<PAGE> 1
KEMPER HORIZON FUND
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE PERIOD ENDED JANUARY 31, 1996
KEMPER HORIZON 20+
PORTFOLIO
KEMPER HORIZON 10+
PORTFOLIO
KEMPER HORIZON 5
PORTFOLIO
"...PRICE WEAKNESS EARLY IN JANUARY PROVIDED US WITH EXCELLENT BUYING
OPPORTUNITIES..."
<PAGE> 2
TABLE OF CONTENTS
2
Terms to Know
3
General
Economic Overview
5
Performance Update
7
Statistics for
Horizon 20+ Portfolio
8
Statistics for
Horizon 10+ Portfolio
9
Statistics for
Horizon 5 Portfolio
10
Portfolio of
Investments
16
Financial Statements
18
Notes to
Financial Statements
22
Financial Highlights
AT A GLANCE
- --------------------------------
KEMPER HORIZON FUND TOTAL RETURN*
- --------------------------------
FOR THE ONE-MONTH ENDED JANUARY 31, 1996
(UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------
<S> <C> <C> <C>
Kemper Horizon
20+ Portfolio 3.58% 3.47% 3.47%
- -----------------------------------------
Kemper Horizon
10+ Portfolio 2.63% 2.53% 2.53%
- -----------------------------------------
Kemper Horizon
5 Portfolio 2.42% 2.42% 2.42%
- -----------------------------------------
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
period noted, securities prices fluctuated. For additional information, see the
Prospectus and Statement of Additional Information and the Financial Highlights
at the end of this report.
<TABLE>
<CAPTION>
- -------------------------------------
NET ASSET VALUE
- -------------------------------------
AS OF AS OF
1/31/96 12/29/95
- -------------------------------------
<S> <C> <C>
Kemper Horizon 20+
Portfolio Class A $9.84 $9.50
- -------------------------------------
Kemper Horizon 20+
Portfolio Class B $9.83 $9.50
- -------------------------------------
Kemper Horizon 20+
Portfolio Class C $9.83 $9.50
- -------------------------------------
Kemper Horizon 10+
Portfolio Class A $9.75 $9.50
- -------------------------------------
Kemper Horizon 10+
Portfolio Class B $9.74 $9.50
- -------------------------------------
Kemper Horizon 10+
Portfolio Class C $9.74 $9.50
- -------------------------------------
Kemper Horizon 5
Portfolio Class A $9.73 $9.50
- -------------------------------------
Kemper Horizon 5
Portfolio Class B $9.73 $9.50
- -------------------------------------
Kemper Horizon 5
Portfolio Class C $9.73 $9.50
- -------------------------------------
</TABLE>
TERMS TO KNOW
GROWTH STOCKS A growth stock is a stock of a company whose earnings growth
has consistently exceeded the growth rate of the overall market and whose
growth is expected to continue or accelerate.
TOTAL RETURN A fund's total return measures both the net investment income
and any realized and unrealized appreciation or depreciation of the underlying
investments in its portfolio for the period, assuming that dividends are
reinvested. It represents the aggregate percentage or dollar value change over
the period.
VALUE STOCKS A value stock is a stock of a company that is out of favor with
investors because the market underestimates its value or overlooks its
potential. Stocks can become undervalued as a result of overreaction by
investors to unfavorable news about a company, industry or the stock markets in
general. Or they can become undervalued as a result of a market decline, poor
economic conditions, tax-loss selling or actual or anticipated unfavorable
developments affecting the company.
VOLATILITY The range that the stock market covers in a given time period --
the difference between its high and low is a measure of its volatility during
that time.
<PAGE> 3
GENERAL ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF EXECUTIVE AND CHIEF INVESTMENT OFFICER
OF ZURICH KEMPER INVESTMENTS, INC.(ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $78 BILLION IN ASSETS, INCLUDING $44 BILLION IN RETAIL MUTUAL
FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN M.B.A. FROM
HARVARD UNIVERSITY.
DEAR SHAREHOLDER:
Last year -- a year in which both the equity and the fixed-income markets
produced strong above-average returns -- will be a difficult year to follow.
However, based on what we see a few months into the new year, we believe 1996
also will be capable of rewarding investors. Unlike last year, however, we
expect there will be more volatility from markets and a wider range of winners
and losers in 1996. This is the time for careful decision-making.
What has changed? We continue to experience low interest rates, an
acceptable rate of economic growth and low inflation. Although certain
government reports have been late in coming due to the federal government
shutdown, there's little in the economic data that suggests cause for concern.
Yet, this year we must begin to consider the possibility of a recession
within the next 24 months. We have enjoyed one of the longest economic
expansions in the 20th century. By virtue of the length of the expansion alone,
it is reasonable to expect a bumpier road ahead with spurts and pockets of
strength followed by potholes. Moreover, recessions can be triggered by a
surprise not forecastable by current available data. It could take the form of
political turmoil in the Middle East, instability in Russia or even a further
downturn in Japan's economic health. Any type of surprise has the potential to
reverse the growth we have become accustomed to.
Having enjoyed an almost uninterrupted climb in 1995, the markets also
are vulnerable to correction. A key reason that stock prices have been rising
is that there have been large cash flows directed to the market. Whenever
positive liquidity is the driving force in the market -- as opposed to
investors' reactions to individual companies' fundamentals -- one has to be
cautious.
Moreover, corporate earnings will not continue to grow at their
earlier, breakneck paces. In 1996, we expect profit growth to be in the
single-digit. Despite all, at this point early in the year, we think the stock
market has the potential to return close to its historical average of about 10
percent.+ Remember, of course, that in January alone the Standard & Poor's 500
Stock Index gained 3.4 percent. Our forecast assumes added stock market
volatility this year.
Our equities forecast assumes some help from the bond market. As you
know, the Federal Reserve Board began to ease short-term interest rates last
year and may ease again if weak economic data appears. The widening
relationship between short and long-term rates at this point in the economic
cycle is an intriguing one, and one that would argue against a recession
forecast. Short-term interest rates are generally falling. Yet, rates usually
rise in an economy headed toward recession.
As is typical after a strong year in the domestic markets, many
investors will be looking overseas for superior return opportunities in 1996.
This move makes good sense to us, as well. Foreign economies' expansions often
follow the U.S. In fact, improvement abroad could help sustain this country's
expansion as it could boost the demand for exports.
The value of the dollar, having had a roller coaster year in 1995,
should settle down. Strength in foreign markets could boost those countries'
currencies, which would bring an end to the current dollar rally later this
year.
As we head toward the November presidential elections, we can expect
continued discussion from both political parties about balancing the federal
budget and related taxation issues. Frankly, we see the candidates as waging a
war in sameness -- there will be little difference between the Republican
primary platform and what President Bill Clinton has committed to about a
balanced budget. Economically as well as socially, the trend in government is
toward conservativism.
With that as an economic backdrop, we encourage you to read the
following detailed report of your fund, including an interview with your fund's
portfolio management. Thank you for your continued support. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Stephen B. Timbers
Stephen B. Timbers
PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER
March 12, 1996
+SOURCES: BASED UPON THE AVERAGE OF THE STANDARD & POOR'S 500 STOCK INDEX
SINCE 1928 (TOWERS DATA SYSTEMS). THIS DATA IS HISTORICAL AND DOES NOT REFLECT
FUTURE RESULTS. THE S&P 500 IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE U.S. STOCK MARKET.
3
<PAGE> 4
GENERAL ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund
performance.
The following are some significant economic guideposts and their
investment rationale that may help your investment decision-making. The 10-year
Treasury rate and the prime rate are prevailing interest rates. The other data
report year-to-year percentage changes.
<TABLE>
<CAPTION>
NOW (2/29/96) 6 MONTHS AGO 1 YEAR AGO 2 YEAR AGO
<S> <C> <C> <C> <C>
10 year Treasury rate 1 15.81% 6.2% 7.2 % 6.48%
Prime rate 2 28.25% 8.75% 9 % 6.06%
Inflation rate 3** 2.6% 2.9% 2.87% 2.52%
The U.S. dollar 4 40.82% 1.17% 8.46% 0.48%
Capital goods orders 5** 11.63% 7.1% 23% 5.48%
Industrial production 6* 0.07% 3.17% 5.41% 4.21%
Employment growth 7 71.51% 1.89% 2.84% 2.97%
</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%. 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 corporate profits and equity performance.
7 An influence on family income and retail sales.
Source: Economics Department, Zurich Kemper Investments, Inc.
* Data as of January 31, 1996
** Data as of December 31, 1995
4
<PAGE> 5
PERFORMANCE UPDATE
[REGNER PHOTO]
THOMAS M. REGNER JOINED ZURICH KEMPER INVESTMENT, INC. IN 1994 AND IS A
SENIOR VICE PRESIDENT AND THE CHIEF EQUITY PORTFOLIO STRATEGIST. IN
ADDITION, HE IS THE PORTFOLIO MANAGER OF THE KEMPER HORIZON FUND. WITH
OVER 20 YEARS OF EXPERIENCE IN THE EQUITY MARKETS, REGNER RECEIVED BOTH
HIS BACHELOR'S AND MASTERS DEGREES FROM THE UNIVERSITY OF WISCONSIN AND
IS A CHARTERED FINANCIAL ANALYST.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE
COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET
AND OTHER CONDITIONS.
GIVEN KEMPER HORIZON FUND'S COMMENCEMENT OF OPERATIONS ON DECEMBER 29, 1995,
THIS FIRST SEMIANNUAL REPORT OF THE FUND (WHOSE FISCAL YEAR ENDS JULY 31)
REPORTS ON ONE MONTH OF ACTIVITY. IN FACT, JANUARY 1996 WAS AN EVENTFUL MONTH
TO BE BUILDING A PORTFOLIO AND, PORTFOLIO MANAGER THOMAS M. REGNER SAYS, EVEN A
MODEST TEST OF THE FUND'S STRATEGY.
Q. TOM, EVERY KEMPER HORIZON FUND SHAREHOLDER MADE A FAIRLY RECENT
INVESTMENT DECISION. EVEN SO, LET'S START WITH A BRIEF REVIEW OF THE FUND'S
STRATEGY.
A. Sure, the fund's overall strategy is to apply professional
management and diversification to seek relatively consistent returns while
controlling risk and reducing volatility for three possible time horizons:
* Kemper Horizon 20+ Portfolio, for investors with a time horizon of
approximately 20-plus years, pursues capital growth as its primary
objective and income as a secondary objective.
* Kemper Horizon 10+ Portfolio, for investors with a time horizon of
approximately 10-plus years, seeks a balance between capital growth and
income.
* Kemper Horizon 5 Portfolio, for investors who have an investment horizon
of approximately five years, strives for a level of income consistent with
capital preservation; capital growth is a secondary objective.
Each of these portfolios has a different mix of equities (including
common stocks, preferred stocks, convertible stocks and other types of equity
investments) and fixed-income securities (including bonds as well as debentures,
convertible debt instruments and other fixed-income investments). The mix varies
according to the various risk tolerances, investment objectives and time
horizons specific to investors in the three portfolios.
In a way, our approach is a throwback to the heritage of mutual funds.
Mutual funds were created to uncomplicate investing. Unfortunately, the
proliferation of mutual funds -- there are now more than 7,000 to choose from --
has made investing more difficult.
At the same time, Kemper Horizon Fund also takes advantage of
state-of-the-art research and computer modeling technology to help reduce risk.
Q. SO, HOW WAS THE FUND'S STRATEGY PURSUED IN ITS FIRST MONTH?
A. We were fortunate because price weakness early in January
provided us with excellent buying opportunities. For example, we believed that
many technology stocks had been oversold -- emotion and not fundamentals had
driven the price of several stocks down. IBM, BMC Software and Boeing were among
the stocks that we bought before the large cap, technology rally that took place
later in the month. These contributed to our strong one-month returns.
5
<PAGE> 6
PERFORMANCE UPDATE
Q. DID ALL THREE PORTFOLIOS OWN THOSE STOCKS?
A. Yes, if we like a company for one portfolio, we'll usually buy
it for all three portfolios. But we may buy more of it for Horizon 20+ and less
of it for Horizon 5, for example.
Q. WHAT OTHER THEMES DID YOU LAY THE GROUNDWORK FOR IN JANUARY?
A. We believe that corporate earnings can't continue to grow as
they did in 1995, particularly if the economy is slowing. So, we established
positions in attractively priced companies that seemed capable of sustaining a
strong earnings growth rate. Beverages, food and drugs, consumer nondurables --
all of these are industries that tend to hold their own in a slowdown. In
January, for example, we bought shares of Philip Morris Companies, Abbott
Laboratories and Johnson & Johnson.
But valuations -- not themes -- influence how we're building these
portfolios. It's a simple concept, really: First, we must like a stock because
it has good prospects. Then, we wait and watch for that stock to go on sale.
So, if a technology stock that we like goes on sale, we buy. If a technology
stock that we like exceeds what we consider an attractive price, we don't buy.
If another stock that we like in a different industry goes on sale, we'll buy
that.
Q. NATURALLY, YOU'RE DOING A LOT OF PURCHASING AS THE FUND GROWS.
WAS THERE MUCH SELLING IN THE FUND'S FIRST MONTH?
A. No, and given our approach to equity investing, I would expect
our turnover to be lower than average.
Q. SO FAR, WE'VE DISCUSSED ONLY THE EQUITY PORTION OF THE
PORTFOLIOS BUT, AS YOU SAID EARLIER, ASSET DIVERSIFICATION IS KEY TO THIS FUND'S
STRATEGY.
A. That's right. We consider the multiple levels of diversification
- -- equities and fixed-income securities, domestic and international stocks,
value and growth style stocks, large and small company stocks.
Q. TOM, WOULD YOU ELABORATE ON THE ROLE THAT THE FIXED-INCOME
PORTION OF THE PORTFOLIO PLAYS?
A. As a matter of fact, I can explain it in the context of what
happened in January. In January, we began to see some volatility return to the
stock market. As you know, the Horizon portfolios all maintain a fixed-income
component (a higher percentage for Horizon 5 shareholders who expect to need
their funds sooner and a lower percentage for Horizon 20+ shareholders, whose
longer horizon makes them more tolerant of short-term volatility). On the days
when the Dow Jones Industrial Average was down in January, the portfolios'
fixed-income securities helped stabilize the portfolios' net asset values. The
greater stability comes from the high average credit quality rating -- which is
currently AAA -- and the relatively short maturity of the fixed-income
investments. They help serve as what we call our "anchor to windward."
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
A. Again, we expect a significant pickup in market volatility. It's
just not clear to us how the market can sustain the growth it enjoyed in 1995
and in January. For the fund, our near-term plan calls for us to build the
international equity portion of the portfolios, as well as to remain alert for
opportunities in the U.S. market. We're expecting the fixed-income components of
the portfolios to help provide relatively steady returns, no matter what the
market environment.
6
<PAGE> 7
STATISTICS FOR 20+ PORTFOLIO
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
KEMPER HORIZON 20+ PORTFOLIO ON 1/31/96
--------------------------------------------
<S> <C>
COMMON STOCKS 72%
--------------------------------------------
TREASURIES 12
--------------------------------------------
CASH AND EQUIVALENTS 16
--------------------------------------------
100%
</TABLE>
[PIE CHART of above Horizon 20+ Portfolio on 1/31/96]
/ / Common Stocks
/ / Treasuries
/ / Cash and Equivalents
INDIVIDUAL HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS
REPRESENTING 12.68% OF TOTAL NET ASSETS ON JANUARY 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------
<S> <C> <C>
Xerox Corporation Develops, manufactures, markets, services and finances 3.02%
a broad range of document processing products and
systems designed to make offices more productive.
- ------------------------------------------------------------------------------------
Boatmen's Bancshares Engaged in commercial banking operations, mortgage 2.51%
banking and related financial services.
- ------------------------------------------------------------------------------------
WorldCom Provides intrastate, interstate and international long 2.50%
distance services, along with operator, billing and
collection services.
- ------------------------------------------------------------------------------------
Astra AB, "A" Develops, manufactures and markets pharmaceuticals. 2.39%
- ------------------------------------------------------------------------------------
First Union Corp. Engaged in commercial, investment and mortgage banking. 2.26%
- ------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
STATISTICS FOR 10+ PORTFOLIO
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
KEMPER HORIZON 10+ PORTFOLIO ON 1/31/96
<S> <C>
COMMON STOCKS 60%
--------------------------------------------
TREASURIES 38
--------------------------------------------
CASH AND EQUIVALENTS 2
--------------------------------------------
100%
</TABLE>
[PIE CHART of above Horizon 10+ Portfolio on 1/31/96]
/ / Common Stocks
/ / Treasuries
/ / Cash Equivalents
INDIVIDUAL HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS
REPRESENTING 8.30% OF TOTAL NET ASSETS ON JANUARY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Boeing Co. Manufactures commercial transportation equipment, primarily 1.70%
passenger and cargo jetliners. Also develops military aircraft
and missiles and space systems.
- --------------------------------------------------------------------------------------------
General Electric Co. Operates in major businesses including power generators, 1.69%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- --------------------------------------------------------------------------------------------
General Re Corp. Operates principally as a property-casualty and life reinsurer. 1.68%
- --------------------------------------------------------------------------------------------
BMC Software Develops, markets and supports standard systems software 1.62%
products to enhance IBM's database management and data
communications systems.
- --------------------------------------------------------------------------------------------
WorldCom Provides intrastate, interstate and international long 1.61%
distance services, along with operator, billing and collection
services.
- --------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
STATISTICS FOR 5 PORTFOLIO
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
KEMPER HORIZON 5 PORTFOLIO ON 1/31/96
<S> <C>
Common stocks 38%
------------------------------------------
Treasuries 50
------------------------------------------
Cash and equivalents 12
------------------------------------------
100%
</TABLE>
/ / Common Stocks
/ / Treasuries
/ / Cash Equivalents
[PIE CHART of above Horizon 5 Portfolio on 1/31/96]
INDIVIDUAL HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS
REPRESENTING 6.88% OF TOTAL NET ASSETS ON JANUARY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Holdings PERCENT
- --------------------------------------------------------------------------
<S> <C> <C>
International Manufactures data
Business Machines processing equipment
and systems in the
information handling
field, encompassing
information handling
systems, equipment
and services to solve
the increasingly
complex problems of
business, government,
science, space
exploration, defense,
education, medicine
and many other areas
of human activity. 1.47%
- --------------------------------------------------------------------------
Novellus Systems Designs,
manufactures, markets
and services chemical
vapor deposition
equipment used in the
fabrication of
integrated circuits. 1.44%
- --------------------------------------------------------------------------
First USA Specialize in the
credit card business.
The company is among
the largest providers
of the Visa and
MasterCard services
in the nation. 1.41%
- --------------------------------------------------------------------------
Johnson & Johnson Largest and most
comprehensive
manufacturer of
health care products
serving the consumer,
pharmaceutical and
professional markets. 1.30%
- --------------------------------------------------------------------------
Philip Morris Companies Largest cigarette
company in the U.S.
and the second
largest brewer,
through its Miller
Brewing subsidiary.
The company is also a
major branded food
producer, through its
Kraft and General
Foods subsidiaries. 1.26%
- --------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 20+ PORTFOLIO
Portfolio of Investments at January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES--12.1%
8.875%, 1998 $ 10,000 $ 11,000
7.125%, 1998 93,000 98,000
5.50%, 1998 15,000 15,000
-----------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES
(Cost: $123,000) 124,000
-----------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS--71.9% NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS, MEDIA
AND ENTERTAINMENT--6.7%
(a)AirTouch Communications 500 14,000
Carnival Corp. 500 14,000
(a)Liberty Media Group, "A" 550 15,000
(a)WorldCom 700 26,000
-----------------------------------------------------------------------------
69,000
- --------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE,
SYSTEMS, ELECTRONIC
DATA PROCESSING
AND ELECTRONIC
COMPONENTS--16.5%
(a)Applied Materials, Inc. 400 15,000
(a)Atmel Corporation 800 23,000
(a)BMC Software 250 14,000
(a)Cisco Systems 200 17,000
Intel Corp. 200 11,000
International Business Machines 100 11,000
(a)Novellus Systems 400 21,000
(a)Seagate Technology 300 18,000
(a)Silicon Graphics, Inc. 400 11,000
(a)Solectron Corp. 300 13,000
(a)3Com Corporation 300 14,000
-----------------------------------------------------------------------------
168,000
- --------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS
AND SERVICES--6.5%
Duracell International Inc. 200 10,000
Philip Morris Companies 200 19,000
Procter & Gamble Co. 200 17,000
UST, Inc. 600 20,000
-----------------------------------------------------------------------------
66,000
- --------------------------------------------------------------------------------------------------------------
DRUGS AND HEALTH
CARE--9.5%
Abbott Laboratories 400 17,000
Astra AB, "A" 600 25,000
(a)Forest Laboratories 250 14,000
(a)Foundation Health Corp. 250 11,000
Johnson & Johnson 200 19,000
Medtronic, Inc. 200 11,000
-----------------------------------------------------------------------------
97,000
- --------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--1.9%
Enron Corp. 400 14,000
Union Texas Petroleum Holdings 300 5,000
-----------------------------------------------------------------------------
19,000
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES--17.4%
Boatmen's Bancshares 600 $ 26,000
Dean Witter Discover 200 11,000
First Union Corp. 400 22,000
First USA 200 10,000
Franklin Resources 200 11,000
General Re Corp. 100 15,000
MBIA Inc. 200 15,000
Merrill Lynch & Co. 200 11,000
J.P. Morgan & Company 100 8,000
Morgan Stanley Group Inc. 400 19,000
NationsBank 300 21,000
Providian Corp. 200 9,000
-----------------------------------------------------------------------------
178,000
- --------------------------------------------------------------------------------------------------------------
MANUFACTURING--11.3%
Allied-Signal 250 12,000
Boeing Co. 200 16,000
(a)FMC Corp. 300 22,000
General Electric Co. 300 23,000
Magna International, "A" 300 12,000
Xerox Corporation 250 31,000
-----------------------------------------------------------------------------
116,000
- --------------------------------------------------------------------------------------------------------------
RETAILING--2.1%
(a)Federated Department Stores 700 19,000
Heilig-Meyers 200 3,000
-----------------------------------------------------------------------------
22,000
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--71.9%
(Cost: $709,000) 735,000
-----------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS--13.7%
Yield--5.31% and 5.33%
Due--February 1996
Federal Home Loan Mortgage Corp. $ 40,000 40,000
Federal National Mortgage Assn. 100,000 100,000
-----------------------------------------------------------------------------
TOTAL MONEY MARKET
INSTRUMENTS--13.7%
(Cost: $140,000) 140,000
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--97.7%
(Cost: $972,000) 999,000
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--2.3% 24,000
-----------------------------------------------------------------------------
NET ASSETS--100% $1,023,000
-----------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $972,000 for federal income tax purposes at
January 31, 1996, the aggregate gross unrealized appreciation was $30,000, the
aggregate gross unrealized depreciation was $3,000 and the net unrealized
appreciation on investments was $27,000.
See accompanying Notes to Financial Statements.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 10+ PORTFOLIO
Portfolio of Investments at January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES--38.2%
8.875%, 1998 $200,000 $ 219,000
7.125%, 1998 93,000 98,000
6.125%, 1998 136,000 139,000
5.50%, 1998 63,000 64,000
-----------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES
(Cost: $519,000) 520,000
-----------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS--60.3% NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS, MEDIA
AND ENTERTAINMENT--5.9%
(a)AirTouch Communications 700 20,000
Carnival Corp. 800 22,000
(a)Liberty Media Group, "A" 600 16,000
(a)WorldCom 600 22,000
-----------------------------------------------------------------------------
80,000
- --------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE,
SYSTEMS, ELECTRONIC
DATA PROCESSING
AND ELECTRONIC
COMPONENTS--14.3%
(a)Applied Materials, Inc. 400 15,000
(a)Atmel Corporation 500 14,000
(a)BMC Software 400 22,000
(a)Cisco Systems 200 17,000
Intel Corp. 300 17,000
International Business Machines 200 22,000
(a)Novellus Systems 400 21,000
(a)Seagate Technology 300 18,000
(a)Silicon Graphics, Inc. 600 17,000
(a)Solectron Corp. 300 14,000
(a)3Com Corporation 400 18,000
-----------------------------------------------------------------------------
195,000
- --------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS
AND SERVICES--5.4%
Duracell International Inc. 350 17,000
Philip Morris Companies 200 19,000
Procter & Gamble Co. 200 17,000
UST, Inc. 600 20,000
-----------------------------------------------------------------------------
73,000
- --------------------------------------------------------------------------------------------------------------
DRUGS AND HEALTH
CARE--7.8%
Abbott Laboratories 500 21,000
Astra AB, "A" 400 16,000
(a)Forest Laboratories 300 16,000
(a)Foundation Health Corp. 400 17,000
Johnson & Johnson 200 19,000
Medtronic, Inc. 300 17,000
-----------------------------------------------------------------------------
106,000
- --------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--2.3%
Enron Corp. 500 19,000
Union Texas Petroleum Holdings 700 13,000
-----------------------------------------------------------------------------
32,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES--14.5%
Boatmen's Bancshares 500 $ 21,000
Dean Witter Discover 400 22,000
First Union Corp. 300 17,000
First USA 100 5,000
Franklin Resources 350 19,000
General Re Corp. 150 23,000
MBIA Inc. 200 15,000
Merrill Lynch & Co. 300 17,000
J.P. Morgan & Company 200 16,000
NationsBank 300 21,000
Providian Corp. 500 22,000
-----------------------------------------------------------------------------
198,000
- --------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.7%
Allied-Signal 300 15,000
Boeing Co. 300 23,000
(a)FMC Corp. 200 15,000
General Electric Co. 300 23,000
Magna International, "A" 400 17,000
Xerox Corporation 100 12,000
-----------------------------------------------------------------------------
105,000
- --------------------------------------------------------------------------------------------------------------
RETAILING--2.4%
(a)Federated Department Stores 700 19,000
Heilig-Meyers 900 14,000
-----------------------------------------------------------------------------
33,000
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--60.3%
(Cost: $782,000) 822,000
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--98.5%
(Cost: $1,301,000) 1,342,000
-----------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--1.5% 20,000
-----------------------------------------------------------------------------
NET ASSETS--100% $1,362,000
-----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $1,301,000 for federal income tax
purposes at January 31, 1996, the aggregate gross unrealized appreciation was
$46,000, the aggregate gross unrealized depreciation was $5,000 and the net
unrealized appreciation on investments was $41,000.
See accompanying Notes to Financial Statements.
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 5 PORTFOLIO
PORTFOLIO OF INVESTMENTS AT JANUARY 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES--50.4%
9.25%, 1998 $ 75,000 $ 82,000
8.875%, 1998 160,000 176,000
7.125%, 1998 93,000 98,000
5.50%, 1998 15,000 15,000
----------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES
(Cost: $370,000) 371,000
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
COMMON STOCKS--37.6% NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS, MEDIA
AND ENTERTAINMENT--3.8%
(a)AirTouch Communications 200 6,000
Carnival Corp. 300 8,000
(a)Liberty Media Group, "A" 250 7,000
(a)WorldCom 200 7,000
----------------------------------------------------------------------------
28,000
- -------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE,
SYSTEMS, ELECTRONIC DATA
PROCESSING AND ELECTRONIC
COMPONENTS--7.6%
(a)BMC Software 150 8,000
(a)Cisco Systems 100 8,000
Intel Corp. 100 6,000
International Business Machines 100 11,000
(a)Novellus Systems 200 11,000
(a)Silicon Graphics, Inc. 250 7,000
(a)Solectron Corp. 100 5,000
----------------------------------------------------------------------------
56,000
- -------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS
AND SERVICES--4.0%
Duracell International Inc. 100 5,000
Philip Morris Companies 100 9,000
Procter & Gamble Co. 100 8,000
UST, Inc. 200 7,000
----------------------------------------------------------------------------
29,000
- -------------------------------------------------------------------------------------------------------------
DRUGS AND HEALTH CARE
- --4.9%
Abbott Laboratories 200 8,000
Astra AB, "A" 100 4,000
(a)Forest Laboratories 150 8,000
(a)Foundation Health Corp. 150 6,000
Johnson & Johnson 100 10,000
----------------------------------------------------------------------------
36,000
- -------------------------------------------------------------------------------------------------------------
ENERGY AND RELATED
SERVICES--1.2%
Enron Corp. 100 4,000
Union Texas Petroleum Holdings 300 5,000
----------------------------------------------------------------------------
9,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS--37.6% NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES--10.3%
Boatmen's Bancshares 100 $ 4,000
Dean Witter Discover 100 5,000
First Union Corp. 100 6,000
First USA 200 10,000
Franklin Resources 50 3,000
General Re Corp. 50 8,000
MBIA Inc. 100 7,000
Merrill Lynch & Co. 150 9,000
J.P. Morgan & Company 100 8,000
NationsBank 100 7,000
Providian Corp. 200 9,000
---------------------------------------------------------------------------
76,000
- ------------------------------------------------------------------------------------------------------------
MANUFACTURING--4.6%
Allied-Signal 150 7,000
Boeing Co. 100 8,000
(a)FMC Corp. 100 7,000
General Electric Co. 100 8,000
Magna International, "A" 100 4,000
---------------------------------------------------------------------------
34,000
- ------------------------------------------------------------------------------------------------------------
RETAILING--1.2%
(a)Federated Department Stores 200 5,000
Heilig-Meyers 200 4,000
---------------------------------------------------------------------------
9,000
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--37.6%
(Cost: $262,000) 277,000
---------------------------------------------------------------------------
TOTAL INVESTMENTS--88.0%
(Cost: $632,000) 648,000
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--12.0% 88,000
---------------------------------------------------------------------------
NET ASSETS--100% $736,000
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $632,000 for federal income tax purposes
at January 31, 1996, the aggregate gross unrealized appreciation was
$18,000, the aggregate gross unrealized depreciation was $2,000 and the net
unrealized appreciation on investments was $16,000.
See accompanying Notes to Financial Statements.
15
<PAGE> 16
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1996
<TABLE>
<CAPTION>
KEMPER HORIZON
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $972,000, $1,301,000 and $632,000) $ 999,000 1,342,000 648,000
- --------------------------------------------------------------------------------------------------------------
Cash 158,000 193,000 70,000
- --------------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 223,000 144,000 76,000
- --------------------------------------------------------------------------------------------------------------
Investments sold 6,000 12,000 2,000
- --------------------------------------------------------------------------------------------------------------
Dividends and interest 2,000 8,000 8,000
- --------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,388,000 1,699,000 804,000
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 364,000 336,000 67,000
- --------------------------------------------------------------------------------------------------------------
Other 1,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------------
Total liabilities 365,000 337,000 68,000
- --------------------------------------------------------------------------------------------------------------
NET ASSETS $1,023,000 1,362,000 736,000
- ------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Paid-in capital 996,000 1,321,000 719,000
- --------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on sales of investments (1,000) (2,000) --
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 27,000 41,000 16,000
- --------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,000 2,000 1,000
- --------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,023,000 1,362,000 736,000
- ------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net assets applicable to shares outstanding $301,440 932,392 203,590
- --------------------------------------------------------------------------------------------------------------
Shares outstanding, no par value 30,648 95,679 20,934
- --------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $9.84 9.75 9.73
- --------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $10.44 10.34 10.32
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $685,248 382,403 492,692
- --------------------------------------------------------------------------------------------------------------
Shares outstanding, no par value 69,736 39,279 50,658
- --------------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $9.83 9.74 9.73
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $36,312 47,205 39,718
- --------------------------------------------------------------------------------------------------------------
Shares outstanding, no par value 3,695 4,846 4,082
- --------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $9.83 9.74 9.73
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 17
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the period December 29, 1995 (date of inception) to January 31,
1996
<TABLE>
<CAPTION>
KEMPER HORIZON
-------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends and interest income $ 1,000 2,000 1,000
- -----------------------------------------------------------------------------------------------------------
Management fee and other expenses 1,000 2,000 1,000
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME -- -- --
- -----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Net realized loss on sales of investments (1,000) (2,000) --
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 27,000 41,000 16,000
- -----------------------------------------------------------------------------------------------------------
Net gain on investments 26,000 39,000 16,000
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 26,000 39,000 16,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the period December 29, 1995 (date of inception) to January 31, 1996
<TABLE>
<CAPTION>
KEMPER HORIZON
------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
OPERATIONS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------------------------------------------------------
Net realized loss $ (1,000) (2,000) --
- -------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 27,000 41,000 16,000
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 26,000 39,000 16,000
- -------------------------------------------------------------------------------------------------------------
Net equalization credits 1,000 2,000 1,000
- -------------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 896,000 1,221,000 619,000
- -------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 923,000 1,262,000 636,000
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------------
Beginning of period 100,000 100,000 100,000
- -------------------------------------------------------------------------------------------------------------
END OF PERIOD 1,023,000 1,362,000 736,000
- -------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME
AT END OF PERIOD $ 1,000 2,000 1,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE FUND Kemper Horizon Fund (the "Fund") is an open-end
diversified management investment company organized
as a business trust under the laws of
Massachusetts. The Fund consists of three
investment portfolios ("Portfolios") designed for
investors with different investment objectives. The
three Portfolios are Kemper Horizon 20+ Portfolio,
Kemper Horizon 10+ Portfolio, and Kemper Horizon 5
Portfolio. Each Portfolio currently offers four
classes of shares. Class A shares are sold to
investors subject to an initial sales charge. Class
B shares are sold without an initial sales charge
but are subject to higher ongoing expenses than
Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares six
years after issuance. Class C shares are sold
without any initial sales charge but are subject to
higher ongoing expenses than Class A shares and,
for shares sold on or after April 1, 1996, a
contingent deferred sales charge payable upon
certain redemptions within one year of purchase.
Class C shares do not convert into another class.
Class I shares (none sold through January 31, 1996)
are offered to a limited group of investors, are
not subject to initial or contingent deferred sales
charges and have lower ongoing expenses than other
classes. Differences in class expenses will result
in the payment of different per share income
dividends by class. Each share of a Portfolio
represents an identical interest in the investments
of the Portfolio and has the same rights.
- --------------------------------------------------------------------------------
2 SIGNIFICANT ACCOUNTING
POLICIES INVESTMENT VALUATION. Investments are stated at
value. Portfolio securities that are traded on a
domestic securities exchange or securities listed
on the NASDAQ National Market are valued at the
last sale price on the exchange or market where
primarily traded or listed or, if there is no
recent sale, at the last current bid quotation.
Portfolio securities that are primarily traded on
foreign securities exchanges are generally valued
at the preceding closing values of such securities
on their respective exchanges where primarily
traded. Securities not so traded or listed are
valued at the last current bid quotation if market
quotations are available. Fixed income securities
are valued by using market quotations, or
independent pricing services that use prices
provided by market makers or estimates of market
values obtained from yield data relating to
instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked price is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes premium and
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
discount amortization on money market instruments
and discount amortization on long-term fixed income
securities. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
EXPENSES. Expenses arising in connection with a
specific Portfolio are allocated to that Portfolio.
Other Fund expenses are allocated among the
Portfolios in proportion to their relative net
assets.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and C shares will be reduced by the amount
of any applicable contingent deferred sales charge.
On each day the New York Stock Exchange is open for
trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Portfolio's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. Each Portfolio has complied
with the special provisions of the Internal Revenue
Code available to investment companies and
therefore no federal income tax provision is
required.
DIVIDENDS TO SHAREHOLDERS. Each Portfolio intends
to pay dividends of net investment income as
follows: annually for the Kemper Horizon 20+
Portfolio, semiannually for the Kemper Horizon 10+
Portfolio, and quarterly for the Kemper Horizon 5
Portfolio. Each Portfolio will pay any net realized
capital gains at least annually. Dividends are
recorded on ex-dividend date. Dividends are
determined in accordance with income tax principles
which may treat certain transactions differently
from generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Portfolio shares
is credited or charged to undistributed net
investment income so that income per share
available for distribution is not affected by sales
or redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS WITH
AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Zurich Kemper Investments, Inc.
(ZKI) (formerly known as Kemper Financial Services,
Inc.) and each Portfolio pays a management fee at
an annual rate of .58% of the first $250 million of
average daily net assets declining to .42% of
average daily net assets in excess of $12.5
billion. Dreman Value Advisors, Inc. (DVA), a
wholly owned subsidiary of ZKI, is the sub-adviser
for the Fund. ZKI pays DVA a fee at the annual rate
of .25% of the average daily net assets of each
Portfolio allocated by ZKI to DVA for management.
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT.
The Fund has an underwriting and distribution
services agreement with Kemper Distributors, Inc.
(KDI). Underwriting commissions paid in connection
with the
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
distribution of each Portfolio's Class A shares for
the period ended January 31, 1996 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS ALLOWED
BY KDI TO ALL FIRMS
-------------------
<S> <C>
Kemper Horizon 20+ Portfolio $ 8,000
Kemper Horizon 10+ Portfolio 29,000
Kemper Horizon 5 Portfolio 6,000
</TABLE>
For services under the distribution services
agreement, each Portfolio pays KDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares of each Portfolio. In addition, KDI receives
any contingent deferred sales charges from
redemptions of Class B and C shares. Commissions
and distribution fees paid by KDI for the sale of
Class B and Class C shares for the period ended
January 31, 1996 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS AND DISTRIBUTION
FEES PAID BY KDI
---------------------------------
TO ALL FIRMS TO AFFILIATES
------------ --------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $ 10,000 1,000
Kemper Horizon 10+ Portfolio 12,000 --
Kemper Horizon 5 Portfolio 15,000 --
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to shareholders, each Portfolio pays KDI a fee at
an annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
arrangements with financial services firms that
provide these services and pays these firms based
on assets of Portfolio accounts the firms services.
Administrative services fees (ASF) paid by KDI for
the period ended January 31, 1996 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
KDI TO ALL FIRMS
-------------------
<S> <C>
Kemper Horizon 20+ Portfolio $ 1,000
Kemper Horizon 10+ Portfolio 1,000
Kemper Horizon 5 Portfolio 1,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Portfolio's custodian
and transfer agent, Kemper Service Company is the
shareholder services agent of the Fund.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of ZKI.
The Fund made no payments to its officers or
trustees during the period ended January 31, 1996.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the period ended January 31, 1996 investment
transactions (excluding short-term instruments) are
as follows:
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5
------------- ------------- ---------
<S> <C> <C> <C>
Purchases $ 839,000 1,315,000 634,000
Proceeds from sales 6,000 12,000 2,000
</TABLE>
20
<PAGE> 21
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of the Portfolios for the period
December 29, 1995 (date of inception) to January
31, 1996:
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
SHARES AMOUNT
<S> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
Class A 27,000 $260,000
----------------------------------------------------------------------------
Class B 67,000 635,000
----------------------------------------------------------------------------
Class C 100 1,000
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $896,000
----------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
SHARES AMOUNT
<S> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
Class A 93,000 $ 871,000
----------------------------------------------------------------------------
Class B 36,000 338,000
----------------------------------------------------------------------------
Class C 1,300 12,000
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $1,221,000
----------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
SHARES AMOUNT
<S> <C> <C>
----------------------------------------------------------------------------
SHARES SOLD
----------------------------------------------------------------------------
Class A 18,000 $165,000
----------------------------------------------------------------------------
Class B 48,000 449,000
----------------------------------------------------------------------------
Class C 500 5,000
----------------------------------------------------------------------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS $619,000
----------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
FINANCIAL HIGHLIGHTS
All Financial Highlights are presented for the period December 29, 1995 (date of
inception) to January 31, 1996
<TABLE>
<CAPTION>
KEMPER HORIZON 20+ PORTFOLIO
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.50 9.50 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- -- --
- -------------------------------------------------------------------------------
Net realized and unrealized gain .34 .33 .33
- -------------------------------------------------------------------------------
Total from investment operations .34 .33 .33
- -------------------------------------------------------------------------------
Net asset value, end of period $9.84 9.83 9.83
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.58% 3.47 3.47
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.47% 2.26 2.23
- -------------------------------------------------------------------------------
Net investment income -- -- --
- -------------------------------------------------------------------------------
SUPPLEMENTAL PORTFOLIO DATA
- -------------------------------------------------------------------------------
Net assets at end of period $ 1,023,000
- -------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 17%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER HORIZON 10+ PORTFOLIO
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------
Net asset value, beginning of period $9.50 9.50 9.50
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- -- --
- --------------------------------------------------------------------------------
Net realized and unrealized gain .25 .24 .24
- --------------------------------------------------------------------------------
Total from investment operations .25 .24 .24
- --------------------------------------------------------------------------------
Net asset value, end of period $9.75 9.74 9.74
- --------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.63% 2.53 2.53
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------
Expenses 1.48% 2.26 2.24
- --------------------------------------------------------------------------------
Net investment income -- -- --
- -------------------------------------------------------------------------------
SUPPLEMENTAL PORTFOLIO DATA
- -------------------------------------------------------------------------------
Net assets at end of period $ 1,362,000
- -------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 21%
- -------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
KEMPER HORIZON 5 PORTFOLIO
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $9.50 9.50 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income -- -- --
- -----------------------------------------------------------------------------------
Net realized and unrealized gain .23 .23 .23
- -----------------------------------------------------------------------------------
Total from investment operations .23 .23 .23
- -----------------------------------------------------------------------------------
Net asset value, end of period $9.73 9.73 9.73
- -----------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.42% 2.42 2.42
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.46% 2.25 2.22
- -----------------------------------------------------------------------------------
Net investment income -- -- --
- -----------------------------------------------------------------------------------
SUPPLEMENTAL PORTFOLIO DATA
Net assets at end of period $736,000
- -----------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 7%
- -----------------------------------------------------------------------------------
</TABLE>
NOTE TO ALL PORTFOLIOS: Total return does not reflect the effect of any sales
charges.
23
<PAGE> 24
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS JOHN E. NEAL JEROME L. DUFFY
President and Trustee Vice President Treasurer
JAMES E. AKINS JOHN E. PETERS Elizabeth C. Werth
Trustee Vice President Assistant Secretary
ARTHUR R. GOTTSCHALK THOMAS M. REGNER
Trustee Vice President
FREDERICK T. KELSEY STEVEN H. REYNOLDS
Trustee Vice President
DOMINIQUE P. MORAX PHILIP J. COLLORA
Trustee Vice President and
Secretary
FRED B. RENWICK CHARLES F. CUSTER
Trustee Vice President
Assistant Secretary
JOHN B. TINGLEFF
Trustee
JOHN G. WEITHERS
Trustee
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT KEMPER SERVICE COMPANY
P.O. Box 419557
Kansas City, MO 64141
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, MO 64105
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS ZURICH KEMPER INVESTMENTS, INC.
DREMAN VALUE ADVISERS, INC.
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
(RECYCLE LOGO)
Printed on recycled paper.
This report is not to be
distributed unless preceded
or accompanied by a
Kemper Horizon Fund prospectus.
KHF - 3 (3/96) (KEMPER FUND LOGO)
1012810
Printed in the U.S.A.
