> <C>
COMMUNICATIONS--2.8%
ADC Telecommunications, Inc. 10,700shs. 488
Ameritech Corp. 6,200 456
BCE, Inc. 4,600 225
BellSouth Corp. 8,000 375
British Telecom PLC 8,300 139
Oki Electric Industry Company 24,000 95
(a) Telecom Italia SpA 5,900 62
------------------------------------------------------
1,840
CONSTRUCTION--.9%
Blount International, Inc. 2,180 59
(a) Del Webb Corp. 1,800 43
Elcor Corp. 800 35
Holderbank Financiere Glaris
AG 300 356
Pioneer International, Ltd. 16,200 42
Pulte Corp. 900 21
------------------------------------------------------
556
CONSUMER DISCRETIONARY--7.3%
Ames Department Stores, Inc. 2,800 128
(a) AutoZone, Inc. 3,500 105
Brown Shoe Company, Inc. 2,000 44
(a) Burlington Coat Factory
Warehouse Corp. 4,500 87
Canadian Tire Corporation 400 12
Carrefour SA 486 72
(a) Central Garden & Pet Co. 2,800 29
Dillard's, Inc. 5,500 193
Douglas Holding AG 200 9
Family Dollar Stores, Inc. 5,100 122
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
CONSUMER DISCRETIONARY--CONTINUED
(a) Federated Department Stores,
Inc. 1,700 $ 90
(a) Finlay Enterprises, Inc. 6,600 88
(a) Foodmaker, Inc. 10,700 304
(a) Friedman's, Inc., "A" 1,985 17
(a) Genesco, Inc. 33,600 489
(a) Goody's Family Clothing, Inc. 9,000 103
(a) Hartmarx Corp. 12,700 53
Home Depot, Inc. 10,700 689
(a) Jones Apparel Group, Inc. 7,904 271
Kingfisher, PLC 17,800 208
(a) Lone Star Steakhouse/Saloon 1,950 19
Longs Drug Stores, Inc. 1,300 45
May Department Stores 450 18
(a) Men's Wearhouse, Inc. 1,950 50
(a) Neiman Marcus Group, Inc. 2,000 51
Newell Rubbermaid, Inc. 2,000 93
(a) Ryan's Family Steak Houses,
Inc. 26,700 310
(a) The Finish Line, Inc. "A" 4,400 50
W.H. Smith Group, PLC 37,600 362
Wal-Mart Stores, Inc. 11,000 531
(a) Wet Seal, Inc. "A" 4,700 135
------------------------------------------------------
4,777
CONSUMER STAPLES--3.7%
American Greeting Corp. "A" 3,300 99
Bass PLC 3,000 44
(a) Chattem, Inc. 3,000 95
Etablissements Economiques du
Casino Guichard-Perrachon SA 2,700 238
Farmer Brothers Co. 300 60
Imperial Tobacco Group, PLC 31,000 340
Michael Foods, Inc. 14,600 343
Philip Morris Companies, Inc. 9,500 382
SEITA 1,300 75
Supervalue, Inc. 2,800 72
Universal Corp. 5,500 156
UST, Inc. 6,000 176
VF Corporation 8,500 363
------------------------------------------------------
2,443
DURABLES--2.4%
AlliedSignal, Inc. 3,400 214
Borg-Warner Automotive, Inc. 3,440 189
Ford Motor Co. 5,600 316
GKN, PLC 1,900 32
Magna International, Inc. "A" 400 23
Renault SA 800 35
(a) Tower Automotive, Inc. 1,600 41
United Technologies Corp. 3,800 272
Yamaha Motor Co., Ltd. 48,000 446
------------------------------------------------------
1,568
ENERGY--3.9%
AK Steel Holding Corp. 4,750 107
AMCOL International Corp. 2,625 38
Coastal Corp. 2,100 84
</TABLE>
80
<PAGE> 83
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
ENERGY--CONTINUED
Compania Espanola de Petroleos
SA 2,900 $ 86
Ente Nazionale Idrocarburi SpA 58,200 349
MAXXAM, Inc. 7,500 484
PetroFina SA 400 231
(a) Pool Energy Services Co. 26,500 538
Repsol SA 8,880 183
Scottish & South Energy 33,900 347
(a) Veritas DGC, Inc. 5,200 95
------------------------------------------------------
2,542
FINANCIAL--14.1%
A.G. Edwards, Inc. 2,000 64
ABN AMRO Holding NV 7,700 167
Aetna, Inc. 3,200 286
AFLAC, Inc. 1,400 67
AMBAC Financial Group, Inc. 4,000 228
American General Corp. 1,800 136
AXA SA 1,700 208
Banc One Corp. 1,799 107
Bank of America Corp. 10,464 767
Banque Nationale de Paris 1,100 92
Bear Stearns Companies, Inc. 5,250 245
BHF-Bank AG 1,600 55
(a) Catellus Development Corp. 8,200 127
Chase Manhattan Corp. 3,900 338
China Resources Enterprises,
Ltd. 44,000 78
Christiania Bank og
Kreditkasse 19,200 69
Cigna Corp. 900 80
Citigroup, Inc. 16,350 777
Compagnie Financiere de
Paribas 600 68
Compagnie Financiere Richemont
AG 200 386
Corporacion Mapfre SA 2,700 55
Dah Sing Financial Group 34,000 130
Dime Bancorp, Inc. 2,600 52
Dresdner Bank AG 1,900 74
Executive Risk, Inc. 400 34
Federal Home Loan Mortgage
Corp. 9,500 551
Federal National Mortgage
Association 4,800 328
Fleet Financial Group, Inc. 5,800 257
GreenPoint Financial Corp. 2,300 75
Hang Seng Bank, Ltd. 19,100 214
Hartford Financial Services
Group, Inc. 4,100 239
Heller Financial, Inc. 5,200 145
ING Groep NV 4,287 233
Jefferson Pilot Corp. 2,150 142
KeyCorp 400 13
Legg Mason, Inc. 3,300 127
Man Group, PLC 5,800 33
Morgan Stanley, Dean Witter
Discover Co. 1,300 133
National Bank of Canada 3,100 41
Pacific Century Financial
Corp. 3,200 69
PNC Bank Corp. 900 52
Protective life Corp. 1,500 49
Resource America, Inc. "A" 7,600 110
Resource Bancshares Mortgage
Group, Inc. 2,656 27
Sakura Bank, Ltd. 103,000 $ 391
Skandia Forsakrings AB 6,200 117
SLM Holding Corp. 7,100 325
Societe Generale 500 88
St. George Bank, Ltd. 29,400 205
Stewart Information Services
Corp. 5,000 106
The Mitsui Trust & Banking
Co., Ltd. 130,000 207
Torchmark Corp. 2,100 72
Toronto-Dominion Bank 2,000 91
Washington Mutual, Inc. 2,184 77
-----------------------------------------------------
9,207
HEALTH--6.4%
(a) Amgen, Inc. 7,800 475
Bindley Western Industries,
Inc. 6,000 138
(a) Biogen, Inc. 2,200 141
C.R. Bard, Inc. 8,700 416
Cardinal Health, Inc. 4,740 304
(a) Express Scripts Inc. "A" 1,600 96
(a) Hanger Orthopedic Group, Inc. 8,700 123
(a) Lincare Holdings, Inc. 2,100 52
(a) Maxxim Medical, Inc. 4,200 98
Merck & Co., Inc. 10,100 747
(a) NBTY, Inc. 11,200 73
Omnicare, Inc. 2,900 37
Shared Medical Systems Corp. 1,400 91
Suzuken Co., Ltd 11,400 320
(a) Trigon Healthcare, Inc. 3,100 113
(a) Universal Health Services,
Inc. 4,000 191
(a) VISX, Inc. 8,000 634
(a) Wellpoint Health Networks,
Inc. 1,400 119
-----------------------------------------------------
4,168
MANUFACTURING--5.6%
Akzo Nobel NV 4,400 186
(a) Albany International Corp. "A" 102 2
Ball Corporation 7,800 330
BASF AG 9,200 408
Bayer AG 2,300 96
Carlisle Companies, Inc. 2,500 120
Cooper Industries, Inc. 1,600 83
Dow Chemical Co. 600 76
(a) Fairchild Corp. "A" 9,700 124
FPB Holding AG 1,671 281
Gleason Corp. 4,500 76
Hillenbrand Industries, Inc. 2,200 95
Ingersoll-Rand Co. 1,400 90
Kawasaki Heavy Industries,
Ltd. 15,000 41
Man AG 2,000 69
NSK, Ltd. 8,000 44
Okuma Corp. 17,000 79
Pentair, Inc. 2,100 96
Praxair, Inc. 3,800 186
Scana Corp. 10,500 245
(a) Shaw Group, Inc. 1,600 25
Sherwin-Williams Co. 2,700 75
(a) SLI, Inc. 2,200 59
Thomas & Betts Corp. 2,200 104
</TABLE>
81
<PAGE> 84
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
MANUFACTURING--CONTINUED
(c) UPM-Kymmene OYJ 8,100 $ 252
Valhi, Inc. 13,800 154
Williams, PLC 13,800 91
(a) Wyman-Gordon Co. 600 12
Xerox Corp. 3,200 189
------------------------------------------------------
3,688
SERVICE INDUSTRIES--2.0%
(a) Affiliated Computer Services 1,900 96
Hanson, PLC 13,600 122
(a) Mail-Well, Inc. 3,600 58
Merrill Lynch & Co., Inc. 1,100 88
Paine Webber Group, Inc. 1,900 89
(a) Personnel Group of America,
Inc. 9,500 95
(a) Pomeroy Computer Resources,
Inc. 8,500 118
Raymond James Financial, Inc. 17,600 421
Reed International, PLC 7,800 52
United Utilities, PLC 7,300 89
(a) US Oncology, Inc. 8,700 104
------------------------------------------------------
1,332
TECHNOLOGY--5.8%
(a) Alliant Techsystems, Inc. 2,000 173
(a) BMC Software, Inc. 3,400 184
(a) CHS Electronics, Inc. 15,500 68
Computer Associates
International, Inc. 400 22
(a) Computer Sciences Corp. 6,840 473
(a) Gateway, Inc. 1,300 77
Intel Corp. 12,600 750
(a) Jabil Circuit 1,300 59
Linear Technology Corp. 5,700 383
(a) MTI Technology Corp. 11,500 150
Primex Technologies, Inc. 5,600 121
Reynolds and Reynolds Co. 8,000 187
SAP AG (pfd.) 200 80
(a) SCI Systems, Inc. 1,800 86
Scientific-Atlanta, Inc. 7,300 263
STMicroelectronics 1,400 94
(a) Synopsys, Inc. 7,600 419
(a) Tech Data Corp. 4,800 184
------------------------------------------------------
3,773
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TRANSPORTATION--2.3%
Air New Zealand Ltd. "B" 113,400 $ 236
Atlantic Coast Airlines
Holdings 9,100 173
Comair Holdings, Inc. 13,000 271
(a) Groupe Air France 3,700 66
Qantas Airways, Ltd. 19,200 64
Railtrack Group, PLC 6,800 139
Roadway Express, Inc. 5,800 112
SAS Norge ASA 2,600 24
Tranz Rail Holdings, (ADR) 33,900 58
Trinity Industries, Inc. 7,830 262
USFreightways Corp. 2,300 107
------------------------------------------------------
1,512
UTILITIES--3.7%
(a) AES Corp. 1,900 110
Aquarion Co. 13,200 459
Black Hills Corp. 2,200 51
Central Hudson Gas & Electric
Co. 1,900 80
Chugoku Electric Power Co.,
Inc. 20,200 307
Columbia Energy Group 1,750 110
Electrabel NPV 600 194
FPL Group, Inc. 500 27
Kyushu Electric Power Co. 19,500 300
Northwestern Corp. 16,400 397
Scottish Power, PLC 7,600 66
Suez Lyonnaise des Eaux 500 91
Texas Utilities Co., Inc. 4,000 165
TNP Enterprises, Inc. 1,900 69
Yorkshire Water 4,000 28
------------------------------------------------------
2,454
------------------------------------------------------
TOTAL COMMON STOCKS--60.9%
(Cost: $35,692) 39,860
------------------------------------------------------
MONEY MARKET INSTRUMENTS--1.1%
(b) Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99
(Cost: $732) $ 732 732
------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $61,687) $65,516
------------------------------------------------------
</TABLE>
NOTES TO KEMPER HORIZON 10+ PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $252,000 (0.38% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at June 30, 1999 aggregated $218,000.
Based on the cost of investments of $61,687,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $5,796,000, the gross
unrealized depreciation was $1,967,000 and the net unrealized appreciation on
investments was $3,829,000.
See accompanying Notes to Financial Statements.
82
<PAGE> 85
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER HORIZON 5 PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
GOVERNMENT NUMBER OF
OBLIGATIONS SHARES VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES--54.8%
Notes 5.875%, 2000 $ 340 $ 341
6.75%, 2000 3,049 3,085
8.875%, 2000 1,470 1,515
8.50%, 2000 1,750 1,820
5.50%, 2000 300 300
5.375%, 2001 1,000 998
8.00%, 2001 573 598
6.50%, 2001 2,610 2,656
6.625%, 2001 4,150 4,236
6.125%, 2001 975 987
6.25%, 2002 4,770 4,842
7.875%, 2004 650 711
-----------------------------------------------------
22,089
MORTGAGE BACKED SECURITIES--4.2%
FNMA 6.01%, 2000 350 351
FNMA 5.625%, 2004 1,120 1,095
FHLMC 6.00%, 2006 66 67
FHLMC 6.50%, 2014 141 142
GNMA 7.00%, 2015 47 47
-----------------------------------------------------
1,702
-----------------------------------------------------
TOTAL GOVERNMENT OBLIGATIONS--59.0%
(Cost: $24,122) 23,791
-----------------------------------------------------
</TABLE>
<TABLE>
COMMON STOCKS
<S> <C> <C>
COMMUNICATIONS--.9%
ADC Telecommunications, Inc. 3,800shs. 173
Alltel Corp. 700 50
BellSouth Corp. 800 38
British Telecom, PLC 2,200 37
Oki Electric Industry Company 3,000 12
SBC Communications, Inc. 700 41
-----------------------------------------------------
351
CONSUMER DISCRETIONARY--4.5%
Ames Department Stores, Inc. 5,600 256
(a) AutoZone, Inc. 1,700 51
Brown Shoe Company, Inc. 730 16
(a) Burlington Coat Factory
Warehouse Corp. 3,300 64
Canadian Tire Corporation 800 23
Coachmen Industries, Inc. 1,000 23
Dillard's, Inc. 2,500 88
Douglas Holding AG 100 5
Family Dollar Stores, Inc. 1,800 43
(a) Friedman's, Inc.,"A" 740 6
(a) Garden Ridge Corporation 9,700 46
(a) Genesco, Inc. 12,700 185
Home Depot, Inc. 2,700 174
(a) Jones Apparel Group, Inc. 3,002 103
(a) Lone Star Steakhouse/Saloon 705 7
Longs Drug Stores, Inc. 2,300 79
May Department Stores 300 12
(a) Men's Wearhouse, Inc. 750 19
Metro AG 400 25
(a) Neiman Marcus Group, Inc. 1,600 41
Newell Rubbermaid, Inc. 1,300 60
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
CONSUMER DISCRETIONARY--CONTINUED
(a) Ryan's Family Steak Houses,
Inc. 10,600 $ 123
(a) The Finish Line, Inc. "A" 1,800 20
W.H. Smith Group, PLC 3,400 33
Wal-Mart Stores, Inc. 4,400 211
(a) Wet Seal, Inc. "A" 1,800 52
Wolseley, PLC 4,900 37
-----------------------------------------------------
1,803
CONSUMER STAPLES--2.9%
American Greeting Corp., "A" 1,200 36
(a) Chattem, Inc. 1,900 60
ConAgra, Inc. 2,500 67
Farmer Brothers Co. 200 40
Gallaher Group, PLC 4,800 30
Imperial Tobacco Group, PLC 16,300 179
Michael Foods, Inc. 3,600 85
Philip Morris Companies, Inc. 3,200 129
Seagram Co., Ltd. 300 15
SEITA 2,400 139
SUPERVALU, Inc. 1,000 26
Universal Corp. 2,900 82
UST, Inc. 3,800 111
VF Corporation 3,800 162
-----------------------------------------------------
1,161
CONSTRUCTION--1.0%
Blount International, Inc. 800 22
(a) Del Webb Corp. 650 16
Elcor Corp. 200 9
Genlyte Group, Inc. 7,700 173
Grupo Dragados, SA 14
Holderbank Financiere Glaris
AG 100 119
Taiheiyo Cement Corp. 6,000 17
Vulcan Materials Co. 600 29
-----------------------------------------------------
399
DURABLES--1.5%
AlliedSignal, Inc. 900 57
Borg-Warner Automotive, Inc. 840 46
DaimlerChrysler AG 300 26
(a) Ducommun, Inc. 900 11
Fiat SpA 12,100 38
Ford Motor Co. 2,200 124
GKN PLC 10,000 171
Magna International, Inc. "A" 100 6
(a) Tower Automotive, Inc. 1,000 25
United Technologies Corp. 1,000 72
-----------------------------------------------------
576
ENERGY--1.0%
BG, PLC 8,500 52
Ente Nazionale Idrocarburi SpA 18,400 110
National-Oilwell, Inc. 1,500 19
Repsol SA 4,470 92
Tosco Corporation 1,000 26
(a) Veritas DGC, Inc. 5,100 93
-----------------------------------------------------
392
</TABLE>
83
<PAGE> 86
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
FINANCIAL--9.7%
A.G. Edwards, Inc. 4,300 $ 139
ABN AMRO Holding NV 3,900 85
Aetna, Inc. 1,100 98
Allamerica Financial Corp. 1,100 67
American General Corp. 600 45
American International Group,
Inc. 200 23
Assurances Generales de France 300 15
AXA SA 515 63
Banc One Corp. 653 39
Bank of America Corp. 4,300 315
Banque Nationale de Paris 1,900 159
Bear Stearns Companies, Inc. 2,310 108
BHF-Bank AG 500 17
Chase Manhattan Corp. 1,600 139
China Resources Enterprises,
Ltd. 23,000 41
Christiania Bank og
Kreditkasse 7,500 27
Citigroup, Inc. 6,300 299
Corporacion Mapfre SA 900 18
Dah Sing Financial Group 5,000 19
DBS Land, Ltd. 23,000 46
Deutsche Pfandbrief-und-
Hypothekenbank AG 300 27
Dresdner Bank AG 500 20
Executive Risk, Inc. 200 17
Federal Home Loan Mortgage
Corp. 3,400 197
Federal National Mortgage
Association 2,900 198
Fleet Financial Group, Inc. 700 31
Hang Seng Bank, Ltd. 2,400 27
Hartford Financial Services
Group, Inc. 2,400 140
Heller Financial, Inc. 1,800 50
ING Groep NV 2,051 111
(a) Istituto Nazionale delle
Assicurazione 15,300 36
Jefferson Pilot Corp. 775 51
KeyCorp 400 13
Man Group, PLC 8,900 51
Merrill Lynch & Co., Inc. 400 32
Morgan Stanley, Dean Witter
Discover Co. 500 51
National Bank of Canada 1,800 24
Pacific Century Financial
Corp. 1,300 28
PNC Bank Corp. 500 29
Progressive Corp. 400 58
Protective Life Corp. 600 20
Provident Financial Group 600 26
Raymond James Financial, Inc. 6,800 163
Resource Bancshares Mortgage
Group, Inc. 945 10
Royal Bank of Canada 100 4
Sakura Bank, Ltd. 18,000 68
Skandia Forsakrings AB 3,100 58
SLM Holding Corp. 2,600 119
Societe Generale 100 18
St. George Bank, Ltd. 21,500 150
Stewart Information Services
Corp. 4,400 93
The Mitsui Trust & Banking
Co., Ltd. 69,000 110
Torchmark Corp. 700 24
Toronto-Dominion Bank 500 23
Wing Hang Bank, Ltd. 4,000 13
Woolwich, PLC 8,900 52
XL Capital Ltd. "A" 183 10
-----------------------------------------------------
3,914
HEALTH--4.3%
Abbott Laboratories 1,200 $ 55
(a) Amgen, Inc. 3,700 225
Bindley Western Industries,
Inc. 2,000 46
(a) Biogen, Inc. 800 51
Bio-Rad Laboratories, Inc. "A" 1,000 26
C.R. Bard, Inc. 3,500 167
Cardinal Health, Inc. 900 58
Chugai Pharmaceutical Co.,
Ltd. 3,000 32
(a) Hanger Orthopedic Group, Inc. 4,600 65
(a) HealthSouth Corp. 3,300 49
(a) Maxxim Medical, Inc. 1,400 33
Merck & Co., Inc. 2,700 200
(a) NBTY, Inc. 6,600 43
Novartis AG 14 21
Shinonogi 3,000 24
Suzuken Co., Ltd. 2,500 70
(a) Trigon Healthcare, Inc. 2,800 102
(a) Universal Health Services,
Inc. 2,700 129
(a) VISX, Inc. 3,200 253
(a) Wellpoint Health Networks,
Inc. 900 76
-----------------------------------------------------
1,725
MANUFACTURING--5.0%
Akzo Nobel NV 1,000 42
(a) Alliant Techsystems, Inc. 1,800 156
Ball Corporation 3,200 135
BASF AG 3,000 133
Columbus McKinnon Corp. 4,500 108
Dow Chemical Co. 200 25
(a) Fairchild Corp. "A" 3,600 46
FPB Holding AG 595 100
Hillenbrand Industries, Inc. 1,900 82
Hon Industries, Inc. 5,800 169
Ingersoll-Rand Co. 1,500 97
Kyowa Hakko Kogyp 5,000 29
Lahmeyer Aktiengesellschaft 700 33
Man AG 1,000 34
Mitsui Chemicals, Inc. 5,000 32
NSK, Ltd. 2,000 11
Okuma Corp. 23,000 107
Pentair, Inc. 700 32
Praxair, Inc. 2,200 108
Premark International, Inc. 1,900 71
Reliance Steel & Aluminum Co. 700 27
Rolls-Royce, PLC 5,000 21
Scana Corp. 1,100 26
(a) Shaw Group, Inc. 600 10
Sherwin-Williams Co. 1,200 33
(a) SLI, Inc. 5,600 151
Sulzer Brothers, Ltd. 100 61
(c) UPM-Kymmene OYJ 2,000 62
Valhi, Inc. 3,700 41
(a) Wyman-Gordon Co. 200 4
Xerox Corp. 500 30
-----------------------------------------------------
2,016
METALS AND MINERALS--.3%
AK Steel Holding Corp. 1,030 23
AMCOL International Corp. 960 14
Bethlehem Steel Corp. 5,200 40
Nucor Corp. 1,200 57
-----------------------------------------------------
134
</TABLE>
84
<PAGE> 87
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
SERVICE INDUSTRIES--1.1%
(a) Affiliated Computer Services 3,800 $ 192
Cap Gemini Sogeti SA 200 32
Granada Group, PLC 1,600 30
Hanson, PLC 4,300 39
(a) Pomeroy Computer Resources,
Inc. 3,700 52
Teleglobe, Inc. 500 15
Trizec Hahn Corporation 2,400 49
United Utilities, PLC 3,200 39
-----------------------------------------------------
448
TECHNOLOGY--3.7%
(a) BMC Software, Inc. 1,100 59
(a) CHS Electronics, Inc. 2,800 12
(a) Computer Sciences Corp. 2,200 152
(a) Gateway, Inc. 400 24
Intel Corp. 5,700 339
Linear Technology Corp. 2,100 141
(a) MTI Technology Corp. 16,400 214
Primex Technologies, Inc. 6,800 147
Reynolds and Reynolds Co. 4,100 96
(a) SCI Systems, Inc. 600 29
Scientific-Atlanta, Inc. 1,600 58
(a) Synopsys, Inc. 2,800 155
(a) Tech Data Corp. 2,100 80
-----------------------------------------------------
1,506
TRANSPORTATION--1.1%
Air New Zealand, Ltd., "B" 39,500 82
Atlantic Coast Airlines
Holdings 3,000 57
Comair Holdings, Inc. 6,300 131
(a) Groupe Air France 200 4
Roadway Express, Inc. 2,000 39
Tranz Rail Holdings, (ADR) 17,300 29
Trinity Industries, Inc. 3,490 117
-----------------------------------------------------
459
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
UTILITIES--2.5%
(a) AES Corp. 500 $ 29
Aquarion Co. 1,500 52
Black Hills Corp. 700 16
Central Hudson Gas & Electric
Co. 900 38
Chugoku Electric Power Co.,
Inc. 16,000 243
Columbia Energy Group 1,850 116
DTE Energy Co. 300 12
Electrabel NPV 300 97
Endesa SA 900 19
FPL Group, Inc. 600 33
Kyushu Electric Power Co. 7,700 118
Northwestern Corp. 3,100 75
OGE Energy Corp. 700 17
Scottish Power, PLC 3,000 26
Texas Utilities Co., Inc. 1,000 41
TNP Enterprises, Inc. 300 11
WPS Resources Corp. 700 21
Yorkshire Water 8,500 59
-----------------------------------------------------
1,023
-----------------------------------------------------
TOTAL COMMON STOCKS--39.5%
(Cost: $14,528) 15,907
-----------------------------------------------------
MONEY MARKET INSTRUMENT--1.5%
(b)Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99
(Cost: $600) $ 600 600
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $39,250) $40,298
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER HORIZON 5 PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreements is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $62,000 (0.15% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at June 30, 1999 aggregated $54,000.
Based on the cost of investments of $39,250,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $2,017,000, the gross
unrealized depreciation was $969,000 and the net unrealized appreciation on
investments was $1,048,000.
See accompanying Notes to Financial Statements.
85
<PAGE> 88
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER BLUE CHIP PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--5.5%
Ameritech Corp. 16,000 $ 1,176
AT&T Corp. 18,500 1,033
Bell Atlantic Corp. 29,500 1,929
Frontier Corp. 12,600 743
(a) MCI WorldCom, Inc. 13,000 1,121
SBC Communications, Inc. 18,800 1,090
--------------------------------------------------
7,092
CONSUMER DISCRETIONARY--6.3%
CVS Corp. 10,000 507
Dayton Hudson Corp. 18,500 1,202
Dollar General Corp. 36,250 1,051
Home Depot, Inc. 22,500 1,450
McDonald's Corp. 28,500 1,177
(a) Mirage Resorts, Inc. 50,400 844
Wal-Mart Stores, Inc. 38,300 1,848
--------------------------------------------------
8,079
CONSUMER STAPLES--6.3%
Albertson's, Inc. 18,000 928
Dean Foods Co. 20,000 831
H.J. Heinz Co. 23,300 1,168
Pepsi Bottling Group, Inc. 52,000 1,199
PepsiCo, Inc. 50,000 1,934
Procter & Gamble Co. 23,000 2,053
--------------------------------------------------
8,113
DURABLES--.8%
Dana Corp. 22,000 1,013
--------------------------------------------------
ENERGY--5.8%
Chevron Corp. 8,800 838
Conoco, Inc. 21,300 594
Exxon Corp. 16,100 1,242
Mobil Corp. 8,900 881
Royal Dutch Petroleum Co. 30,000 1,807
Schlumberger Ltd. 9,500 605
Texaco, Inc. 13,000 812
Unocal Corp. 18,000 713
--------------------------------------------------
7,492
FINANCIAL--14.2%
American Express Credit
Corp. 13,600 1,770
American International Group 13,500 1,580
BankAmerica Corp. 24,316 1,783
Capital One Finance Corp. 15,500 863
Chase Manhattan Corp. 12,500 1,083
Cigna Corp. 13,400 1,193
Citigroup, Inc. 39,750 1,888
Compass Bancshares, Inc. 30,450 830
First Tennessee National
Corp. 16,000 13
(a) Goldman Sachs Group, Inc. 5,200 376
Household International, Inc 31,799 1,506
J.P. Morgan & Co., Inc. 7,500 1,054
Jefferson Pilot Corp. 13,350 $ 884
St. Paul Companies, Inc. 39,000 1,241
Summit Bancorp. 14,000 585
UNUM Corp. 21,000 1,150
--------------------------------------------------
18,399
HEALTH--11.3%
Abbott Laboratories 32,000 1,456
American Home Products Corp. 23,800 1,368
Baxter International, Inc. 22,000 1,334
Bristol-Myers Squibb Co. 23,500 1,655
Eli Lilly & Co. 11,000 788
Medtronic, Inc. 24,515 1,909
Pfizer, Inc. 12,500 1,372
Schering-Plough Corp. 24,200 1,283
SmithKline Beecham, PLC 14,000 925
Warner-Lambert Co. 18,000 1,249
(a) Wellpoint Health Networks,
Inc. 14,500 1,231
--------------------------------------------------
14,570
MANUFACTURING--9.8%
Air Products & Chemicals,
Inc. 25,000 1,006
Corning, Inc. 14,000 982
Emerson Electric Co. 21,600 1,358
Federal-Mogul Corp. 22,400 1,165
General Electric Co. 29,600 3,345
Parker-Hannifin Corp. 25,000 1,144
Tyco International, Ltd. 22,304 2,113
Xerox Corp. 26,600 1,571
--------------------------------------------------
12,684
MEDIA--7.1%
(a) AT&T Corp -- Liberty Media
Group 36,000 1,323
(a) CBS Corp. 23,600 1,025
(a) Clear Channel Communications 15,994 1,103
(a) Infinity Broadcasting Corp. 29,900 890
(a) Media One Group, Inc. 11,000 818
Time Warner, Inc. 13,400 985
Tribune Co. 13,000 1,133
(a) Univision Communication Inc. 12,600 832
Young & Rubicam, Inc. 23,300 1,059
--------------------------------------------------
9,168
SERVICE INDUSTRIES--2.2%
Automatic Data Processing,
Inc, 32,000 1,408
Waste Management, Inc. 27,000 1,451
---------------------------------------------------
2,859
</TABLE>
86
<PAGE> 89
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
TECHNOLOGY--18.6%
(a) Applied Materials, Inc. 15,000 $ 1,108
(a) Cisco Systems, Inc. 32,450 2,093
(a) EMC Corp. 12,000 660
Hewlett-Packard Co. 23,900 2,402
Intel Corp. 40,000 2,380
International Business
Machines 14,000 1,809
(a) Intuit, Inc. 9,000 811
(a) Microsoft Corp. 31,000 2,796
Motorola, Inc. 23,800 2,255
(a) Novell, Inc. 39,000 1,033
(a) Oracle Systems Corp. 40,000 1,485
Raytheon Co. 20,243 1,394
(a) Solectron Corp. 16,400 1,094
(a) Sun Microsystems, Inc. 17,600 1,212
Texas Instruments, Inc. 4,800 696
(a) Xilinx, Inc. 14,500 830
-----------------------------------------------------
24,058
TRANSPORTATION--1.7%
Canadian National Railway Co 19,800 1,336
Norfolk Southern Corp. 30,000 904
-----------------------------------------------------
2,240
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TOTAL COMMON STOCKS--89.6%
(Cost: $95,656) $115,767
-----------------------------------------------------
PREFERRED STOCKS--.4%
CVS Corp., convertible
(Cost: $363) 5,000 450
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement
State Street Bank and
Trust Company, dated
6/30/99, 4.75%, due 7/1/99 $1,175 1,175
Commercial paper
Yield--4.99% to 5.30%
Due--July 1999
Countrywide Home Loans,
Inc. 5,500 5,495
Other 6,300 6,288
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--10.0%
(Cost: $12,957) 12,958
-----------------------------------------------------
TOTAL INVESTMENTS PORTFOLIO--100%
(Cost: $108,976) $129,175
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER BLUE CHIP PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $108,976,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $20,827,000, the gross
unrealized depreciation was $628,000 and the net unrealized appreciation on
investments was $20,199,000.
See accompanying Notes to Financial Statements.
87
<PAGE> 90
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER GLOBAL INCOME PORTFOLIO
Portfolio of Investments at June 30, 1999
(UNAUDITED IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
<S> <C> <C> <C>
BRITISH POUNDS--5.2% United Kingdom Treasury Bond
8.00%, 2003 $ 180 $ 309
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
CANADIAN DOLLARS--5.5% Government of Canada
4.50%, 2001 130 88
5.50%, 2009 350 239
--------------------------------------------------------------------------
327
- --------------------------------------------------------------------------------------------------------------------------
EURO--32.1% Depfa Pfandbrief Bank
4.75%, 2008 250 258
Ford Motor Credit Corp.
3.75%, 2004 260 261
German Bundesrepublic
3.25%, 2004 520 525
Government of the Netherlands
5.75%, 2004 190 211
Kredit Fuer Wiederaufbau
5.00%, 2009 245 258
Rheinische Hypo Bank
4.50%, 2003 210 221
Treuhandanstalt
6.75%, 2004 140 162
--------------------------------------------------------------------------
1,896
- --------------------------------------------------------------------------------------------------------------------------
FRENCH FRANCS--2.1% Government of France
4.50%, 2002 115 122
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
JAPANESE YEN--4.8% Italian Treasury
3.80%, 2008 30,000 285
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND DOLLARS--3.8% Government of New Zealand
8.00%, 2004 250 143
7.00%, 2009 150 82
--------------------------------------------------------------------------
225
- --------------------------------------------------------------------------------------------------------------------------
NORWEGIAN KRONER--10.7% Kingdom of Norway
5.75%, 2004 730 93
Norwegian Government Bond
5.50%, 2009 1,300 163
Norweigan Government
7.00%, 2001 2,890 377
--------------------------------------------------------------------------
633
- --------------------------------------------------------------------------------------------------------------------------
SPANISH PESETAS--6.2% Kingdom of Spain
5.875, 2008 200 188
5.15%, 2009 170 181
--------------------------------------------------------------------------
369
</TABLE>
88
<PAGE> 91
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. DOLLAR
CURRENCY ISSUER PRINCIPAL VALUE
<S> <C> <C> <C>
SWEDISH KRONOR--5.8% Government of Sweden
5.00%, 2004 $ 1,100 $ 132
Kingdom of Sweden
5.00%, 2009 1,800 211
--------------------------------------------------------------------------
343
- --------------------------------------------------------------------------------------------------------------------------
U.S. DOLLARS--15.7% (a)
Argentine Republic
5.688%, 2001 1 1
Argentine Republic Global
11.375%, 2017 30 26
Federative Republic of Brazil
(a) 6.813%, 2001 54 52
(a) 6.125%, 2006 14 11
4.5% with 3.5% Interest Capitalization, 2014 12 8
Government of Jamaica
10.875%, 2005 25 23
Republic of Bulgaria, Interest Arrears Bond,
LIBOR
plus .8125%, 6.688%, 2011 20 14
Republic of Panama
5.50%, 2014 20 15
Republic of Panama, Past Due Interest Bond
6.563%, 2016 16 12
Republic of Turkey
9.875%, 2005 20 18
Republic of the Philippines
8.875%, 2008 80 79
Sunamerica Institute Fund
5.75%, 2009 250 226
United Mexican States
11.50%, 2026 40 45
U.S. Treasury Bond
7.50%, 2024 160 186
U.S. Treasury Note
5.50%, 2000 215 215
--------------------------------------------------------------------------
931
--------------------------------------------------------------------------
TOTAL BONDS--91.9%
(Cost: $5,730) 5,440
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS--.1% Put on New Zealand Dollars, strike price .5366,
expires 7/22/99
(Cost: $1) 436 4
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
INSTRUMENTS--8.0% (b) Repurchase agreement
Chase Manhattan Bank
dated 6/30/99, 4.62%, due 7/1/99
(Cost: $470) 471 470
--------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $6,201) $5,914
--------------------------------------------------------------------------
</TABLE>
89
<PAGE> 92
PORTFOLIO OF INVESTMENTS
NOTES TO KEMPER GLOBAL INCOME PORTFOLIO OF INVESTMENTS
(a) Variable rate security. Rate shown is the effective rate on June 30, 1999
and the date shown represents the final maturity of the obligation.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
The portfolio 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 $6,204,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $5,000, the gross
unrealized depreciation was $295,000 and the net unrealized depreciation was
$290,000.
See accompanying Notes to Financial Statements.
90
<PAGE> 93
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
BANKS--21.0%
Bank of America Corp. 47,586 $ 3,489
BankBoston Corp. 21,940 1,122
Bank of New York Co., Inc. 12,300 451
Banc One Corp. 92,205 5,492
First Union Corp. 31,271 1,470
Fleet Financial Group, Inc. 57,440 2,549
J.P. Morgan & Co., Inc. 3,100 435
KeyCorp. 73,505 2,361
National Bank of Canada 5,600 74
PNC Bank Corp. 57,339 3,304
Republic New York Corp. 36,884 2,515
SunTrust Banks, Inc. 8,292 576
-----------------------------------------------------
23,838
CONSUMER DISCRETIONARY--6.2%
Borders Group, Inc. 206,200 3,261
Dayton Hudson Corp. 4,400 286
(a) Fruit of the Loom, Inc. 95,845 934
Rite Aid Corp. 11,300 278
(a) Toys "R" Us Inc. 109,740 2,270
-----------------------------------------------------
7,029
CONSUMER STAPLES--17.9%
Imperial Tobacco Group, (ADR) 19,100 418
Nabisco Group Holdings 181,310 3,547
Philip Morris Companies, Inc. 225,910 9,079
(a) R.J. Reynolds Tobacco
Holdings, Inc. 60,403 1,903
Universal Corp. 47,650 1,355
UST, Inc. 136,910 4,005
-----------------------------------------------------
20,307
ENERGY--16.0%
Atlantic Richfield Co. 37,538 3,137
Columbia Energy Group 31,290 1,961
Conoco Inc. "A" 195,395 5,447
Consolidated Natural Gas Corp. 8,100 492
Diamond Offshore Drilling,
Inc. 19,700 559
ENSCO International, Inc. 43,200 861
(a) Global Marine, Inc. 33,100 511
(a) Noble Drilling Corp. 33,600 661
Texaco, Inc. 47,805 2,988
Tidewater, Inc. 18,290 558
Transocean Offshore, Inc. 36,900 969
-----------------------------------------------------
18,144
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
FINANCIAL--9.6%
American International Group,
Inc. 4,200 $ 492
Citigroup, Inc. 52,955 2,515
Federal Home Loan Mortgage
Corp. 55,741 3,233
Federal National Mortgage
Association 57,073 3,902
Ohio Casualty Corp. 3,900 141
Safeco Corp. 3,400 150
St. Paul Companies, Inc. 14,000 445
-----------------------------------------------------
10,878
HEALTH--9.4%
Columbia/HCA Healthcare Corp. 40,500 924
(a) Humana, Inc. 259,300 3,355
LifePoint Hospitals, Inc. 2,031 27
McKesson HBOC, Inc. 108,500 3,485
(a) Tenet Healthcare Corp. 154,205 2,862
(a) Triad Hospitals, Inc. 2,031 27
-----------------------------------------------------
10,680
MANUFACTURING--.6%
Xerox Corp. 11,934 705
SERVICE INDUSTRIES--.8%
Prison Realty Trust, Inc.
(REIT) 99,900 980
-----------------------------------------------------
TOTAL COMMON STOCKS--81.5%
(Cost: $88,267) 92,561
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(c) Repurchase agreement State
Street Bank and Trust, dated
6/30/99, 4.75%, due 7/1/99 $ 4,124 4,124
(b) Commercial paper
Yield--4.24% to 5.05%
Due--July and August 1999
Barton Capital Corp. 5,000 4,972
Bellsouth Corp. 4,000 3,985
Other 5,000 7,987
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--18.5%
(Cost: $21,067) 21,068
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $109,334) $113,629
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) The portfolio has entered into exchange traded S&P 500 index futures
contracts in order to take advantage of anticipated market conditions and
effectively invest in equities approximately $15,503,000 of money market
instruments. As a result, approximately 95% of the portfolio's net assets
are effectively invested in equities. (See note 6 of the Notes to Financial
Statements.)
(c) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $109,334,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $8,716,000, the gross
unrealized depreciation was $4,421,000 and the net unrealized appreciation on
investments was $4,295,000.
See accompanying Notes to Financial Statements.
91
<PAGE> 94
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
CONSUMER STAPLES--.2%
Universal Corp. 2,000 $ 57
-----------------------------------------------------
BANKS--51.5%
BancWest Corporation 8,200 304
BankBoston Corp. 6,000 307
Bank of America Corp. 30,073 2,205
BANK ONE 23,202 1,382
Chase Manhattan Corp. 12,800 1,109
Colonial BancGroup, Inc. 11,500 160
Corus Bankshares, Inc. 5,200 165
First Citizens BancShares,
Inc. 300 24
First Union Corp. 24,550 1,154
Fleet Financial Group Inc. 20,675 917
J.P. Morgan & Co., Inc. 3,200 450
KeyCorp 27,400 880
Mellon Bank Corp. 9,400 342
National Bank of Canada 7,700 101
North Fork Bancorporation,
Inc. 6,000 128
People's Heritage Financial
Group, Inc. 6,100 115
PNC Bank Corp. 19,300 1,112
Popular, Inc. 8,200 249
Provident Financial Group 3,415 149
Republic New York Corp. 10,900 743
Summit Bancorp 5,200 217
SunTrust Banks, Inc. 5,900 410
Valley National Bank 735 21
Washington Mutual, Inc. 9,670 342
Wells Fargo Co. 26,000 1,112
-----------------------------------------------------
14,098
CONSUMER FINANCE--8.4%
American Express Credit Corp. 6,600 859
Associates First Capital Corp. 300 13
Citigroup, Inc. 25,050 1,190
SLM Holding Corp. 4,900 224
-----------------------------------------------------
2,286
INSURANCE--18.9%
Allstate Corp. 14,705 528
American International Group,
Inc. 18,770 2,197
Chubb Corp. 3,800 264
</TABLE>
<TABLE>
<CAPTION>
INSURANCE--CONTINUED
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
Cigna Corp. 3,500 $ 312
Jefferson Pilot Corp. 1,700 113
Lincoln National Corp. 4,200 220
Marsh & McLenna Companies,
Inc. 3,550 268
Ohio Casualty Corp. 8,600 311
Safeco Corp. 5,600 247
St. Paul Companies, Inc. 12,300 391
Torchmark Corp. 3,200 109
Transamerica Corp. 2,600 195
-----------------------------------------------------
5,155
SERVICE INDUSTRIES--3.4%
Franklin Resources, Inc. 4,300 175
Lehman Brothers Holdings, Inc. 1,668 104
Merrill Lynch & Co., Inc. 7,600 608
Raymond James Financial, Inc. 2,105 50
-----------------------------------------------------
937
OTHER FINANCIAL COMPANIES--15.2%
Bear Stearns Companies, Inc. 3,815 178
Federal Home Loan Mortgage
Corp. 15,820 918
Federal National Mortgage
Association 21,940 1,500
Golden West Financial Corp. 1,000 98
(a) Goldman Sachs Group, Inc. 2,100 152
Household International, Inc. 4,900 232
Prison Realty Trust, Inc.
(REIT) 111,400 1,093
-----------------------------------------------------
4,171
-----------------------------------------------------
TOTAL COMMON STOCKS--97.6%
(Cost: $25,122) 26,704
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--2.4%
(b) Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99
(Cost: $652) $ 652 652
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $25,774) $27,356
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $25,774,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $2,765,000, the gross
unrealized depreciation was $1,183,000 and the net unrealized appreciation on
investments was $1,582,000.
See accompanying Notes to Financial Statements.
92
<PAGE> 95
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER GLOBAL BLUE CHIP PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER OF
GOVERNMENT OBLIGATIONS SHARES VALUE
<S> <C> <C>
UNITED STATES--2.3%
U.S. Treasury Bond
5.25%, 2029
(Cost: $243) $ 250 $ 225
-----------------------------------------------------
COMMON STOCKS
AUSTRALIA--1.6%
(a) Cable & Wireless Optus, Ltd.
(PROVIDER OF COMMUNICATION
AND TELECOMMUNICATION
SERVICES) 39,077shs. 89
Woodside Petroleum, Ltd.
(MAJOR OIL AND GAS PRODUCER) 10,000 68
-----------------------------------------------------
157
BRAZIL--1.9%
Aracruz Celulose, SA (ADR)
(PRODUCER OF EUCALYPTUS
KRAFT PULP) 4,200 92
Companhia Vale do Rio Doce,
(ADR)
(MINING, RAIL
TRANSPORTATION, AND MINERAL
SALES IN IRON ORE, ALUMINUM,
MANGANESE, TITANIUM, GOLD, &
COPPER) 4,700 94
-----------------------------------------------------
186
CANADA--7.5%
Alberta Energy Co., Ltd
(MAJOR OIL AND GAS PRODUCER) 6,700 216
Barrick Gold Corp.
(GOLD EXPLORATION AND
PRODUCTION IN NORTH AND
SOUTH AMERICA) 5,400 105
BCE, Inc.
(TELECOMMUNICATION SERVICES) 2,200 108
Canadian National Railway Co.
(RAILROAD OPERATOR) 2,900 196
Molson Cos., Ltd. "A"
(BREWERY) 6,800 124
-----------------------------------------------------
749
DENMARK--.9%
Unidanmark "A" (Registered)
(FINANCIAL SERVICES COMPANY) 1,300 86
-----------------------------------------------------
FRANCE--2.5%
AXA SA
(INSURANCE GROUP PROVIDING
INSURANCE, FINANCE AND REAL
ESTATE SERVICES) 1,242 152
Canal Plus
(LEADING PAY TELEVISION
NETWORK) 326 92
-----------------------------------------------------
244
</TABLE>
<TABLE>
<CAPTION>
NUMBER
GOVERNMENT OBLIGATIONS OF SHARES VALUE
<S> <C> <C>
GERMANY--8.9%
Allianz AG
(MULTI-LINE INSURANCE
COMPANY) 394 $ 110
BASF AG
(INTERNATIONAL CHEMICAL
PRODUCER) 3,371 150
Bayerische Vereinsbank AG
(COMMERCIAL BANK) 2,101 137
Gerresheimer Glas AG
(MANUFACTURER OF GLASS
CONTAINERS AND TUBING) 4,091 64
Hoechst AG
(CHEMICAL PRODUCER) 3,029 138
Muenchener
Rueckversicherungs-Gesellschaft
AG (Registered)
(INSURANCE COMPANY) 440 82
Muenchener
Rueckversicherungs-Gesellschaft
AG New Shares
(PROVIDER OF COMPREHENSIVE
REINSURANCE SERVICES) 103 19
RWE AG
(PRODUCER OF PETROLEUM AND
CHEMICAL PRODUCTS) 1,021 47
RWE AG (pfd.)
(PRODUCER AND MARKETER OF
PETROLEUM AND CHEMICAL
PRODUCTS) 1,200 42
VIAG AG
(PROVIDER OF ELECTRICAL
POWER AND NATURAL GAS
SERVICES, ALUMINUM PRODUCTS,
CHEMICALS, CERAMICS AND
GLASS) 212 100
-----------------------------------------------------
889
JAPAN--10.5%
Bank of Tokyo-Mitsubishi, Ltd.
(PROVIDER OF FINANCIAL
SERVICES) 2,000 29
(a) Canon, Inc.
(LEADING PRODUCER OF VISUAL
IMAGE AND INFORMATION
EQUIPMENT) 4,000 115
Daiwa Securities Co., Ltd.
(PROVIDER OF BROKERAGE AND
OTHER FINANCIAL SERVICES) 17,000 112
Mitsubishi Estate Co., Ltd.
(REAL ESTATE COMPANY) 8,000 78
Mitsui Fudosan Co., Ltd.
(REAL ESTATE COMPANY) 6,000 49
Sanwa Bank, Ltd.
(BANK) 4,000 39
Sharp Corp.
(MANUFACTURER OF CONSUMER
AND INDUSTRIAL ELECTRONICS) 9,000 106
Sony Corp.
(MANUFACTURER OF CONSUMER
ELECTRONIC PRODUCTS) 1,600 173
</TABLE>
93
<PAGE> 96
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
JAPAN--CONTINUED
Sumitomo Metal Mining Co.,
Ltd.
(LEADING GOLD, NICKEL AND
COPPER MINING COMPANY) 14,000 $ 58
TDK Corp.
(MANUFACTURER OF MAGNETIC
TAPES AND FLOPPY DISCS) 1,000 92
Yamanouchi Pharmaceutical Co.,
Ltd.
(LEADING MANUFACTURER OF
ETHICAL DRUGS) 5,000 191
-----------------------------------------------------
1,042
SWITZERLAND--2.3%
Nestle SA (Registered)
(FOOD MANUFACTURER) 68 123
Novartis AG (Registered)
(PHARMACEUTICAL COMPANY) 75 110
-----------------------------------------------------
233
UNITED KINGDOM--12.9%
British Telecom, PLC
(TELECOMMUNICATION SERVICES) 11,373 191
Carlton Communications, PLC
(TELEVISION POST PRODUCTION
PRODUCTS AND SERVICES) 17,458 145
(a) Flextech, PLC
(BROADCASTER OF
ENTERTAINMENT PROGRAMS) 6,163 100
General Electric Co., PLC
(MANUFACTURER OF POWER,
COMMUNICATIONS AND DEFENSE
EQUIPMENT) 5,427 55
(a) National Grid Group, PLC
(OWNER AND OPERATOR OF
ELECTRIC TRANSMISSION
SYSTEMS) 23,288 162
Prudential Corporation, PLC
(PROVIDER OF BROAD RANGE OF
FINANCIAL SERVICES) 6,139 91
Railtrack Group, PLC
(OPERATOR OF RAILWAY
INFRASTRUCTURE) 6,438 132
Rentokil Initial, PLC
(ENVIRONMENTAL SERVICES
COMPANY) 11,771 46
Reuters Group, PLC
(INTERNATIONAL NEWS AGENCY) 4,427 58
Rio Tinto, PLC
(MINING COMPANY) 13,710 230
Shell Transport & Trading, PLC
(PETROLEUM COMPANY) 9,630 72
-----------------------------------------------------
1,282
UNITED STATES--40.4%
(a) AT&T Corp--Liberty Media Group
(HOLDING COMPANY OF
ENTERTAINMENT NETWORKS) 6,400 235
AT&T Corp.
(TELECOMMUNICATION SERVICES) 3,395 190
(a) America Online, Inc.
(PROVIDER OF ONLINE COMPUTER
SERVICES) 400 $ 44
American Express Credit Corp.
(TRAVEL AND INVESTMENT
SERVICES, INSURANCE,
BANKING) 500 65
Anadarko Petroleum Corp.
(OIL AND GAS EXPLORATION AND
PRODUCTION) 1,800 66
Azurix Corp.
(PROVIDER OF WASTEWATER
RELATED SERVICES) 5,000 100
Banc One Corp
(CONSUMER AND COMMERCIAL
BANK) 900 54
Burlington Resources, Inc.
(OIL AND NATURAL GAS
EXPLORATION AND PRODUCTION) 4,400 190
Comcast Corp. "A"
(CABLE TV, SOUND AND
TELECOMMUNICATION SYSTEMS) 3,400 131
CSX Corp.
(RAILROAD, INTEGRATED
TRANSPORTATION SYSTEMS AND
SHIPPING CONTAINER COMPANY) 3,400 154
Duke Energy Corp.
(ELECTRIC UTILITY IN THE
CAROLINAS) 2,800 152
Enron Corp.
(PRODUCER OF NATURAL GAS AND
ELECTRICITY) 1,900 155
Gap Inc.
(APPAREL SPECIALTY STORES) 450 23
Homestake Mining Co.
(MAJOR INTERNATIONAL GOLD
PRODUCER) 10,300 84
Immunex Corp.
(PHARMACEUTICAL COMPANY) 500 64
International Business
Machines Corp.
(MANUFACTURER OF COMPUTERS
AND SERVICER OF INFORMATION
PROCESSING UNITS) 900 116
Lockheed Martin Corp.
(MANUFACTURER OF AIRCRAFT,
MISSILES AND SPACE
EQUIPMENT) 2,200 82
Metzler Group, Inc.
(PROVIDER OF CONSULTING
SERVICES TO ENERGY BASED AND
OTHER NETWORK AND RELATED
INDUSTRIES) 2,000 55
Motorola, Inc.
(MANUFACTURER OF
TELECOMMUNICATION PRODUCTS
AND SEMICONDUCTORS) 2,200 209
Newmont Mining Corp.
(INTERNATIONAL GOLD
EXPLORATION AND MINING
COMPANY) 5,300 105
</TABLE>
94
<PAGE> 97
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
UNITED STATES--CONTINUED
Northrop Grumman Corp.
(MANUFACTURER OF AIRCRAFT,
AIRCRAFT ASSEMBLIES AND
ELECTRONIC SYSTEMS FOR
MILITARY AND COMMERCIAL USE) 1,800 $ 119
(a) Oracle Systems Corp.
(DATABASE MANAGEMENT
SOFTWARE) 1,950 72
PacifiCorp
(ELECTRIC UTILITY) 9,500 175
Peco Energy Co.
(ELECTRIC AND GAS UTILITY) 3,300 138
Progressive Corp.
(PROPERTY AND CASUALTY
INSURANCE COMPANY) 1,000 145
ProLogis Trust
(GLOBAL OWNER OF CORPORATE
DISTRIBUTION FACILITIES) 3,000 61
Providian Financial Corp.
(INSURANCE AND FINANCIAL
SERVICES) 200 19
(a) Sabre Group Holdings Inc. "A"
(TRAVEL RESERVATION SYSTEM
PROVIDER) 1,600 110
(a) Stillwater Mining Co.
(EXPLORATION AND DEVELOPMENT
OF MINES IN MONTANA
PRODUCING PLATINUM,
PALLADIUM AND ASSOCIATED
METALS) 2,550 83
(a) Sun Microsystems, Inc.
(PRODUCER OF
HIGH-PERFORMANCE
WORKSTATIONS, SERVERS AND
NETWORKING SOFTWARE) 1,800 124
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
UNITED STATES--CONTINUED
Unicom Corp.
(ELECTRIC UTILITY) 4,000 $ 154
Unocal Corp.
(EXPLORER AND PRODUCER OF
OIL AND GAS) 2,100 83
UNUM Corp.
(PROVIDER OF GROUP
DISABILITY AND SPECIAL RISK
INSURANCE) 3,800 208
US Airways Group, Inc.
(MAJOR AIRLINE) 1,000 44
USEC, Inc.
(PROVIDER OF ENRICHED
URANIUM PRODUCTS AND
SERVICES) 5,600 83
Williams Cos., Inc.
(GAS PIPELINE OPERATOR AND
PETROLEUM PRODUCER) 2,900 123
---------------------------------------------------
4,015
---------------------------------------------------
TOTAL COMMON STOCKS--89.4%
(Cost: $8,052) 8,883
---------------------------------------------------
MONEY MARKET INSTRUMENTS--8.3%
Yield--4.60%
Due--July 1999
Federal Home Loan Bank
(Cost: $833) $ 833 833
---------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $9,128) $9,941
---------------------------------------------------
</TABLE>
95
<PAGE> 98
PORTFOLIO OF INVESTMENTS
At June 30, 1999, the Kemper Global Blue Chip Portfolio had the following
industry diversification (dollars in thousands):
<TABLE>
<CAPTION>
VALUE %
<S> <C> <C>
---------------------------------------------------------------------------------------
Finance $1,534 15.4
---------------------------------------------------------------------------------------
Energy 1,058 10.6
---------------------------------------------------------------------------------------
Manufacturing 817 8.2
---------------------------------------------------------------------------------------
Utilities 782 7.9
---------------------------------------------------------------------------------------
Metals & Minerals 759 7.6
---------------------------------------------------------------------------------------
Media 703 7.1
---------------------------------------------------------------------------------------
Technology 613 6.2
---------------------------------------------------------------------------------------
Communications 577 5.8
---------------------------------------------------------------------------------------
Transportation 525 5.3
---------------------------------------------------------------------------------------
Consumer Staples 420 4.2
---------------------------------------------------------------------------------------
Service Industries 413 4.2
---------------------------------------------------------------------------------------
Health 365 3.7
---------------------------------------------------------------------------------------
Durables 201 2.0
---------------------------------------------------------------------------------------
Construction 93 1.0
---------------------------------------------------------------------------------------
Consumer Discretionary 23 0.2
---------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 8,883 89.4
---------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS AND OTHER OBLIGATIONS 1,058 10.6
---------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO $9,941 100.0
---------------------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER GLOBAL BLUE CHIP PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $9,128,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $1,033,000, the gross
unrealized depreciation was $220,000, and the net unrealized appreciation on
investments was $813,000.
See accompanying Notes to Financial Statements.
96
<PAGE> 99
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER
CONVERTIBLE BONDS OF SHARES VALUE
<S> <C> <C>
JAPAN--2.0%
- ----------------------------------------------------------
MBL International Finance
(Bermuda)
3.00%, 2002 $ 85 $ 96
UNITED KINGDOM--2.2%
Swiss Life Finance, Ltd.
2.00%, 2003 102 101
UNITED STATES--2.3%
Merrill Lynch & Co.
2.00%, 2004 114 106
-----------------------------------------------------
TOTAL CONVERTIBLE BONDS--6.5%
(Cost: $326) 303
-----------------------------------------------------
COMMON STOCKS
AUSTRIA--2.0%
Bank Austria AG
(PROVIDER OF COMMERCIAL AND
CORPORATE BANKING SERVICES) 1,800shs. 95
-----------------------------------------------------
CANADA--2.0%
BCE, Inc.
(TELECOMMUNICATION SERVICES) 1,905 93
-----------------------------------------------------
FINLAND--2.3%
(b) UPM-Kymmene OYJ
(MANUFACTURER OF PAPER AND
PAPER PRODUCTS) 3,440 107
-----------------------------------------------------
FRANCE--11.1%
Accor SA
(PROVIDER OF CATERING, HOTEL
AND TRAVEL SERVICES) 510 129
Compagnie Generale des
Etablissements Michelin "B"
(LEADING TIRE MANUFACTURER) 1,666 68
Dexia France
(PROVIDER OF MUNICIPAL AND
LOCAL DEVELOPMENT FINANCING) 834 112
Elf Aquitaine SA
(PETROLEUM COMPANY) 681 100
Scor SA
(PROPERTY, CASUALTY AND LIFE
REINSURANCE COMPANY) 2,221 111
-----------------------------------------------------
520
GERMANY--9.2%
Adidas-Salomon AG
(MANUFACTURER OF SPORT
SHOES, CLOTHING AND
EQUIPMENT) 978 97
Bayer AG
(CHEMICAL PRODUCER) 2,523 105
</TABLE>
<TABLE>
<CAPTION>
NUMBER
CONVERTIBLE BONDS OF SHARES VALUE
<S> <C> <C>
GERMANY--CONTINUED
RWE AG (pfd.)
(PRODUCER OF PETROLEUM AND
CHEMICAL PRODUCTS) 2,392 $ 111
SAP AG
(COMPUTER SOFTWARE
MANUFACTURER) 339 115
-----------------------------------------------------
428
HONG KONG--6.0%
Hong Kong Telecommunications,
Ltd.
(TELECOMMUNICATION SERVICES) 51,200 133
HSBC Holdings, PLC
(INTERNATIONAL BANKING AND
FINANCIAL SERVICES PROVIDER) 4,000 146
-----------------------------------------------------
279
ITALY--2.7%
Ente Nazionale Idrocarburi SpA
(EXPLORATION AND PRODUCTION
OF OIL, NATURAL GAS AND
CHEMICALS) 7,400 44
La Rinascente SpA di Risparmio
(DEPARTMENT STORE CHAIN) 22,330 81
-----------------------------------------------------
125
JAPAN--19.1%
(a) Canon, Inc.
(MANUFACTURER OF LASER
COPIERS AND VIDEO EQUIPMENT) 68 97
(a) Honda Motor Co., Ltd.
(MANUFACTURER OF
MOTORCYCLES, AUTOMOBILES AND
POWER PRODUCTS) 78 83
Matsushita Electric
Industrial, Ltd.
(MANUFACTURER OF ELECTRONICS
PRODUCTS) 66 89
Nintendo Co., Ltd.
(MANUFACTURER OF GAME
EQUIPMENT) 1,200 169
Nippon Telegraph & Telephone
Corp.
(TELECOMMUNICATION SERVICES) 43 99
Sekisui House, Ltd.
(HOME BUILDER) 9,000 97
Sony Corp.
(MANUFACTURER OF CONSUMER
ELECTRONIC PRODUCTS) 64 136
Teijin Ltd.
(MANUFACTURER OF POLYESTER
PRODUCTS) 31,000 126
-----------------------------------------------------
896
</TABLE>
97
<PAGE> 100
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
<S> <C> <C>
NETHERLANDS--3.8%
Elsevier NV
(INTERNATIONAL PUBLISHER OF
SCIENTIFIC, PROFESSIONAL,
BUSINESS, AND CONSUMER
INFORMATION BOOKS) 4,640 $ 54
Koninklijke KPN NV
(PROVIDER OF
TELECOMMUNICATIONS SERVICES) 1,270 60
Royal Dutch Petroleum Co.
(OWNER OF 60% OF ROYAL
DUTCH/SHELL GROUP) 1,120 66
-----------------------------------------------------
180
SPAIN--2.0%
Iberdrola SA
(ELECTRIC UTILITY) 6,065 93
-----------------------------------------------------
SWEDEN--4.1%
Avesta-Sheffield AB
(MANUFACTURER OF STAINLESS
STEEL PRODUCTS) 23,300 101
Investor AB
(INVESTMENT COMPANY) 8,120 91
-----------------------------------------------------
192
SWITZERLAND--8.3%
ABB, Ltd.
(SWISS HOLDING COMPANY
ACTIVE IN POWER GENERATION,
TRANSMISSION, OIL, TRANSIT
SYSTEMS) 972 92
Georg Fischer AG (Registered)
(MANUFACTURER OF AUTOMOTIVE
PRODUCTS AND PIPING SYSTEMS) 256 84
Swisscom AG
(OPERATOR OF
TELECOMMUNICATION NETWORKS
AND NETWORK APPLICATION
SERVICES) 273 103
UBS AG-Registered
(PROVIDER OF BANKING AND
ASSET MANAGEMENT SERVICES) 367 110
-----------------------------------------------------
389
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM--17.0%
Allied Domecq, PLC
(INTERNATIONAL FOOD, DRINK
AND HOSPITALITY GROUP) 9,087 $ 87
EMI Group, PLC
(MUSIC RECORDING AND
RETAILING COMPANY) 15,892 128
J Sainsbury, PLC
(RETAIL DISTRIBUTOR OF FOOD
THROUGH SUPERMARKETS) 6,351 40
LASMO, PLC
(OIL PRODUCTION AND
EXPLORATION) 57,554 130
Marks & Spencer, PLC
(RETAILER OF CONSUMER GOODS
AND FOODS) 15,056 87
Peninsular and Oriental Steam
Navigation Co.
(SHIPPING AND TRANSPORTATION
COMPANY) 7,513 113
Rentokil Intitial, PLC
(ENVIRONMENTAL SERVICES
COMPANY) 23,302 90
Royal & Sun Alliance Insurance
Group, PLC
(INSURANCE COMPANY) 13,363 120
-----------------------------------------------------
795
-----------------------------------------------------
TOTAL COMMON STOCKS--89.6%
(Cost: $4,061) 4,192
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--3.9%
Yield--4.60%
Due--July 1999
(Cost: $182) $ 182 182
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $4,569) $4,677
-----------------------------------------------------
</TABLE>
98
<PAGE> 101
PORTFOLIO OF INVESTMENTS
At June 30, 1999, the Kemper International Growth and Income Portfolio had the
following industry diversification (dollars
in thousands):
<TABLE>
<CAPTION>
VALUE %
<S> <C> <C>
-------------------------------------------------------------------------------------------
Finance $ 785 16.8
-------------------------------------------------------------------------------------------
Manufacturing 771 16.5
-------------------------------------------------------------------------------------------
Consumer Discretionary 515 11.0
-------------------------------------------------------------------------------------------
Communications 488 10.4
-------------------------------------------------------------------------------------------
Service Industries 365 7.8
-------------------------------------------------------------------------------------------
Energy 340 7.3
-------------------------------------------------------------------------------------------
Durables 235 5.0
-------------------------------------------------------------------------------------------
Consumer Staples 174 3.7
-------------------------------------------------------------------------------------------
Technology 115 2.5
-------------------------------------------------------------------------------------------
Transportation 113 2.4
-------------------------------------------------------------------------------------------
Metals & Minerals 101 2.1
-------------------------------------------------------------------------------------------
Construction 97 2.1
-------------------------------------------------------------------------------------------
Utilities 93 2.0
-------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 4,192 89.6
-------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS 485 10.4
-------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO $4,677 100.0
-------------------------------------------------------------------------------------------
</TABLE>
NOTES TO KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $107,000 (2.21% of net assets). Their
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of these
securities at June 30, 1999 aggregated $101,000.
Based on the cost of investments of $4,569,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $284,000, the gross
unrealized depreciation was $176,000 and the net unrealized appreciation on
investments was $108,000.
See the accompanying Notes to Financial Statements.
99
<PAGE> 102
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER AGGRESSIVE GROWTH PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--6.2%
(a) MCI WorldCom, Inc. 500 $ 43
(a) Pinnacle Holdings, Inc. 1,500 37
Pittway Corp. 700 24
-----------------------------------------------------
104
CONSUMER DISCRETIONARY--22.8%
(a) CEC Entertainment, Inc. 800 34
Cinar Corp. 1,100 26
(a) CSK Auto Corp. 600 16
Dayton Hudson Corp. 400 26
Dollar Tree Stores, Inc. 300 13
(a) Foodmaker, Inc. 1,300 37
Harley-Davidson, Inc. 400 22
(a) Kohl's Corp. 200 15
(a) Linens 'n' Things, Inc. 600 26
(a) Men's Wearhouse, Inc. 800 20
Office Depot, Inc. 1,100 24
(a) O'Reilly Automotive 300 15
Regis Corp. 900 17
(a) Station Casinos, Inc. 1,400 29
TJX Companies, Inc. 500 17
(a) Tommy Hilfiger Corp. 200 15
(a) Zale Corp. 700 28
-----------------------------------------------------
380
CONSUMER STAPLES--1.1%
(a) Hain Food Group, Inc. 900 19
-----------------------------------------------------
DURABLES--3.7%
(a) Cisco Systems, Inc. 400 26
(a) Gilat Satellite Networks, Ltd. 400 21
(a) Tower Automotive 600 15
-----------------------------------------------------
62
ENERGY--1.0%
Halliburton Co. 300 14
-----------------------------------------------------
FINANCIAL--2.7%
Protective Life Corp. 500 17
Providian Financial Corp. 300 28
-----------------------------------------------------
45
HEALTH--11.5%
AmeriSource Health Corp. 100 3
Bergen Brunswig Corp. 1,000 17
(a) Biogen, Inc. 400 26
Biomet, Inc. 400 16
(a) Hanger Orthopedic Group, Inc. 1,000 14
(a) MedQuist, Inc. 600 26
Medtronic, Inc. 200 16
(a) ResMed, Inc. 500 17
(a) Ventana Medical Systems, Inc. 700 13
</TABLE>
<TABLE>
<CAPTION>
HEALTH--CONTINUED
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
(a) VISX, Inc. 300 $ 24
Xomed Surgical Products, Inc. 400 19
-----------------------------------------------------
191
MANUFACTURING--3.9%
(a) Applied Micro Circuits Corp. 300 25
(a) Lexmark International Group,
Inc. 600 40
-----------------------------------------------------
65
MEDIA--8.7%
(a) CBS Corp. 600 26
(a) Hispanic Broadcasting Corp. 400 30
(a) Outdoor Systems, Inc. 700 26
Time Warner, Inc. 300 22
(a) Univision Communication, Inc. 600 40
-----------------------------------------------------
144
SERVICE INDUSTRIES--11.9%
(a) Concord EFS, Inc. 1,500 63
CSG Systems International,
Inc. 400 10
(a) Dycom Industries, Inc. 700 39
Ecolab, Inc. 400 17
(a) Education Management Corp. 500 10
Metris Companies, Inc. 900 37
Select Appointments Hldgs. 900 22
-----------------------------------------------------
198
TECHNOLOGY--20.5%
(a) Comverse Technologies, Inc. 400 30
(a) Intuit, Inc. 200 18
(a) Jabil Circuit 500 23
Linear Technology Corp. 600 40
(a) Mercury Computer Systems, Inc. 1,000 32
(a) Mercury Interactive Corp. 700 25
(a) Microsoft Corp. 300 27
(a) Novell, Inc. 1,000 27
Sanmina Corp. 400 30
SDL, Inc. 400 20
(a) Solectron Corp. 300 20
(a) Verity, Inc. 400 22
(a) Vitesse Semiconductor Corp. 400 27
-----------------------------------------------------
341
-----------------------------------------------------
TOTAL COMMON STOCKS--94.0%
(Cost: $1,414) 1,563
-----------------------------------------------------
-----------------------------------------------------
MONEY MARKET INSTRUMENTS--6.0%
Yield--4.60%
Due--July 1999
Federal Home Loan Bank
(Cost: $100) $ 100 100
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $1,514) $1,663
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER AGGRESSIVE GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments of $1,514,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $192,000, the gross
unrealized depreciation was $43,000 and the net unrealized appreciation on
investments was $149,000.
See accompanying Notes to Financial Statements.
100
<PAGE> 103
PORTFOLIO OF INVESTMENTS
KEMPER VARIABLE SERIES KEMPER TECHNOLOGY GROWTH PORTFOLIO
Portfolio of Investments at June 30, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
COMMUNICATIONS--2.0%
(a) Inet Technologies, Inc. 2,000 $ 48
(a) MCI WorldCom, Inc. 400 34
Time Warner
Telecommunications, Inc. 300 9
-----------------------------------------------------
91
CONSUMER DISCRETIONARY--.6%
(a) Electronic Arts, Inc. 500 27
-----------------------------------------------------
DURABLES--5.8%
(a) Cisco Systems, Inc. 1,424 92
Lucent Technologies, Inc. 1,275 86
Nokia AB 400 37
Tellabs, Inc. 700 47
-----------------------------------------------------
262
MANUFACTURING--1.2%
Corning, Inc. 800 56
-----------------------------------------------------
MEDIA--.6%
DoubleClick, Inc. 300 27
-----------------------------------------------------
SERVICE INDUSTRIES--1.2%
(a) America Online, Inc. 468 52
-----------------------------------------------------
TECHNOLOGY--32.2%
(a) Applied Materials, Inc. 1,289 95
(a) Ariba, Inc. 300 29
(a) BEA Systems, Inc. 1,000 29
(a) Business Objects, SA 800 29
(a) EMC Corp. 1,100 60
(a) Entrust Technologies, Inc. 1,000 33
(a) Extreme Networks, Inc. 600 35
Hewlett-Packard Co. 560 56
International Business Machines
Corp. 620 80
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY--CONTINUED
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
(a) Intuit, Inc. 575 $ 52
(a) Juniper Networks, Inc. 700 104
Linear Technology Corp. 1,035 70
(a) Macromedia, Inc. 500 18
(a) Maxim Integrated Products, Inc. 700 46
(a) Microsoft Corp. 1,560 141
Molex, Inc. 1,110 35
Motorola, Inc. 1,140 108
(a) Novell, Inc. 710 19
(a) PSINet, Inc. 500 22
Raytheon Co. 300 21
SAP AG 500 17
(a) Seagate Technology, Inc. 1,400 36
(a) Solectron Corp. 1,150 77
(a) Sun Microsystems, Inc. 1,262 87
(a) Synopsys, Inc. 700 39
Texas Instruments, Inc. 436 63
(a) Yahoo!, Inc. 300 52
-----------------------------------------------------
1,453
-----------------------------------------------------
TOTAL COMMON STOCKS--43.6%
(Cost: $1,678) 1,968
-----------------------------------------------------
MONEY MARKET INSTRUMENTS
(b) Repurchase agreement
State Street Bank and Trust
Company, dated 6/30/99,
4.75%, due 7/1/99 $ 549 549
Commercial paper
Yield--4.60%
Due--July 1999
Federal Home Loan Bank 2,000 2,000
-----------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--56.4%
(Cost: $2,549) 2,549
-----------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $4,227) $4,517
-----------------------------------------------------
</TABLE>
NOTES TO KEMPER TECHNOLOGY GROWTH PORTFOLIO OF INVESTMENTS
(a) Non-income producing security
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the portfolio so that its
market value is at least equal to the minimum carrying value of the
repurchase agreement.
Based on the cost of investments of $4,227,000 for federal income tax purposes
at June 30, 1999, the gross unrealized appreciation was $320,000, the gross
unrealized depreciation was $30,000 and the net unrealized appreciation on
investments was $290,000.
See accompanying Notes to Financial Statements.
101
<PAGE> 104
This 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
Printed on recycled paper.
KVS-3 (8/31/99) 1087490
Printed in the U.S.A.
[KEMPER VARIABLE SERIES LOGO]
