<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JULY 31, 1997
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
Kemper Horizon Fund p Horizon
" . . . we've focused on good
long-term investments and
on realizing gains
for shareholders . . ."
KEMPER LOGO
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
PORTFOLIO STATISTICS
LARGEST HOLDINGS
14
PORTFOLIO OF INVESTMENTS
32
REPORT OF INDEPENDENT AUDITORS
33
FINANCIAL STATEMENTS
35
NOTES TO FINANCIAL STATEMENTS
40
FINANCIAL HIGHLIGHTS
At A GLANCE
- -----------------------------------------------------------------------
KEMPER HORIZON FUND TOTAL RETURNS*
- -----------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1997
(UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+
PORTFOLIO 33.90% 33.01% 32.80%
- -----------------------------------------------------------------------
KEMPER HORIZON 10+
PORTFOLIO 27.43% 26.25% 25.97%
- -----------------------------------------------------------------------
KEMPER HORIZON 5
PORTFOLIO 19.02% 18.15% 18.13%
- -----------------------------------------------------------------------
</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.
- -----------------------------------------------------------------------
KEMPER HORIZON FUND
LIPPER RANKINGS*
- -----------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THEIR RESPECTIVE LIPPER CATEGORIES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON
20+ PORTFOLIO #47 of #50 of #51 of
1-YEAR 204 funds 204 funds 204 funds
- -----------------------------------------------------------------------
KEMPER HORIZON
10+ PORTFOLIO #222 of #244 of #246 of
1-YEAR 317 funds 317 funds 317 funds
- -----------------------------------------------------------------------
KEMPER HORIZON
5 PORTFOLIO #26 of #34 of #35 of
1-YEAR 53 funds 53 funds 53 funds
- -----------------------------------------------------------------------
</TABLE>
* Lipper Analytical Services, Inc. rankings are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable. Rankings are
historical and do not reflect future performance. The portfolios are compared
to their respective Lipper categories as follows: Flexible Portfolio, Balanced
and Income.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------
AS OF AS OF
7/31/97 7/31/96
- -----------------------------------------------------------------------
<S> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO
CLASS A $12.89 $9.72
- -----------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
CLASS B $12.79 $9.65
- -----------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
CLASS C $12.80 $9.67
- -----------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO
CLASS A $12.01 $9.60
- -----------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO
CLASS B $12.00 $9.60
- -----------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO
CLASS C $11.98 $9.60
- -----------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
CLASS A $11.06 $9.57
- -----------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
CLASS B $11.06 $9.57
- -----------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
CLASS C $11.07 $9.57
- -----------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------
DIVIDEND REVIEW
- -----------------------------------------------------------------------
DURING THE YEAR ENDED JULY 31, 1997, THE FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
INCOME DIVIDEND
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+
PORTFOLIO $0.1040 $0.0380 $0.0350
- -----------------------------------------------------------------------
KEMPER HORIZON 10+
PORTFOLIO $0.1990 $0.1067 $0.1013
- -----------------------------------------------------------------------
KEMPER HORIZON 5
PORTFOLIO $0.2990 $0.2242 $0.2131
- -----------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
EQUITY STYLE BOX
Source: Morningstar, Inc., Chicago, IL (312)
STYLE 696-6000. (Morningstar Style Box is based on a
VALUE BLEND GROWTH portfolio date as of July 31, 1997.) The Equity
SIZE Style Box placement is based on a fund's
/ / /X/ / / LARGE price-to-earnings and price-to-book ratio
relative to the S&P 500, as well as the size of
/ / / / / / MEDIUM the companies in which it invests, or median
market capitalization.
/ / / / / / SMALL
Please note that style boxes do not represent
exact assessment of risk and do not represent
future performance. Please note that style boxes
do not represent an performance. Please consult
the prospectus for a description of investment
policies.
<PAGE> 3
ECONOMIC OVERVIEW
[TIMBERS PHOTO]
STEPHEN B. TIMBERS IS PRESIDENT, CHIEF INVESTMENT AND EXECUTIVE OFFICER OF
ZURICH KEMPER INVESTMENTS INC. (ZKI). ZKI AND ITS AFFILIATES MANAGE
APPROXIMATELY $80 BILLION IN ASSETS, INCLUDING $45 BILLION IN
RETAIL MUTUAL FUNDS. TIMBERS IS A GRADUATE OF YALE UNIVERSITY AND HOLDS AN
M.B.A. FROM HARVARD UNIVERSITY.
DEAR SHAREHOLDER,
A self-regulating economy, a balanced budget agreement and a positive stock
market all have contributed to another excellent year for investors. Given the
extended length of today's bull market (which celebrated its 15th anniversary on
August 12), it is prudent to wonder whether the end is near. Our position is
that while there is a certain precariousness to today's environment, which we
will elaborate on below, we see little to suggest that there will be more than
occasional market corrections.
Bipartisan agreement to balance the federal budget by the year 2002
represents significant progress that should benefit investors over the
long term. By reducing the burden of capital gains and eliminating certain tax
loopholes, the Taxpayer Relief Act of 1997 and the Balanced Budget Act of 1997
have the potential to meaningfully affect behavior. Now that the ceiling has
been raised on capital gains from the sale of a home, empty nesters will be
more inclined to move out of homes and into smaller condominiums. Added
investment and savings options should help boost the country's sagging savings
rate. From a social perspective, government's action to widen the difference
between the taxation rate on capital gains and on income reflects a conscious
effort to encourage capital investment. The more people and businesses can do
for themselves, the less likely they are to rely on the government, which
should help restrain federal spending.
The maximum tax on long-term capital gains is now 20 percent versus a
maximum of approximately 40 percent on ordinary income earned by
Americans in the highest income tax brackets. This dramatic difference could
have some influence on the management of mutual funds in the future. Although
few investment decisions are based on their tax consequences, the legislation
supports a "buy and hold" approach to investing, by which a mutual fund
generates investment returns through gains on investments held 18 months or
longer. Such gains are taxed at the reduced capital gains rate. On the margin,
portfolio managers should focus on long-term investing -- the strategy that we
have always supported.
In addition, mutual funds will gain investment flexibility with the new
law's repeal of what has been called the "short/short rule."
Previously, investment companies had been subject to a 30 percent limitation on
total income arising from the sale of securities held less than three months --
or face severe tax consequences. The lifting of this limitation provides newer
funds, in particular, with much needed maneuvering ability.
You can expect to hear more from Kemper about the implications of the new
legislation, and specifically about the tax reporting changes, over the next
several weeks and months. Overall, we believe that this legislation is something
the country can be proud of. It represents years of a commitment on the part of
the federal government to hold spending in check and refrain from creating new
programs. Expanding corporate revenues and profits in an extended period of low
inflation also contributed to making this investor-friendly environment
possible.
As we look toward the end of the year, we see little to trouble us. The
economy appears to be in excellent condition. Continuing the alternatingly
fast/slow pace that we have experienced for several months, the fast-growing
first quarter was followed by a slower second quarter. Such self-regulation has
minimized any need for the Federal Reserve Board to raise interest rates again.
We don't rule out the possibility of another hike in the fourth quarter,
however.
Inflation is very low. In spite of unemployment being the lowest we have
seen in decades, wage pressures are still manageable. For example, the
United Parcel Service strike and the earlier steel and airlines work actions
represent the most union activity we have seen in 10 years. Encouraged by the
low unemployment (and therefore high demand for workers), the unions are
becoming bolder but in the end seem ready to resolve disputes sensibly. As a
consequence, wage increases remain moderate.
Our primary concern is the very high valuations of the stock market. All
things considered, it is difficult to see where we can go from here. With prices
at such heady
3
<PAGE> 4
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.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (8/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 6.3 6.69 6.83 6.2
PRIME RATE(2) 8.5 8.3 8.25 8.75
INFLATION RATE(3) 2.23 3.03 2.88 2.62
THE U.S. DOLLAR(4) 10.1 8.58 3.32 -1.17
CAPITAL GOODS ORDERS(5)* 10.56 5.8 6.81 4.49
INDUSTRIAL PRODUCTION(5)* 3.73 4.06 2.04 3.73
EMPLOYMENT GROWTH(6) 2.07 2.24 2.03 2.3
</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 family income and retail sales.
* Data as of July 31, 1997.
Source: Economics Department, Zurich Kemper Investments, Inc.
levels, the market can be expected to react negatively to even minor earnings
disappointments, as we have seen in August. Kemper's response to this market is
to remain fully invested and to reduce risk by diversifying across a wider group
of investment opportunities. Research, the first step in stock selection, is key
in this kind of a market.
Bond markets are obviously cheered by recent events, and prospects for
income investors continue to be positive. Interest rates are stable and
credit quality has not been an issue. A dwindling supply of municipal bonds has
enabled municipal investments to outperform U.S. Treasuries.
In such a fully valued domestic market, it can make sense to look to
international markets for their growth potential. The strength of the dollar
thus far this year has diminished returns but international opportunities look
bright.
With this commentary 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
Zurich Kemper Investments, Inc.
September 11, 1997
4
<PAGE> 5
IN A YEAR WHEN LARGE COMPANY STOCKS WERE BY FAR THE
BEST PERFORMERS, THE PORTFOLIOS OF KEMPER HORIZON
FUND NEVERTHELESS PERFORMED WELL.
Q
COULD YOU RECAP THE PERFORMANCE OF THE VARIOUS MARKETS OVER THE LAST YEAR?
A
Certainly. Much as in the first half of the fiscal year, large company
domestic stocks continued to be by far the dominant performer for the period.
The extent of large cap outperformance can be seen in the chart below. In
addition, among large cap stocks, growth stocks tended to outgain value stocks.
Q
WHY HAVE BIG COMPANY GROWTH STOCKS TENDED TO OUTPERFORM?
A
There have been several reasons. First, earnings of blue chip companies
have remained
strong, and in fact have often surprised on the upside.
Second, the moderate rise in interest rates over the last several months has
prompted investors to wonder whether the stock market rally can sustain its
torrid pace. During times of uncertainty, the stocks of large companies tend to
outperform small company stocks because they are considered more reliable
performers should the economy slow or earnings growth diminish.
Also, there has been a tremendous influx of cash into the market from
retirement plans, pension funds and international sources. The majority of this
money has been invested in large company stocks, as they are
PERFORMANCE Update
In March 1997, Daniel J. Bukowski and William Knapp were named portfolio
co-managers of Kemper
Horizon Fund.
PHOTO
Daniel J. Bukowski is a senior vice president and director of quantitative
research for Zurich Kemper Investments, Inc. (ZKI). Bukowski also manages Kemper
Quantitative Equity Fund and co-manages Kemper Value+Growth Fund. He has more
than 10 years of experience in the capital markets and holds a bachelor's degree
and an M.B.A. from the University of Chicago.
PHOTO
William Knapp joined Zurich Kemper Investments, Inc. (ZKI) in 1992 as a
quantitative analyst. He also co-manages Kemper Value+Growth Fund. Knapp
received his B.S. and graduated magna cum laude at Drake University and his M.S.
at the University of Wisconsin-Madison. He also earned his Ph.D. at the
University of Wisconsin- Madison with an emphasis in Industrial Organization and
Finance.
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.
LARGE CAPITALIZATION STOCKS OUTPERFORMED OTHER AS
5
SET CLASSES GRAPH
<PAGE> 6
PERFORMANCE UPDATE
viewed as more conservative investments than mid-cap or small-cap stocks, and
therefore better candidates for retirement assets.
And finally, investors have been focusing on a very concentrated group of
stocks: large, multinational companies with strong brands such as Coke, Procter
& Gamble and McDonald's. This demand stems largely from investors looking to
capitalize on the improving economic environment overseas. To gain exposure to
foreign markets, they're choosing a few big, established, domestic companies
with which they're comfortable. The result has been powerful price gains on a
few selected stocks.
Q HOW HAS THE KEMPER HORIZON FUND PERFORMED IN THIS ENVIRONMENT?
A Overall, the portfolios performed well. The Horizon 20+ Portfolio Class A
shares - the portfolio most heavily weighted in equities - posted a total return
of 33.90% (unadjusted for sales charge) for the fiscal year. The Horizon 10+
Portfolio Class A shares returned 27.43% (unadjusted for sales charge), and the
Horizon 5 Portfolio Class A shares, with more than half invested in bonds,
returned 19.02% (unadjusted for sales charge) for the same period.
Even though each portfolio is partially invested in bonds, we still
would have liked to see the portfolios' returns more closely reflect
those of the stock market than they did during the past year. But the
significant outperformance of one part of the market - large cap stocks - made
that difficult. In essence, the fund's broad diversification worked against it
relative to the S&P 500. Part of the reason for this is that the S&P 500 is
market capitalization-weighted, meaning that the largest companies account for
a proportionate share of the index's performance. In fact, one third of the S&P
500's value is currently in the top 25 companies. Due to the gains made by the
largest company stocks, it was tough to keep pace with the index.
In addition, our style of investing - "growth at the right price" - has
been out of favor recently. An apt description of the current trend
might be "growth at ANY price." Investors seem willing to pay any amount to own
big multinationals. To us, this trend is reminiscent of the so-called "Nifty
50" stocks of the early 70s. Those were also big, consumer-product companies
with strong brand names that people thought would just keep growing unabated.
Like today's favored companies, "Nifty 50" stocks sold at exorbitant multiples.
Of course, in the ensuing bear market of 1973-74, the highest flying stocks
suffered the steepest declines.
Q DO YOU THINK THIS "GROWTH AT ANY PRICE" TREND WILL CONTINUE FOR VERY
LONG?
A Actually, the advance has started to broaden of late. Smaller company
stocks have started to come around, and technology stocks led the market in May
and June. Historically, the market has tended to recognize value, so we plan to
stay disciplined and stick to our guns. The worst thing we could do is to change
our approach and buy "Nifty 50"-type stocks at the top and then get whipsawed.
We've really been happy with the make-up of the portfolio, so a lot of
trading hasn't been necessary. Any new money that comes in we've been
allocating to small company stocks, some of which represent excellent values
in our opinion, and to beef up the fund's international holdings.
The bottom line is we've focused on good long-term investments and on
realizing gains for our shareholders.
Q WHAT STRATEGIES HAVE YOU USED TO MANAGE THE FUND IN THIS MARKET?
A Our strategy has always been one of "bottom-up" stock picking rather than
trying to predict broad market moves. So we've looked for individual stocks that
offer multinational exposure but are selling at what we believe are attractive
values.
We've also paid strict attention to the investment parameters of the
fund. The Horizon 20+ Portfolio is very close to its 80% stocks/20%
bonds benchmark. Likewise, the 10+ and 5 Portfolios are very near their
prescribed allocations. We firmly believe that other asset classes will catch
up to the large cap market, and we want to make sure that the fund is well
represented across the board if that happens.
Overall, we've just tried to be patient and to find stocks that we
think will perform well when investors decide they don't want to pay
high prices relative to earnings growth.
Q WHERE HAVE YOU FOUND OPPORTUNITIES THAT DON'T COST AS MUCH?
A Tobacco stocks have been a cross-holding on both the value and growth
sides of the portfolio. They offer the low P/E, high-yield characteristics that
are attractive from a value standpoint. Plus, they continue to grow earnings,
which is what growth managers look for. Tobacco stocks have been very volatile
but have done well recently on news of a compromise agreement with federal
health officials. Part of the volatility has to do with arbitrageurs trading on
day-to-day news. But serious investors can see the long-term potential inherent
in many of these companies.
Another area of emphasis on the value side has been financial companies -
banks, insurance companies and brokerages. They have continued to perform well,
in particular regional banks which have been in
6
<PAGE> 7
PERFORMANCE UPDATE
the midst of acquisitions and mergers. The Federal National Mortgage
Association, or "Fannie Mae," is a big holding because we think interest rates
will be flat to down. This should enable the stock to provide both growth
potential and income. We think it's a solid value right now.
Early in 1997, we bought a lot of big cap drug stocks, and overweighted
them during much of their run up in the first half of the year. We've
since sold many of them and reallocated to basic industries like chemicals,
paper, steel, and commodities excluding oil. That reflects our expectation for
solid economic growth.
On the growth side of the portfolio, technology stocks remain our most
significant position. We were probably a little too overweight in them during
the first quarter when they were beaten up due to investor concerns over
earnings. But many of them boasted - and continue to boast - growth rates three
or four times that of the market as a whole. So we stuck with them and, for the
most part, we were rewarded for our patience when they rebounded strongly in May
and June. In fact, some have doubled off their Spring lows. We've also focused
our technology holdings in larger companies that offer a bit more liquidity and
therefore are lower-risk technology plays. Specific examples were networking
companies like 3Com Corp., Cisco Systems, Novellus Systems and Ascend
Communications, and smaller semiconductor companies such as Atmel Corp.,
Microchip Technology and Applied Materials.
Q ANY STRATEGIES THAT DIDN'T WORK OUT AS WELL AS YOU'D HOPED?
A Aside from getting into technology stocks a little early, we would like
to have committed more to the big consumer non-durable companies, but they've
just been too expensive for our taste. We misjudged the market's appetite for
them, but trying to capture what the market likes isn't our game. We believe in
growth at the right price, and prices on the select stocks that have driven the
S&P 500 to all-time highs suggest to us that there is currently more risk than
return potential in those companies.
Q ARE YOU FAVORING VALUE OR GROWTH RIGHT NOW?
A We are maintaining a slight bias - about a 60% position - to growth. The
economy overall continues to grow at a moderate pace and interest rates are
fairly stable. Growth stocks tend to perform better in such an environment,
because they don't necessarily need a vibrant economy to sustain earnings
growth. In fact, during the last two years people have been expecting earnings
for growth companies to level off, but the date it's supposed to happen keeps
getting pushed out. Until we see signs of an accelerating economy or a threat of
significantly higher interest rates, we'll likely maintain our bias toward
growth stocks.
Q HOW ARE THE INTERNATIONAL ASSETS DISTRIBUTED?
A Primarily, we tended to concentrate on growth companies there too,
particularly in the European equity markets. Low inflation, low interest rates
and moderate growth, combined with the benefits that the export sector
experienced due to the dollar's strength, created a very positive investment
environment. The sectors we tended to favor were pharmaceuticals and financial
stocks. We remained underweighted in Asia, Japan in particular, as companies
there continue to struggle with fairly sizable debt loads and - for them -
sluggish economies.
Q HOW DID THE BOND PORTION OF THE PORTFOLIOS DO?
A Overall, the bond component of the portfolios did what they were supposed
to do. In the longer-term portfolios, they helped dampen volatility. In the
Horizon 5, bond prices ended up where they started the year, and we reaped the
income from their coupon. Our trading has basically involved striving to keep
income levels up. Because the interest rate environment is good and inflation
has been all but forgotten, issuers aren't compensating investors to take extra
risk. That brings yields down on lower quality bonds and makes it difficult to
maintain the fund's income level. We've acted to help sustain income primarily
by reducing the fund's Treasury exposure in favor of corporate bonds.
Q WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
A Overall, the outlook for stocks in general appears good. The most
important factors remain positive: solid but not raging economic growth, subdued
inflation, and a relatively benign global climate for interest rates.
This combination of factors has led to dynamic growth for a select group
of companies. But at some point, we believe people are going to want
more upside potential for their investment dollar. Once that happens, we may
see more volatility in the market averages, but improved performance from the
"growth at the right price" stocks that we emphasize, particularly the smaller
company and foreign stocks. Of course, the fund's broad diversification should
help insulate shareholders from the stock market'svolatility, and offer them
exposure to the markets that are performing best.
7
<PAGE> 8
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED JULY 31, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS A 26.24% 17.43% (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS B 30.01 19.13 (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS C 32.80 20.86 (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class A shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS A(1) 10,000 10,848 12,912
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,955 15,063
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS B(1) 10,000 11,398 13,211
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,955 15,063
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS C(1) 10,000 11,406 13,518
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,955 15,063
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
*Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends and for
Class A Shares adjustment for the maximum sales charge of 5.75 percent and
for Class B Shares adjustment for the applicable contingent deferred sales
charge (CDSC) of 3 percent. The maximum CDSC is 4 percent. For C Shares
purchased there is a 1 percent CDSC on certain redemptions within the first
year of purchase. During the periods 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.
(1) Performance includes reinvestment of dividends and adjustment for the
maximum sales charge for A Shares and the contingent deferred sales
charge in effect at the end of the period for B Shares. Each portfolio is
compared to the S&P 500 Stock Index, Lehman Brothers Gov't/Corp. Bond Index
and a blend of the S&P 500 and the Lehman Brothers Gov't/Corp. Bond Index.
Kemper Horizon 20+ Portfolio is compared with a blend of 80 percent S&P 500
and 20 percent Lehman Brothers Gov't./Corp. Kemper Horizon 10+ Portfolio is
compared with a blend of 60 percent S&P 500 and 40 percent Lehman Brothers
Gov't./Corp. Kemper Horizon 5 Portfolio is compared with a blend of 40
percent S&P 500 and 60 percent Lehman Brothers Gov't/Corp. In comparing
Kemper Horizon Fund to the indices, you should note that the fund's
performance reflects the maximum sales charge, while no such charges are
reflected in the performance of the indices.
+The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market. Source is Towers Data Systems.
++The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
comprised of intermediate and long-term government and investment grade
corporate debt securities. Source is Towers Data Systems.
8
<PAGE> 9
STATISTICS FOR 20+ PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO* ON 7/31/97 ON 7/31/96
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 79% 79%
- ----------------------------------------------------------------------------------
BONDS 20 20
- ----------------------------------------------------------------------------------
CASH AND EQUIVALENTS 1 1
- ----------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/97 ON 7/31/96
LARGEST HOLDINGS
- --------------------------------------------------------------------------------
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 7.1% OF TOTAL NET ASSETS ON JULY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 1.8%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
INTEL Engaged in the design, development, manufacture and sale of 1.4%
advanced microcomputer components, such as integrated
circuits and related products.
GENERAL ELECTRIC Operates in major businesses including power generators, 1.4%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
UST Manufactures and sells moist snuff, wine and other products. 1.3%
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 1.2%
ASSOCIATION corporation federally chartered to provide financial
products and services that increase the availability and
affordability of housing to low, moderate and middle-income
Americans.
</TABLE>
*The portfolio's composition and holdings are subject to change.
9
<PAGE> 10
PERFORMANCE UPDATE
KEMPER HORIZON 10+ PORTFOLIO
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED JULY 31, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS A 20.05% 13.40% (since 12/29/95)
- -----------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS B 23.25 15.04 (since 12/29/95)
- -----------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS C 25.97 16.63 (since 12/29/95)
- -----------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class A shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS A(1) 10,000 10,584 12,214
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,547 14,056
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS B(1) 10,000 11,152 12,496
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,547 14,056
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 07/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS C(1) 10,000 11,146 12,772
COMBINED S&P 500 STOCK INDEX AND LEHMAN BROTHERS GOV'T/CORP. BOND INDEX(1) 10,000 11,547 14,056
S&P 500 STOCK INDEX+ 10,000 12,319 16,039
LEHMAN BROTHERS GOV'T/CORP. BOND INDEX++ 10,000 10,290 10,896
</TABLE>
* Total return measures as net investment income and capital gain or loss
from portfolio investments, assuming reinvestment of all dividends and for
Class A Shares adjustment for the maximum sales charge of 5.75 percent and
for Class B Shares adjustment for the applicable contingent deferred sales
charge (CDSC) of 3 percent. The maximum CDSC is 4 percent. For C Shares
purchased after April 1, 1996 there is a 1 percent CDSC on certain
redemptions within the first year of purchase. During the periods 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.
(1) Performance includes reinvestment of dividends and adjustment for the
maximum sales charge for A Shares and the contingent deferred sales charge
in effect at the end of the period for B Shares. Each portfolio is compared
to the S&P 500 Stock Index, Lehman Brothers Gov't/Corp. Bond Index and a
blend of the S&P 500 and the Lehman Brothers Gov't/Corp. Bond Index. Kemper
Horizon 20+ Portfolio is compared with a blend of 80 percent S&P 500 and 20
percent Lehman Brothers Gov't./Corp. Kemper Horizon 10+ Portfolio is
compared with a blend of 60 percent S&P 500 and 40 percent Lehman Brothers
Gov't./Corp. Kemper Horizon 5 Portfolio is compared with a blend of 40
percent S&P 500 and 60 percent Lehman Brothers Gov't/Corp. In comparing
Kemper Horizon Fund to the indices, you should note that the fund's
performance reflects the maximum sales charge, while no such charges are
reflected in the performance of the indices.
+ The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market. Source is Towers Data Systems.
++ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
comprised of intermediate and long-term government and investment grade
corporate debt securities. Source is Towers Data Systems.
10
<PAGE> 11
STATISTICS FOR 10+ PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO ON 7/31/97 ON 7/31/96
- -----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 60% 60%
- -----------------------------------------------------------------------------------
BONDS 39 39
- -----------------------------------------------------------------------------------
CASH AND EQUIVALENTS 1 1
- -----------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/97 ON 7/31/96
LARGEST HOLDINGS
- ----------------------------------------------------------------------
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 5.7% OF TOTAL NET ASSETS ON JULY 31, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 1.4%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
GENERAL ELECTRIC Operates in major businesses including power generators, 1.2%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
INTEL Engaged in the design, development, manufacture and sale of 1.1%
advanced microcomputer components, such as integrated
circuits and other related products.
UST Manufactures and sells moist snuff, wine and other products. 1.0%
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 1.0%
ASSOCIATION corporation federally chartered to provide financial
products and services that increase the availability and
affordability of housing to low, moderate and middle-income
Americans.
</TABLE>
*The portfolio's composition and holdings are subject to change.
11
<PAGE> 12
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED JULY 31, 1997 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 5 PORTFOLIO CLASS A 12.22% 8.73% (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS B 15.15 10.29 (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS C 18.13 12.05 (since 12/29/95)
- ------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class A shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 7/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Horizon 5 Portfolio Class A(1) 10,000 10,313 11,424
Combined S&P 500 Stock Index and Lehman Brothers
Gov't/Corp. Bond Index(1) 10,000 11,141 13,049
S&P 500 Stock Index(+) 10,000 12,319 16,039
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 7/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Horizon 5 Portfolio Class B(1) 10,000 10,870 11,685
Combined S&P 500 Stock Index and Lehman Brothers
Gov't/Corp. Bond Index(1) 10,000 11,141 13,049
S&P 500 Stock Index(+) 10,000 12,319 16,039
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 10,290 10,896
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/29/95 to 7/31/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 7/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Horizon 5 Portfolio Class C(1) 10,000 10,859 11,984
Combined S&P 500 Stock Index and Lehman Brothers
Gov't/Corp. Bond Index(1) 10,000 11,141 13,049
S&P 500 Stock Index(+) 10,000 12,319 16,039
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 10,290 10,896
</TABLE>
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends and for Class
A Shares adjustment for the maximum sales charge of 5.75 percent and for
Class B Shares adjustment for the applicable contingent deferred sales
charge (CDSC) of 3 percent. The maximum CDSC is 4 percent. For C Shares
purchased there is a 1 percent CDSC on certain redemptions within the first
year of purchase. During the periods 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.
(1) Performance includes reinvestment of dividends and adjustment for the
maximum sales charge for A Shares and the contingent deferred sales charge
in effect at the end of the period for B Shares. Each portfolio is compared
to the S&P 500 Stock Index, Lehman Brothers Gov't/Corp. Bond Index and a
blend of the S&P 500 and the Lehman Brothers Gov't/Corp. Bond Index. Kemper
Horizon 20+ Portfolio is compared with a blend of 80 percent S&P 500 and 20
percent Lehman Brothers Gov't./Corp. Kemper Horizon 10+ Portfolio is
compared with a blend of 60 percent S&P 500 and 40 percent Lehman Brothers
Gov't./Corp. Kemper Horizon 5 Portfolio is compared with a blend of 40
percent S&P 500 and 60 percent Lehman Brothers Gov't/Corp. In comparing
Kemper Horizon Fund to the indices, you should note that the fund's
performance reflects the maximum sales charge, while no such charges are
reflected in the performance of the indices.
+ The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market. Source is Towers Data Systems.
++ The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
comprised of intermediate and long-term government and investment grade
corporate debt securities. Source is Towers Data Systems.
12
<PAGE> 13
STATISTICS FOR 5 PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO ON 7/31/97 ON 7/31/96
- -------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 40% 40%
- -------------------------------------------------------------------------
BONDS 60 57
- -------------------------------------------------------------------------
CASH AND EQUIVALENTS -- 3
- -------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/97 ON 7/31/96
LARGEST HOLDINGS
- --------------------------------------------------------------------------------
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 4.0% OF TOTAL NET ASSETS ON JULY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Holdings Percent
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 1.1%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
INTEL Engaged in the design, development, manufacture and sale of 0.8%
advanced microcomputer components, such as integrated
circuits and related products.
UST Manufactures and sells moist snuff, wine and other products. 0.7%
GENERAL ELECTRIC Operates in major businesses including power generators, 0.7%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 0.7%
ASSOCIATION corporation federally chartered to provide financial
products and services that increase the availability and
affordability of housing to low, moderate and middle-income
Americans.
- -------------------------------------------------------------------------------------------------
</TABLE>
*The portfolio's composition and holdings are subject to change.
13
<PAGE> 14
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 20+ PORTFOLIO
Portfolio of Investments at July 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND COUPON PRINCIPAL
CORPORATE OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 9.125% 1999 $ 700 $ 740
SECURITIES--17.2%
8.875 1999 500 523
8.00 1999 1,680 1,752
7.50 1999 240 249
8.875 2000 2,370 2,557
8.50 2000 1,645 1,749
6.75 2000 445 456
8.00 2001 800 858
6.625 2001 1,715 1,761
6.25 2001 125 127
--------------------------------------------------------------------------
10,772
- -----------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED FHLMC 6.50 2014 625 631
SECURITIES--2.5% GNMA 6.50 2015 975 983
--------------------------------------------------------------------------
1,614
- -----------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION--.2% Marriott
International 6.75 2003 110 111
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
CORPORATE OBLIGATIONS--19.9%
(Cost: $12,444) 12,497
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--5.5% AK Steel Holding Corp. 1,200 55
AMCOL International 2,000 36
Bayer A.G. 5,323 224
Carpenter Technology Corp. 1,600 76
Cementos Mexicanos, S.A. de C.V., "B" 82,600 458
Champion International Corp. 2,400 149
Crown Cork & Seal Co. 4,000 202
Dow Chemical Co. 4,100 389
Eastman Chemical Co. 3,200 194
Ferro Corp. 2,400 89
Georgia-Pacific Corp. 1,500 142
(a)Global Industrial Technologies, Inc. 2,500 47
Louisana-Pacific Corp. 6,600 151
(a)Lydall, Inc. 1,800 42
Myers Industries 2,100 37
Oregon Metallurgical Corp. 1,400 34
Rentokil Initial PLC 64,904 231
Rexene Corp. 1,000 16
Sonoco Products Co. 8,000 267
Technip S.A. 1,801 227
Toray Industries 29,000 191
Union Camp Corp. 3,500 205
--------------------------------------------------------------------------
3,462
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--5.8% Ball Corp. 1,100 33
Blount, International, "A" 700 31
Briggs & Stratton Corp. 600 30
Elcor Corp. 1,100 31
General Electric Co. 12,100 849
Intermet Corp. 3,800 64
(a)Littelfuse, Inc. 6,500 185
Mannesmann A.G. 197 92
(a)Miller Industries 9,900 167
</TABLE>
14
<PAGE> 15
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Mueller Industries, Inc. 400 $ 18
Murata Manufacturing 5,000 235
Pacific Scientific Co. 2,700 42
(a)Philip Services Corp. 12,400 184
Precision Castparts Corp. 1,100 69
Quanex Corp. 1,600 50
Raytheon Co. 4,500 251
Simpson Industries 2,000 22
Sony Corp. 3,800 379
Stewart & Stevenson Services 2,200 60
Trinity Industries 1,000 39
(a)U.S. Filter Corp. 8,900 269
(a)United Waste Systems 6,800 291
Walbro Corp. 1,900 42
Watsco, Inc. 5,700 172
Watts Industries, Inc. 1,700 43
-----------------------------------------------------------------------
3,648
- -------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--9.7%
American Greetings Corp. 10,700 358
(a)AutoZone 8,000 229
BJ's Wholesale Club 900 27
J. Baker, Inc. 1,100 10
Brown Group, Inc. 800 14
Bulgari Spa 34,012 193
Bush Industries 700 17
(a)CapStar Hotel Co. 4,400 141
Carnival Corp. 5,700 240
Carrefour S.A. 416 281
Circle K Japan Co., Ltd. 4,400 258
(a)Consolidated Graphics, Inc. 4,300 202
(a)Consolidated Stores Corp. 7,390 297
Walt Disney Co. 6,500 525
Finish Line 2,000 27
Flowerserve Corp. 627 21
Four Seasons Hotels Inc. 7,100 237
(a)Friedman's Inc. 1,300 20
Haggar Apparel Co. 3,000 38
Heilig-Meyers 2,800 47
(a)Tommy Hilfiger Corp. 9,000 401
Home Depot 4,300 214
Homebase Inc. 900 8
Hudson's Bay Co. 15,400 346
(a)Interim Services 2,300 105
LIN Television Corp. 1,700 82
May Department Stores Co. 4,000 223
Men's Wearhouse 3,800 141
(a)Nautica Enterprises 6,300 173
NIKE 6,350 396
(a)Nine West Group 800 32
(a)Outdoor Systems Inc. 4,575 121
J.C. Penney Co. 3,000 176
Royal Caribbean Cruises Ltd. 600 24
Sears, Roebuck & Co. 4,400 279
Springs Industries Inc. 300 15
(a)U.S. Rentals 2,100 61
V.F. Corp. 900 81
-----------------------------------------------------------------------
6,060
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER DURABLES--1.9%
Fleetwood Enterprises 800 $ 26
Ford Motor Co. 7,500 307
Harman International Industries 700 28
Honda Motor Co., Ltd. 6,100 204
Leggett & Platt Inc. 1,400 64
Magna International Inc., "A" 2,800 187
Matsushita Electric Industrial Co., Ltd. 11,000 229
Superior Industries International 5,000 136
---------------------------------------------------------------------------
1,181
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--6.0%
Arbor Drugs 5,700 140
(a)Boston Chicken 1,300 17
(a)Emmis Broadcasting Corp. 3,200 136
Independent Newspapers PLC 39,536 240
(a)Insurance Auto Auctions 4,400 41
Kimberly-Clark de Mexico, S.A. de C.V. 51,000 232
Koninklijke Ahold N.V. 6,744 195
(a)Lone Star Steakhouse & Saloon 1,200 28
(a)MSC Industrial Direct 3,700 160
Newell Co. 2,200 92
(a)Performance Food Group 1,700 41
Philip Morris Companies 25,350 1,144
Reed International PLC 16,580 166
UST, Inc. 28,200 820
Unilever N.V., ADR 900 196
(a)Young Broadcasting Corp. 3,900 120
---------------------------------------------------------------------------
3,768
- -----------------------------------------------------------------------------------------------------------------------
ENERGY--4.7%
AMOCO Corp. 3,500 329
Atlantic Richfield Co. 4,200 314
British Petroleum 23,672 323
Chevron Corp. 3,000 237
(a)Chieftain International Inc. 1,900 41
Elf Aquitaine 2,136 244
Exxon Corp. 4,000 257
Giant Industries 3,300 57
KCS Energy 2,800 61
Kerr-McGee Corp. 2,000 125
(a)Nuevo Energy Co. 600 26
Petro-Canada 10,540 188
Questar Corp. 3,000 123
(a)Reading & Bates Corp. 4,000 133
Royal Dutch Petroleum 4,394 247
(a)Seitel, Inc. 1,000 41
(a)Tesoro Petroleum Corp. 3,200 50
Texaco 800 93
United Cities Gas Co. 1,400 33
--------------------------------------------------------------------------
2,922
- ----------------------------------------------------------------------------------------------------------------------
FINANCE--16.5%
H.F. Ahmanson & Co. 4,500 239
American General Corp. 2,400 128
American International Group, Inc. 1,800 192
Astoria Financial Corp. 700 34
Banc One Corp. 4,500 253
Banco Bilbao Vizcaya 10,416 272
Banco Popular Espanol 762 169
Bank of Ireland 13,599 166
Bank of New York Co. 1,700 83
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BankAmerica Corp. 2,400 $ 181
Bankers Trust New York Corp. 2,000 202
Barnett Banks 2,000 114
Bear Stearns Companies 5,000 204
CITIC Pacific Ltd. 54,000 342
Chase Manhattan Corp. 1,600 182
Cheung Kong Holdings Ltd. 15,000 167
Commercial Federal Corp. 3,100 124
Compass Bancshares 900 32
Crestar Financial Corp. 1,400 66
Cullen Frost Bankers 1,000 47
Dean Witter Discover 4,000 209
Del Webb Corp. 3,100 58
Development Bank of Singapore 17,000 221
Executive Risk 3,100 162
Federal Home Loan Mortgage Corp. 11,200 404
Federal National Mortgage Association 16,500 781
(a)Financial Federal Corp. 7,200 109
First Commerce Corp. 1,200 63
First Financial Caribbean Corp. 600 22
First Financial Corp. 1,800 57
First Union Corp. 1,000 101
Fleet Financial Group, Inc. 1,500 102
Fremont General Corp. 800 34
General Re Corp. 1,500 313
HSBC Holdings PLC, ADR 8,498 296
Henderson Land Development 6,000 59
ING Groep N.V. 6,366 310
Imperial Credit Industries 1,700 40
Integon Corp. 2,500 63
Jefferson-Pilot Corp. 1,500 107
Kansas City Southern Industries 1,300 98
KeyCorp 1,300 81
LaSalle Partners 2,800 84
Lawyers Title Insurance Corp. 1,100 24
Long Island Bancorp 1,500 61
MGIC Investment Corp. 7,800 410
Malayan Banking Berhad 11,000 104
Meditrust 3,500 140
Mercantile Bancorp 1,226 87
Merrill Lynch & Co. 2,000 141
NationsBank 7,100 505
North Fork Bancorp 1,756 45
Norwest Corp. 1,200 76
PNC Bank, N.A. 3,000 137
PennCorp Financial Group 800 30
Post Properties 3,500 140
Protective Life Insurance Co. 3,100 158
Resource Bancshares Mortgage Group 2,000 37
Safeco Corp. 3,000 144
Signet Banking Corp. 3,200 173
(a)Southern Pacific Funding Corp. 2,000 34
T.R. Financial Corp. 2,000 54
Texas Regional Bankshares 1,800 73
United Companies Financial Corp. 1,200 35
Vedior N.V. 5,330 134
Washington Mutual 6,000 415
Webster Financial Corp. 700 36
Wells Fargo & Co. 600 165
--------------------------------------------------------------------------
10,329
</TABLE>
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH CARE--9.6% (a)ALZA Corp. 10,700 $ 346
Abbott Laboratories 2,645 173
American Home Products Corp. 2,100 173
Amgen, Inc. 5,400 318
(a)Apria Healthcare Group 1,600 27
Astra, A.B., ADR 16,800 307
C.R. Bard 5,000 188
Baxter International 2,500 145
(a)Biogen 9,500 366
Bristol-Myers Squibb Co. 1,800 141
(a)British Biotech PLC 34,970 90
(a)CONMED Corp. 1,400 24
(a)Dura Pharmaceuticals 2,800 109
(a)Fresenius Medical Care, A.G. 3,120 208
Glaxo Wellcome PLC
ADR 4,700 200
common 11,003 233
(a)Hanger Orthopedic Group 8,500 108
(a)HealthCare COMPARE Corp. 5,100 291
(a)Healthcare Financial Partners 5,900 126
Mallinckrodt Group 4,200 147
Medtronic, Inc. 1,550 135
Merck & Co. 3,300 343
(a)National Surgery Centers 5,000 159
Novartis 167 268
(a)PAREXEL International Corp. 1,400 54
Roche Holding A.G. 22 213
(a)Safeskin Corp. 4,700 155
(a)Sofamor-Danek Group 4,500 202
(a)Tenet Healthcare Corp. 5,500 165
United Healthcare Corp. 6,500 370
Zeneca Group PLC 6,700 222
--------------------------------------------------------------------------
6,006
- -------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--15.1% AMP Inc. 7,000 366
(a)Analog Devices 2,900 91
(a)Applied Materials, Inc. 3,100 285
(a)Ascend Communications, Inc. 4,900 266
(a)Asyst Technologies, Inc. 300 16
(a)Atmel Corp. 10,700 365
Belden Inc. 5,600 217
(a)Benchmark Electronics 700 38
(a)Burr Brown Corp. 1,000 35
Canon, Inc. 8,000 255
(a)Ceridian Corp. 8,400 367
(a)Cisco Systems 8,100 644
(a)Compaq Computer Corp. 13,500 771
(a)EXAR Corp. 800 17
L.M. Ericsson Telephone Co., "B" 8,375 378
(a)Electroglas 500 16
Fuji Photo Film Co., Ltd. 6,000 252
(a)General Cable Corp. 1,300 39
Hewlett-Packard Co. 3,000 210
Intel Corp. 9,600 881
(a)Jones Intercable Inc. 3,800 48
(a)Keane, Inc. 2,400 147
(a)Komag, Inc. 300 6
(a)Kulicke & Soffa Industries 2,200 85
(a)Learning Co. 1,700 22
(a)MRV Communications 3,400 105
</TABLE>
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Microchip Technology 4,600 $ 171
(a)Novellus Systems 2,350 247
(a)Oracle Corp. 6,550 357
(a)Parametric Technology Corp. 4,600 225
Paychex 1,800 73
Pittway Corp. 5,100 297
(a)Quantum Corp. 10,800 314
(a)Read-Rite Corp. 1,300 34
Reynolds & Reynolds Co. 1,000 19
(a)Sanmina Corp. 1,300 95
Scientific Atlanta 3,300 69
(a)Seagate Technology 2,000 82
(a)Sun Microsystems 8,100 370
(a)3Com Corp. 4,700 257
(a)Tech-Sym Corp. 1,800 61
(a)Technomatix Technologies 4,500 148
(a)Tellabs, Inc. 2,300 138
(a)Western Digital Corp. 8,600 331
Xerox Corp. 3,500 288
--------------------------------------------------------------------------
9,498
- -------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.7% Airborne Freight Corp. 1,000 49
(a)America West Airlines 2,100 29
Borg-Warner Automotive, Inc. 600 33
Canadian National Railway Co. 3,700 192
Swire Pacific Ltd., "A" 17,000 161
--------------------------------------------------------------------------
464
- -------------------------------------------------------------------------------------------------------------------
UTILITIES--4.0% AT&T 2,800 103
Empresa Nacional de Electricidad S.A. 10,604 219
Florida Progress Corp. 3,500 113
GTE Corp. 5,500 256
Southern Co. 10,000 219
Telecom Italia Mobile 73,079 247
Telefonica de Espana, S.A. 15,085 405
Telefonica del Peru S.A., ADR 3,750 93
Veba, A.G. 4,055 236
(a)WorldCom, Inc. 17,000 594
--------------------------------------------------------------------------
2,485
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--79.5%
(Cost: $40,670) 49,823
--------------------------------------------------------------------------
TOTAL INVESTMENTS--99.4%
(Cost: $53,114) 62,320
--------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.6% 353
--------------------------------------------------------------------------
NET ASSETS--100% $62,673
--------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $53,114,000 for federal income tax purposes
at July 31, 1997, the gross unrealized appreciation was $9,518,000, the gross
unrealized depreciation was $312,000 and the net unrealized appreciation on
investments was $9,206,000.
See accompanying Notes to Financial Statements.
19
<PAGE> 20
PORTFOLIO of INVESTMENTS
KEMPER HORIZON 10+ PORTFOLIO
Portfolio of Investments at July 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND COUPON PRINCIPAL
CORPORATE OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes
SECURITIES--34.0% 9.125% 1999 $3,310 $ 3,499
8.00 1999 3,350 3,494
7.75 1999 1,030 1,074
8.875 2000 4,050 4,370
8.50 2000 2,620 2,787
7.75 2000 100 104
8.00 2001 4,620 4,955
6.625 2001 1,267 1,301
-------------------------------------------------------
21,584
- ------------------------------------------------------------------------------------------------
MORTGAGE BACKED FHLMC 6.50 2014 1,234 1,245
SECURITIES--5.2% GNMA 6.50 2015 2,025 2,042
-------------------------------------------------------
3,287
- ------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION--.4% Marriott
International 6.75 2003 230 232
-------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
CORPORATE OBLIGATIONS--39.6%
(Cost: $24,903) 25,103
-------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--3.9% AK Steel Holding Corp. 900 41
AMCOL International 1,500 27
Bayer A.G. 4,091 172
Carpenter Technology Corp. 1,000 48
Cementos Mexicanos, S.A. de C.V., "B" 49,700 276
Champion International Corp. 2,200 136
Crown Cork & Seal Co. 3,000 152
Dow Chemical Co. 2,800 266
Eastman Chemical Co. 3,000 182
Ferro Corp. 1,600 59
Georgia-Pacific Corp. 1,000 94
(a)Global Industrial Technologies, Inc. 1,800 34
Louisana-Pacific Corp. 5,000 115
(a)Lydall, Inc. 1,300 31
Myers Industries 1,500 26
Oregon Metallurgical Corp. 1,000 25
Rentokil Initial PLC 36,278 129
Rexene Corp. 700 11
Sonoco Products Co. 6,500 217
Technip S.A. 1,367 173
Toray Industries 15,000 99
Union Camp Corp. 3,100 182
-------------------------------------------------------------------
2,495
- ------------------------------------------------------------------------------------------------
CAPITAL GOODS--4.4% Ball Corp. 700 21
Blount, International, "A" 500 22
Briggs & Stratton Corp. 400 20
Elcor Corp. 800 23
General Electric Co. 10,500 737
Intermet Corp. 2,900 49
(a)Littelfuse, Inc. 4,600 131
Mannesmann A.G. 241 113
(a)Miller Industries 6,500 110
(a)Mueller Industries, Inc. 300 13
Murata Manufacturing 6,100 287
</TABLE>
20
<PAGE> 21
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Scientific Co. 2,000 $ 31
Precision Castparts Corp. 1,000 63
Quanex Corp. 1,200 37
Raytheon Co. 4,000 224
Simpson Industries 1,600 17
Sony Corp. 2,600 259
Stewart & Stevenson Services 1,600 44
Trinity Industries 700 27
(a)U.S. Filter Corp. 6,700 202
(a)United Waste Systems 5,700 244
Walbro Corp. 1,400 31
Watsco, Inc. 1,900 57
Watts Industries, Inc. 1,300 33
--------------------------------------------------------------------------
2,795
- -------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--6.8% American Greetings Corp. 7,600 255
(a)AutoZone 6,000 172
BJ's Wholesale Club 700 21
J. Baker, Inc. 800 7
Brown Group, Inc. 500 9
Bulgari Spa 21,352 121
Bush Industries 500 12
(a)CapStar Hotel Co. 2,800 89
Carnival Corp. 4,400 185
Carrefour S.A. 323 218
Circle K Japan Co., Ltd. 1,500 88
(a)Consolidated Graphics, Inc. 2,400 113
(a)Consolidated Stores Corp. 5,781 233
Walt Disney Co. 3,900 315
Finish Line 1,500 20
Flowerserve Corp. 418 14
Four Seasons Hotels Inc. 4,000 134
(a)Friedman's Inc. 1,000 15
Haggar Apparel Co. 2,200 28
Heilig-Meyers 2,100 35
(a)Tommy Hilfiger Corp. 6,000 267
Home Depot 3,100 155
Homebase Inc. 700 6
Hudson's Bay Co. 12,000 269
(a)Interim Services 1,100 50
LIN Television Corp. 700 34
May Department Stores Co. 4,000 224
Men's Wearhouse 2,600 96
(a)Nautica Enterprises 2,700 74
NIKE 4,800 299
(a)Nine West Group 600 24
(a)Outdoor Systems Inc. 5,775 153
J.C. Penney Co. 3,300 193
Royal Caribbean Cruises Ltd. 1,000 40
Sears, Roebuck & Co. 3,300 209
Springs Industries Inc. 200 10
(a)U.S. Rentals 3,000 88
V.F. Corp. 700 63
--------------------------------------------------------------------------
4,338
- -------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.5% Fleetwood Enterprises 600 19
Ford Motor Co. 8,000 327
Harman International Industries 500 20
Honda Motor Co., Ltd. 4,200 140
Leggett & Platt Inc. 1,100 50
</TABLE>
21
<PAGE> 22
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Magna International Inc., "A" 2,020 $ 135
Matsushita Electric Industrial Co., Ltd. 6,000 125
Superior Industries International 4,000 109
--------------------------------------------------------------------------
925
- -------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.9% Arbor Drugs 4,500 111
(a)Boston Chicken 1,000 13
(a)Emmis Broadcasting Corp. 2,000 85
Independent Newspapers PLC 15,351 93
(a)Insurance Auto Auctions 3,300 31
Kimberly-Clark de Mexico, S.A. de C.V. 43,000 195
Koninklijke Ahold N.V. 9,534 276
(a)Lone Star Steakhouse & Saloon 900 21
(a)MSC Industrial Direct 6,500 281
Newell Co. 1,800 75
(a)Performance Food Group 1,300 31
Philip Morris Companies 20,350 918
Reed International PLC 13,254 133
UST, Inc. 21,700 631
Unilever N.V., ADR 600 131
(a)Young Broadcasting Corp. 2,300 71
--------------------------------------------------------------------------
3,096
- --------------------------------------------------------------------------------------------------------------------
ENERGY--3.8% AMOCO Corp. 2,700 254
Atlantic Richfield Co. 3,200 239
British Petroleum 15,144 207
Chevron Corp. 3,000 237
(a)Chieftain International Inc. 1,400 30
Elf Aquitaine 2,376 271
Exxon Corp. 2,600 167
Giant Industries 2,200 38
KCS Energy 2,000 44
Kerr-McGee Corp. 1,700 106
(a)Nuevo Energy Co. 400 17
Petro-Canada 12,430 221
Questar Corp. 2,500 102
(a)Reading & Bates Corp. 4,000 133
Royal Dutch Petroleum 2,696 151
(a)Seitel, Inc. 800 33
(a)Tesoro Petroleum Corp. 2,400 37
Texaco 600 70
United Cities Gas Co. 1,000 24
-------------------------------------------------------------------------
2,381
- --------------------------------------------------------------------------------------------------------------------
FINANCE--13.0% ADVANTA Corp. 1,000 35
H.F. Ahmanson & Co. 3,500 186
American General Corp. 2,600 138
American International Group, Inc. 1,800 192
Astoria Financial Corp. 500 24
Banc One Corp. 4,665 262
Banco Bilbao Vizcaya 7,914 207
Banco Popular Espanol 580 129
Bank of Ireland 10,320 126
Bank of New York Co. 1,200 58
BankAmerica Corp. 1,800 136
Bankers Trust New York Corp. 900 91
Barnett Banks 1,400 80
Bear Stearns Companies 3,900 159
</TABLE>
22
<PAGE> 23
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CITIC Pacific Ltd. 32,000 $ 203
Chase Manhattan Corp. 1,500 170
Cheung Kong Holdings Ltd. 14,000 156
Commercial Federal Corp. 2,250 90
Compass Bancshares 650 23
Crestar Financial Corp. 1,000 47
Cullen Frost Bankers 700 33
Dean Witter Discover 3,000 157
Del Webb Corp. 2,200 41
Development Bank of Singapore 14,000 182
Executive Risk 1,800 94
Federal Home Loan Mortgage Corp. 9,500 343
Federal National Mortgage Association 13,300 629
(a)Financial Federal Corp. 5,400 82
First Commerce Corp. 800 42
First Financial Caribbean Corp. 500 18
First Financial Corp. 1,250 39
First Union Corp. 1,200 122
Fleet Financial Group, Inc. 1,200 81
Fremont General Corp. 600 26
General Re Corp. 1,000 209
HSBC Holding PLC, ADR 10,235 357
Henderson Land Development 5,000 49
ING Groep N.V. 5,677 277
Imperial Credit Industries 1,300 30
Integon Corp. 1,900 48
Jefferson-Pilot Corp. 1,500 107
Kansas City Southern Industries 1,300 98
KeyCorp 1,700 106
LaSalle Partners 800 24
Lawyers Title Insurance Corp. 800 17
Long Island Bancorp 1,100 45
MGIC Investment Corp. 6,000 315
Malayan Banking Berhad 9,000 85
Meditrust 3,000 120
Mercantile Bancorp 827 58
Merrill Lynch & Co. 1,600 113
NationsBank 5,300 377
North Fork Bancorp 1,244 32
Norwest Corp. 1,300 82
PNC Bank, N.A. 2,100 96
PennCorp Financial Group 600 22
Post Properties 3,000 120
Protective Life Insurance Co. 2,100 107
Resource Bancshares Mortgage Group 1,500 27
Safeco Corp. 2,000 96
Signet Banking Corp. 2,000 108
(a)Southern Pacific Funding Corp. 1,400 24
T.R. Financial Corp. 1,600 43
Texas Regional Bankshares 1,400 57
United Companies Financial Corp. 900 26
Vedior N.V. 4,400 110
Washington Mutual 4,500 311
Webster Financial Corp. 500 25
Wells Fargo & Co. 400 110
---------------------------------------------------------------------------
8,232
- -----------------------------------------------------------------------------------------------------------------------
HEALTH CARE--6.9% (a)ALZA Corp. 8,000 259
Abbott Laboratories 2,000 131
American Home Products Corp. 1,600 132
</TABLE>
23
<PAGE> 24
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amgen, Inc. 4,200 $ 247
(a)Apria Healthcare Group 1,200 20
Astra, A.B., ADR 13,066 238
C.R. Bard 4,500 169
Baxter International 1,500 87
(a)Biogen 7,300 281
Biomet, Inc. 5,000 100
Bristol-Myers Squibb Co. 1,400 110
(a)British Biotech PLC 31,162 80
(a)CONMED Corp. 1,000 17
(a)Dura Pharmaceuticals 2,200 86
(a)Fresenius Medical Care, A.G. 1,846 123
Glaxo Wellcome PLC
ADR 3,600 153
common 9,144 193
(a)Hanger Orthopedic Group 3,900 50
(a)HealthCare COMPARE Corp. 3,900 222
(a)Healthcare Financial Partners 2,400 51
Mallinckrodt Group 3,200 112
Medtronic, Inc. 1,150 100
Merck & Co. 2,500 260
(a)National Surgery Centers 3,100 99
Novartis 120 193
(a)PAREXEL International Corp. 1,100 42
Roche Holding A.G. 18 174
(a)Safeskin Corp. 3,100 102
(a)Sofamor-Danek Group 2,700 121
(a)Tenet Healthcare Corp. 4,300 129
United Healthcare Corp. 3,500 200
Zeneca Group PLC 2,860 95
---------------------------------------------------------------------------
4,376
- -----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--11.1%
AMP Inc. 6,000 314
(a)Analog Devices 1,200 38
(a)Applied Materials, Inc. 2,400 221
(a)Ascend Communications, Inc. 3,800 207
(a)Asyst Technologies, Inc. 300 16
(a)Atmel Corp. 7,500 256
Belden Inc. 3,500 136
(a)Benchmark Electronics 600 32
(a)Burr Brown Corp. 700 24
Canon, Inc. 11,000 351
(a)Ceridian Corp. 3,900 171
(a)Cisco Systems 6,350 505
(a)Compaq Computer Corp. 10,250 586
(a)EXAR Corp. 700 15
L.M. Ericsson Telephone Co., "B" 4,664 211
(a)Electroglas 400 13
Fuji Photo Film Co., Ltd. 2,400 101
(a)General Cable Corp. 900 27
Hewlett-Packard Co. 3,000 210
Intel Corp. 7,300 670
(a)Jones Intercable Inc. 2,900 37
(a)KLA Instruments 1,100 67
(a)Keane, Inc. 800 49
(a)Komag, Inc. 200 4
(a)Kulicke & Soffa Industries 2,200 85
(a)Learning Co. 1,200 16
(a)MRV Communications 1,700 52
(a)Microchip Technology 3,500 130
</TABLE>
24
<PAGE> 25
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Novellus Systems 1,800 $ 189
(a)Oracle Corp. 5,000 272
(a)Parametric Technology Corp. 3,600 176
Paychex 1,800 73
Pittway Corp. 3,200 186
(a)Quantum Corp. 8,400 244
(a)Read-Rite Corp. 1,100 28
Reynolds & Reynolds Co. 700 14
(a)Sanmina Corp. 600 44
Scientific Atlanta 2,400 50
(a)Seagate Technology 2,000 82
(a)Sun Microsystems 6,000 274
(a)3Com Corp. 3,800 208
(a)Tech-Sym Corp. 1,300 44
(a)Technomatix Technologies 900 30
(a)Tellabs, Inc. 1,800 108
(a)Western Digital Corp. 6,400 246
Xerox Corp. 3,000 247
---------------------------------------------------------------------------
7,059
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.6%
Airborne Freight Corp. 800 39
(a)America West Airlines 1,500 21
Borg-Warner Automotive, Inc. 400 22
Canadian National Railway Co. 2,700 140
Swire Pacific Ltd., "A" 16,000 152
---------------------------------------------------------------------------
374
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES--2.9%
AT&T 2,900 107
Empresa Nacional de Electricidad S.A. 7,396 153
Florida Progress Corp. 3,000 97
GTE Corp. 5,000 233
Southern Co. 10,000 219
Telecom Italia Mobile 58,229 197
Telefonica de Espana, S.A. 9,580 257
Telefonica del Peru S.A., ADR 1,750 43
Veba, A.G. 3,053 178
(a)WorldCom, Inc. 11,000 384
---------------------------------------------------------------------------
1,868
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--59.8%
(Cost: $30,607) 37,939
---------------------------------------------------------------------------
TOTAL INVESTMENTS--99.4%
(Cost: $55,510) 63,042
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--.6% 358
---------------------------------------------------------------------------
NET ASSETS--100% $63,400
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $55,510,000 for federal income tax purposes
at July 31, 1997, the gross unrealized appreciation was $7,753,000, the gross
unrealized depreciation was $221,000 and the net unrealized appreciation on
investments was $7,532,000.
See accompanying Notes to Financial Statements.
25
<PAGE> 26
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 5 PORTFOLIO
Portfolio of Investments at July 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND COUPON PRINCIPAL
CORPORATE OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 8.875% 1998 $ 770 $ 800
SECURITIES--51.3% 9.125 1999 770 814
8.00 1999 1,760 1,836
7.75 1999 300 313
7.50 1999 790 818
8.875 2000 5,607 6,049
8.50 2000 1,500 1,595
6.75 2000 250 256
8.00 2001 1,490 1,598
6.625 2001 1,620 1,663
-----------------------------------------------------------------------------
15,742
- ---------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED FHLMC 6.50 2014 663 669
SECURITIES--8.8% GNMA 6.50 2015 2,000 2,017
-----------------------------------------------------------------------------
2,686
- ---------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATION--.5% Marriott
International 6.75 2003 160 162
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
CORPORATE OBLIGATIONS--60.6%
(Cost: $18,504) 18,590
-----------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--2.6% AK Steel Holding Corp. 400 18
AMCOL International 600 11
Bayer A.G. 1,680 71
Carpenter Technology Corp. 400 19
Cementos Mexicanos, S.A. de C.V., "B" 10,900 60
Champion International Corp. 600 37
Crown Cork & Seal Co. 1,000 51
Dow Chemical Co. 1,100 104
Eastman Chemical Co. 900 54
Ferro Corp. 1,000 37
(a)Global Industrial Technologies, Inc. 700 13
Louisiana-Pacific Corp. 2,300 53
(a)Lydall, Inc. 600 14
Myers Industries 800 14
Oregon Metallurgical Corp. 400 10
Rentokil Initial PLC 11,300 40
Rexene Corp. 300 5
Sonoco Products Co. 1,700 57
Technip S.A. 236 30
Toray Industries 5,000 33
Union Camp Corp. 900 53
---------------------------------------------------------------------------
784
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--3.1% Ball Corp. 500 15
Blount, International, "A" 200 9
Briggs & Stratton Corp. 200 10
Elcor Corp. 300 9
General Electric Co. 3,000 211
Intermet Corp. 1,300 22
(a)Littelfuse, Inc. 900 26
Mannesmann A.G. 127 59
</TABLE>
26
<PAGE> 27
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Miller Industries 1,600 $ 27
(a)Mueller Industries, Inc. 100 4
Murata Manufacturing 1,000 47
Pacific Scientific Co. 1,000 16
(a)Philip Services Corp. 1,900 28
Precision Castparts Corp. 700 44
Quanex Corp. 500 16
Raytheon Co. 1,200 67
Simpson Industries 800 9
Sony Corp. 1,000 100
Stewart & Stevenson Services 600 16
Trinity Industries 300 12
(a)U.S. Filter Corp. 2,200 66
(a)United Waste Systems 2,000 86
Walbro Corp. 500 11
Watsco, Inc. 800 24
Watts Industries, Inc. 600 15
--------------------------------------------------------------------------
949
- -------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--4.5% American Greetings Corp. 2,700 90
(a)AutoZone 2,000 57
BJ's Wholesale Club 300 9
J. Baker, Inc. 300 3
Brown Group, Inc. 200 3
Bulgari Spa 6,084 34
Bush Industries 300 7
(a)CapStar Hotel Co. 1,200 38
Carnival Corp. 1,500 63
Carrefour S.A. 88 59
Circle K Japan Co., Ltd. 700 41
(a)Consolidated Graphics, Inc. 800 38
(a)Consolidated Stores Corp. 1,921 77
Walt Disney Co. 1,400 113
Finish Line 600 8
Flowerserve Corp. 279 10
Four Seasons Hotels Ltd. 700 23
(a)Friedman's Inc. 400 6
Haggar Apparel Co. 1,000 13
Heilig-Meyers 900 15
(a)Tommy Hilfiger Corp. 2,000 89
Homebase Inc. 300 3
Hudson's Bay Co. 4,500 101
LIN Television Corp. 800 39
May Department Stores Co. 900 50
(a)Nautica Enterprises 1,400 38
NIKE 1,750 109
(a)Nine West Group 200 8
(a)Outdoor Systems Inc. 2,100 56
J.C. Penney Co. 1,000 59
Royal Caribbean Cruises Ltd. 200 8
Sears, Roebuck & Co. 1,200 76
Springs Industries Inc. 100 5
(a)U.S. Rentals 800 23
V.F. Corp. 200 18
--------------------------------------------------------------------------
1,389
</TABLE>
27
<PAGE> 28
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER DURABLES--1.2% Fleetwood Enterprises 200 $ 6
Ford Motor Co. 2,800 114
Harman International Industries 200 8
Honda Motor Co., Ltd. 2,000 67
Magna International Inc., "A" 750 50
Matsushita Electric Industrial Co., Ltd. 4,000 83
Superior Industries International 1,000 27
--------------------------------------------------------------------------
355
- -------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.2% Arbor Drugs 1,400 34
(a)Boston Chicken 400 5
(a)Emmis Broadcasting Corp. 500 21
Independent Newspapers PLC 5,942 36
(a)Insurance Auto Auctions 1,400 13
Kimberly-Clark de Mexico, S.A. de C.V. 25,000 114
Koninklijke Ahold N.V. 2,856 83
(a)Lone Star Steakhouse & Saloon 400 9
(a)MSC Industrial Direct 600 26
(a)Performance Food Group 600 14
Philip Morris Companies 7,150 323
Reed International PLC 4,098 41
UST, Inc. 7,300 212
Unilever N.V., ADR 200 44
(a)Young Broadcasting Corp. 700 22
--------------------------------------------------------------------------
997
- -------------------------------------------------------------------------------------------------------------------
ENERGY--2.4% AMOCO Corp. 900 85
Atlantic Richfield Co. 1,000 75
British Petroleum 4,606 63
Chevron Corp. 1,000 79
(a)Chieftain International Inc. 800 17
Elf Aquitaine 641 73
Exxon Corp. 800 51
Giant Industries 700 12
KCS Energy 1,000 22
Kerr-McGee Corp. 400 25
(a)Nuevo Energy Co. 200 9
Petro-Canada 3,580 64
Questar Corp. 700 29
Royal Dutch Petroleum 1,160 65
(a)Seitel, Inc. 300 12
(a)Tesoro Petroleum Corp. 1,100 17
Texaco 200 23
United Cities Gas Co. 400 9
--------------------------------------------------------------------------
730
- -------------------------------------------------------------------------------------------------------------------
FINANCE--8.7% H.F. Ahmanson & Co. 1,000 53
American International Group, Inc. 600 64
Astoria Financial Corp. 200 10
Banc One Corp. 1,683 94
Banco Bilbao Vizcaya 2,769 72
Banco Popular Espanol 120 27
Bank of Ireland 3,783 46
Bank of New York Co. 500 24
BankAmerica Corp. 600 45
Bankers Trust New York Corp. 400 40
Barnett Banks 600 34
Bear Stearns Companies 1,300 53
</TABLE>
28
<PAGE> 29
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CITIC Pacific Ltd. 11,000 $ 70
Chase Manhattan Corp. 200 23
Cheung Kong Holdings Ltd. 5,000 56
Commercial Federal Corp. 900 36
Compass Bancshares 300 11
Crestar Financial Corp. 400 19
Cullen Frost Bankers 300 14
Dean Witter Discover 1,000 52
Del Webb Corp. 900 17
Development Bank of Singapore 3,500 45
Executive Risk 800 42
Federal Home Loan Mortgage Corp. 3,000 108
Federal National Mortgage Association 4,400 208
(a)Financial Federal Corp. 450 7
First Commerce Corp. 200 11
First Financial Caribbean Corp. 200 7
First Financial Corp. 525 17
First Union Corp. 400 41
Fleet Financial Group, Inc. 400 27
Fremont General Corp. 200 9
General Re Corp. 300 63
HSBC Holdings PLC, ADR 2,221 77
Henderson Land Development 2,000 20
ING Groep N.V. 2,667 130
Imperial Credit Industries 500 12
Integon Corp. 800 20
Jefferson-Pilot Corp. 400 28
KeyCorp 400 25
LaSalle Partners 800 24
Lawyers Title Insurance Corp. 300 6
Long Island Bancorp 500 21
MGIC Investment Corp. 2,000 105
Malayan Banking Berhad 2,000 19
Meditrust 900 36
Mercantile Bancorp 227 16
Merrill Lynch & Co. 800 56
NationsBank 2,000 142
North Fork Bancorp 422 11
Norwest Corp. 300 19
PNC Bank, N.A. 900 41
PennCorp Financial Group 300 11
Post Properties 1,000 40
Protective Life Insurance Co. 900 46
Resource Bancshares Mortgage Group 600 11
Signet Banking Corp. 900 49
(a)Southern Pacific Funding Corp. 600 10
T.R. Financial Corp. 800 22
United Companies Financial Corp. 400 12
Vedior N.V. 1,650 41
Washington Mutual 1,500 104
Webster Financial Corp. 200 10
Wells Fargo & Co. 200 55
------------------------------------------------------------------------------
2,664
- -----------------------------------------------------------------------------------------------------------------------
HEALTH CARE--4.5% (a)ALZA Corp. 2,800 90
Abbott Laboratories 400 26
Amgen, Inc. 1,400 82
(a)Apria Healthcare Group 400 7
Astra, A.B., ADR 2,720 50
</TABLE>
29
<PAGE> 30
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
C.R. Bard 1,600 $ 60
Baxter International 500 29
(a)Biogen 2,500 96
(a)British Biotech PLC 7,500 19
(a)CONMED Corp. 400 7
(a)Dura Pharmaceuticals 900 35
(a)Fresenius Medical Care, A.G. 553 37
Glaxo Wellcome PLC
ADR 1,400 60
common 3,535 75
(a)Hanger Orthopedic Group 4,000 51
(a)HealthCare COMPARE Corp. 1,300 74
Mallinckrodt Group 1,100 39
Merck & Co. 900 94
(a)National Surgery Centers 1,100 35
Novartis 56 90
(a)PAREXEL International Corp. 800 31
Roche Holding A.G. 5 48
(a)Safeskin Corp. 1,000 33
(a)Sofamor-Danek Group 1,600 72
United Healthcare Corp. 1,700 97
Zeneca Group PLC 1,600 53
---------------------------------------------------------------------------
1,390
- -----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--7.9%
AMP Inc. 1,400 73
(a)Analog Devices 1,400 44
(a)Applied Materials, Inc. 800 74
(a)Ascend Communications, Inc. 1,300 71
(a)Asyst Technologies, Inc. 100 5
(a)Atmel Corp. 3,300 113
Belden Inc. 2,000 77
(a)Benchmark Electronics 200 11
(a)Burr Brown Corp. 300 10
Canon, Inc. 2,000 64
(a)Ceridian Corp. 1,200 52
(a)Cisco Systems 2,200 175
(a)Compaq Computer Corp. 3,500 200
(a)EXAR Corp. 300 6
L.M. Ericsson Telephone Co., "B" 1,918 87
(a)Electroglas 200 6
Fuji Photo Film Co., Ltd. 1,000 42
(a)General Cable Corp. 400 12
Hewlett-Packard Co. 900 63
Intel Corp. 2,550 234
(a)Jones Intercable Inc. 1,200 15
(a)Komag, Inc. 100 2
(a)Learning Co. 500 7
(a)Microchip Technology 1,200 45
(a)NCR Corp. 56 2
(a)Novellus Systems 600 63
(a)Oracle Corp. 750 41
(a)Parametic Technology Corp. 1,300 64
Paychex 1,800 73
Pittway Corp. 1,100 64
(a)Quantum Corp. 3,000 87
(a)Read-Rite Corp. 500 13
Reynolds & Reynolds Co. 300 6
(a)Sanmina Corp. 600 44
Scientific Atlanta 1,100 23
</TABLE>
30
<PAGE> 31
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Sun Microsystems 2,100 $ 96
(a)3Com Corp. 1,200 66
(a)Tech-Sym Corp. 500 17
(a)Technomatix Technologies 700 23
(a)Tellabs, Inc. 1,700 102
(a)Western Digital Corp. 2,200 85
Xerox Corp. 900 74
---------------------------------------------------------------------------
2,431
- -----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.4%
Airborne Freight Corp. 300 15
(a)America West Airlines 600 8
Borg-Warner Automotive, Inc. 200 11
Canadian National Railway Co. 1,000 52
Swire Pacific, Ltd., "A" 3,500 33
---------------------------------------------------------------------------
119
- -----------------------------------------------------------------------------------------------------------------------
UTILITIES--1.7%
AT&T 700 26
Empresa Nacional de Electricidad S.A. 2,764 57
Florida Progress Corp. 1,000 32
GTE Corp. 2,000 93
Southern Co. 2,000 44
Telecom Italia Mobile 15,782 53
Telefonica de Espana, S.A. 2,640 71
Telefonica del Peru, S.A., ADR 750 19
(a)WorldCom, Inc. 4,100 143
---------------------------------------------------------------------------
538
----------------------------------------------------------------------------
TOTAL COMMON STOCKS--40.2%
(Cost: $9,947) 12,346
----------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--5.00%
INSTRUMENT--.3% Due--August 1997
(Cost: $100) $ 100 100
-----------------------------------------------------------------------------
TOTAL INVESTMENTS--101.1%
(Cost: $28,551) 31,036
-----------------------------------------------------------------------------
LIABILITIES LESS CASH AND OTHER ASSETS--(1.1%) (336)
-----------------------------------------------------------------------------
NET ASSETS--100% $30,700
-----------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments of $28,551,000 for federal income tax purposes
at July 31, 1997, the gross unrealized appreciation was $2,606,000, the gross
unrealized depreciation was $121,000 and the net unrealized appreciation on
investments was $2,485,000.
See accompanying Notes to Financial Statements.
31
<PAGE> 32
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER HORIZON FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Horizon 20+ Portfolio, Kemper
Horizon 10+ Portfolio and Kemper Horizon 5 Portfolio, comprising Kemper Horizon
Fund (the Fund), as of July 31, 1997, the related statements of operations for
the year then ended and the statement of changes in net assets and the financial
highlights for the year then ended and for the period from December 29, 1995
(commencement of operations) to July 31, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of July
31, 1997, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios comprising Kemper Horizon Fund at July 31, 1997, the results
of their operations, the changes in their net assets and the financial
highlights for the periods referred to above in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 17, 1997
32
<PAGE> 33
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $53,114, $55,510 and $28,551) $62,320 63,042 31,036
- ------------------------------------------------------------------------------------------------------------
Cash 553 76 --
- ------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 1,590 1,292 659
- ------------------------------------------------------------------------------------------------------------
Fund shares sold 320 275 118
- ------------------------------------------------------------------------------------------------------------
Dividends and interest 337 556 385
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 65,120 65,241 32,198
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Cash overdraft -- -- 568
- ------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 2,212 1,669 589
- ------------------------------------------------------------------------------------------------------------
Fund shares redeemed 72 3 266
- ------------------------------------------------------------------------------------------------------------
Management fee 30 30 14
- ------------------------------------------------------------------------------------------------------------
Distribution services fee 22 22 11
- ------------------------------------------------------------------------------------------------------------
Administrative services fee 12 13 6
- ------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 84 93 34
- ------------------------------------------------------------------------------------------------------------
Trustees' fees and other 15 11 10
- ------------------------------------------------------------------------------------------------------------
Total liabilities 2,447 1,841 1,498
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $62,673 63,400 30,700
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Paid-in capital $51,281 53,781 27,285
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,830 1,481 619
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 9,206 7,532 2,485
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 356 606 311
- ------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $62,673 63,400 30,700
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- ------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net assets applicable to shares outstanding $25,697 27,475 11,832
- ------------------------------------------------------------------------------------------------------------
Shares outstanding 1,994 2,288 1,070
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 12.89 12.01 11.06
- ------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $ 13.68 12.74 11.73
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $32,158 29,602 15,632
- ------------------------------------------------------------------------------------------------------------
Shares outstanding 2,515 2,466 1,413
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 12.79 12.00 11.06
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 3,948 5,922 3,108
- ------------------------------------------------------------------------------------------------------------
Shares outstanding 308 494 281
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 12.80 11.98 11.07
- ------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net assets applicable to shares outstanding $ 870 401 128
- ------------------------------------------------------------------------------------------------------------
Shares outstanding 67 33 12
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 12.96 11.97 11.06
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
33
<PAGE> 34
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Dividends $ 442 353 126
- -------------------------------------------------------------------------------------------------------------
Interest 634 1,212 953
- -------------------------------------------------------------------------------------------------------------
Total investment income 1,076 1,565 1,079
- -------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 225 234 130
- -------------------------------------------------------------------------------------------------------------
Distribution services fee 165 168 104
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 88 96 54
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 300 264 111
- -------------------------------------------------------------------------------------------------------------
Professional fees 19 20 13
- -------------------------------------------------------------------------------------------------------------
Reports to shareholders 4 4 3
- -------------------------------------------------------------------------------------------------------------
Trustees' fees and other 21 21 13
- -------------------------------------------------------------------------------------------------------------
Total expenses 822 807 428
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 254 758 651
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 1,880 1,517 676
- -------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from futures transactions 57 57 (12)
- -------------------------------------------------------------------------------------------------------------
Net realized gain 1,937 1,574 664
- -------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 9,767 7,921 2,641
- -------------------------------------------------------------------------------------------------------------
Net gain on investments 11,704 9,495 3,305
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,958 10,253 3,956
- -------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
----------------------- ----------------------- -----------------------
YEAR DECEMBER 29, YEAR DECEMBER 29, YEAR DECEMBER 29,
ENDED 1995 TO ENDED 1995 TO ENDED 1995 TO
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 254 59 758 104 651 82
- ------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,937 (102) 1,574 (88) 664 (42)
- ------------------------------------------------------------------------------------------------------------------
Change in net unrealized
appreciation (depreciation) 9,767 (561) 7,921 (389) 2,641 (156)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 11,958 (604) 10,253 (373) 3,956 (116)
- ------------------------------------------------------------------------------------------------------------------
Net equalization credits 174 71 293 97 148 46
- ------------------------------------------------------------------------------------------------------------------
Distribution from net investment
income (207) -- (581) (70) (565) (54)
- ------------------------------------------------------------------------------------------------------------------
Net increase from capital share
transactions 32,497 18,684 34,523 19,158 16,330 10,855
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 44,422 18,151 44,488 18,812 19,869 10,731
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 18,251 100 18,912 100 10,831 100
- ------------------------------------------------------------------------------------------------------------------
END OF PERIOD 62,673 18,251 63,400 18,912 30,700 10,831
- ------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME
AT END OF PERIOD $ 356 134 606 135 311 76
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
34
<PAGE> 35
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 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 within one year of purchase.
Class C shares do not convert into another class.
Class I shares 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. All shares of
each Portfolio have equal rights with respect to
voting, dividends and assets, subject to class
specific preferences.
- --------------------------------------------------------------------------------
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.
CURRENCY TRANSLATION. The books and records of the
Portfolios are maintained in U.S. dollars. All
assets and liabilities initially expressed in
foreign currency values are converted into U.S.
dollar values at the mean between the bid and
offered quotations of such currencies against U.S.
dollars as last quoted by a recognized dealer. If
such quotations are not readily available, the
rates of exchange are determined in good faith by
the Board of Trustees. Income and expenses and
purchases and sales of investments are translated
into U.S. dollars at the rates of exchange
prevailing on the respective dates of such
transactions. The Portfolios include that portion
of the results of operations resulting from
35
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
changes in foreign exchange rates with net
realized and unrealized gain (loss) on
investments.
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 discount amortization on
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 Class 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 Horizon
20+ Portfolio, semiannually for the Horizon
10+ Portfolio, and quarterly for the 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), 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.
The Fund incurred a management fee of
$589,000 for the year ended July 31, 1997.
Zurich Kemper Value Advisors, Inc. (ZKVA)
(formerly known as Dreman Value Advisors,
Inc.), a wholly owned subsidiary of ZKI, is a
sub-adviser for the Fund and manages the
value portion of the Portfolios. Zurich
Investment Management Limited (ZIML), an
affiliate of ZKI, serves as a sub-adviser for
the Fund with respect to foreign securities
investments in the Portfolios. ZKVA and ZIML
are paid by ZKI for their services.
36
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Zurich
Kemper Distributors, Inc. (ZKDI) (formerly
known as Kemper Distributors, Inc.).
Underwriting commissions paid in connection
with the distribution of each Portfolio's
Class A shares for the year ended July 31,
1997 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS COMMISSIONS
RETAINED ALLOWED BY
BY ZKDI ZKDI TO FIRMS
----------- -------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $23,000 198,000
Kemper Horizon 10+ Portfolio 31,000 219,000
Kemper Horizon 5 Portfolio 20,000 127,000
</TABLE>
For services under the distribution services
agreement, each Portfolio pays ZKDI a fee of
.75% of average daily net assets of Class B
and Class C shares. Pursuant to the
agreement, ZKDI 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, ZKDI
receives any contingent deferred sales
charges (CDSC) from redemptions of Class B
and Class C shares. Distribution fees and
commissions paid in connection with the sale
of Class B and Class C shares and the CDSC
received in connection with the redemption of
such shares for the year ended July 31, 1997
are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY ZKDI BY ZKDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $185,000 587,000
Kemper Horizon 10+ Portfolio 191,000 514,000
Kemper Horizon 5 Portfolio 119,000 279,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund
has an administrative services agreement with
ZKDI. For providing information and
administrative services to Class A, Class B
and Class C shareholders, each Portfolio pays
ZKDI a fee at an annual rate of up to .25% of
average daily net assets of each class. ZKDI
in turn has various agreements with financial
services firms that provide these services
and pays these firms based on assets of
Portfolio accounts the firms service.
Administrative services fees (ASF) paid for
the year ended July 31, 1997 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY
THE PORTFOLIOS TO ZKDI ZKDI TO FIRMS
---------------------- -------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $88,000 96,000
Kemper Horizon 10+ Portfolio 96,000 100,000
Kemper Horizon 5 Portfolio 54,000 57,000
</TABLE>
37
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's custodian
and transfer agent, Zurich Kemper Service
Company (ZKSvC) (formerly known as Kemper
Service Company) is the shareholder service
agent of the Fund. Under the agreement, ZKSvC
received shareholder services fees of
$468,000 for the year ended July 31, 1997.
OFFICERS AND TRUSTEES. Certain officers or
trustees of the Fund are also officers or
directors of ZKI. During the year ended July
31, 1997, the Fund made no payments to its
officers and incurred trustees' fees of
$26,000 to independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the year ended July 31, 1997, investment
transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5
----------- ----------- ---------
<S> <C> <C> <C>
Purchases $83,306 86,050 50,343
Proceeds from sales 50,671 51,205 33,233
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity
in capital shares of the Portfolios (in
thousands):
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 29, 1995
JULY 31, 1997 TO JULY 31, 1996
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,392 $15,323 854 $ 8,500
--------------------------------------------------------------------------------
Class B 1,837 19,895 888 8,850
--------------------------------------------------------------------------------
Class C 301 3,266 86 857
--------------------------------------------------------------------------------
Class I 38 411 103 1,045
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 12 123 -- --
--------------------------------------------------------------------------------
Class B 6 58 -- --
--------------------------------------------------------------------------------
Class C 1 6 -- --
--------------------------------------------------------------------------------
Class I 1 13 -- --
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (248) (2,762) (26) (264)
--------------------------------------------------------------------------------
Class B (194) (2,256) (18) (179)
--------------------------------------------------------------------------------
Class C (76) (815) (7) (68)
--------------------------------------------------------------------------------
Class I (70) (765) (5) (57)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 7 82 -- --
--------------------------------------------------------------------------------
Class B (7) (82) -- --
--------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $32,497 $18,684
--------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 29, 1995 TO
JULY 31, 1997 JULY 31, 1996
-------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,736 $18,250 986 $ 9,625
--------------------------------------------------------------------------------
Class B 1,820 19,131 920 8,999
--------------------------------------------------------------------------------
Class C 484 5,055 89 877
--------------------------------------------------------------------------------
Class I 46 490 12 104
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 31 337 5 48
--------------------------------------------------------------------------------
Class B 17 186 2 20
--------------------------------------------------------------------------------
Class C 3 39 1 3
--------------------------------------------------------------------------------
Class I 1 9 -- --
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (466) (5,040) (21) (208)
--------------------------------------------------------------------------------
Class B (255) (2,788) (27) (264)
--------------------------------------------------------------------------------
Class C (82) (882) (4) (45)
--------------------------------------------------------------------------------
Class I (25) (264) (1) (1)
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 14 150 -- --
--------------------------------------------------------------------------------
Class B (14) (150) -- --
--------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $34,523 $19,158
--------------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 29, 1995 TO
JULY 31, 1997 JULY 31, 1996
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 845 $ 8,504 509 $ 4,935
--------------------------------------------------------------------------------
Class B 1,343 13,437 611 5,902
--------------------------------------------------------------------------------
Class C 286 2,897 64 625
--------------------------------------------------------------------------------
Class I 2 23 10 102
--------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 23 236 3 26
--------------------------------------------------------------------------------
Class B 26 265 2 22
--------------------------------------------------------------------------------
Class C 4 38 1 3
--------------------------------------------------------------------------------
Class I 1 4 1 1
--------------------------------------------------------------------------------
SHARES REDEEMED
Class A (274) (2,800) (54) (524)
--------------------------------------------------------------------------------
Class B (538) (5,514) (20) (195)
--------------------------------------------------------------------------------
Class C (73) (743) (4) (42)
--------------------------------------------------------------------------------
Class I (2) (17) -- --
--------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 15 150 -- --
--------------------------------------------------------------------------------
Class B (14) (150) -- --
--------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $16,330 $10,855
--------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------ ------------------------------
Class A Class B
------------------------------ ------------------------------
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED DECEMBER 29, 1995
JULY 31, TO JULY 31, TO
KEMPER HORIZON 20+ PORTFOLIO 1997 JULY 31, 1996 1997 JULY 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.72 9.50 9.65 9.50
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .12 .18 .03 .11
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain 3.15 .04 3.15 .04
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 3.27 .22 3.18 .15
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .10 -- .04 --
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $12.89 9.72 12.79 9.65
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 33.90% 2.32 33.01 1.58
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 1.69% 1.48 2.47 2.26
- ------------------------------------------------------------------------------- ------------------------------
Net investment income 1.08% 1.51 .30 .73
- ------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------ -----------------------------
Class C Class I
------------------------------ -----------------------------
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED APRIL 8
JULY 31, TO JULY 31, TO
1997 JULY 31, 1996 1997 JULY 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.67 9.50 9.73 10.03
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .04 .13 .19 .07
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) 3.13 .04 3.17 (.37)
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 3.17 .17 3.36 (.30)
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .04 -- .13 --
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $12.80 9.67 12.96 9.73
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 32.80% 1.79 34.84 (2.99)
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 2.48% 2.23 1.04 .73
- ------------------------------------------------------------------------------- ------------------------------
Net investment income .29% .76 1.73 2.32
- ------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
1997 JULY 31, 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets at end of period (in thousands) $62,673 18,251
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 130% 122
- -----------------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock
transactions $ .0491 .0417
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
40
<PAGE> 41
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------- --------------------------------
Class A Class B
------------------------------- --------------------------------
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED DECEMBER 29, 1995
JULY 31, TO JULY 31, TO
KEMPER HORIZON 10+ PORTFOLIO 1997 JULY 31, 1996 1997 JULY 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- --------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.60 9.50 9.60 9.50
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .25 .20 .16 .17
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) 2.36 (.04) 2.35 (.04)
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 2.61 .16 2.51 .13
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .20 .06 .11 .03
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $12.01 9.60 12.00 9.60
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 27.43% 1.70 26.25 1.38
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 1.51% 1.48 2.36 2.26
- ------------------------------------------------------------------------------- ------------------------------
Net investment income 2.36% 2.40 1.51 1.62
- ------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------- ------------------------------
Class C Class I
--------------------------------- ------------------------------
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED APRIL 8
JULY 31, TO JULY 31, TO
1997 JULY 31, 1996 1997 JULY 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.60 9.50 9.57 9.83
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .14 .17 .26 .09
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) 2.34 (.04) 2.40 (.26)
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 2.48 .13 2.66 (.17)
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .10 .03 .26 .09
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $11.98 9.60 11.97 9.57
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 25.97% 1.39 28.09 (1.74)
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 2.61% 2.23 1.06 .73
- ------------------------------------------------------------------------------- ------------------------------
Net investment income 1.26% 1.65 2.81 3.21
- ------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
1997 JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets at end of period (in thousands) $63,400 18,912
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 126% 87
- ----------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock
transactions $ .0494 .0413
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
41
<PAGE> 42
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------ ------------------------------
Class A Class B
------------------------------ ------------------------------
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED DECEMBER 29, 1995
JULY 31, TO JULY 31, TO
KEMPER HORIZON 5 PORTFOLIO 1997 JULY 31, 1996 1997 JULY 31, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.57 9.50 9.57 9.50
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .34 .25 .27 .21
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) 1.45 (.07) 1.44 (.07)
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 1.79 .18 1.71 .14
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .30 .11 .22 .07
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $11.06 9.57 11.06 9.57
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 19.02% 1.84 18.15 1.44
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 1.51% 1.48 2.15 2.26
- ------------------------------------------------------------------------------- ------------------------------
Net investment income 3.30% 3.20 2.66 2.42
- ------------------------------------------------------------------------------- ------------------------------
<CAPTION>
------------------------------ ------------------------------
Class C Class I
------------------------------ ------------------------------
APRIL 8
YEAR ENDED DECEMBER 29, 1995 YEAR ENDED TO
JULY 31, TO JULY 31, JULY 31,
1997 JULY 31, 1996 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, beginning of period $ 9.57 9.50 9.58 9.69
- ------------------------------------------------------------------------------- ------------------------------
Income from investment operations:
Net investment income .28 .21 .32 .08
- ------------------------------------------------------------------------------- ------------------------------
Net realized and unrealized gain (loss) 1.43 (.07) 1.49 (.11)
- ------------------------------------------------------------------------------- ------------------------------
Total from investment operations 1.71 .14 1.81 (.03)
- ------------------------------------------------------------------------------- ------------------------------
Less distribution from net investment income .21 .07 .33 .08
- ------------------------------------------------------------------------------- ------------------------------
Net asset value, end of period $11.07 9.57 11.06 9.58
- ------------------------------------------------------------------------------- ------------------------------
TOTAL RETURN (NOT ANNUALIZED) 18.13% 1.45 19.27 (.31)
- ------------------------------------------------------------------------------- ------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------- ------------------------------
Expenses 2.16% 2.23 1.20 .73
- ------------------------------------------------------------------------------- ------------------------------
Net investment income 2.65% 2.45 3.61 4.11
- ------------------------------------------------------------------------------- ------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
1997 JULY 31, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net assets at end of period (in thousands) $30,700 10,831
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 150% 57
- ----------------------------------------------------------------------------------------------------------------
Average commission rates paid per share on stock
transactions $ .0476 .0460
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS FOR ALL PORTFOLIOS:
Total returns do not reflect the effect of any sales charges.
Per share data for the period ended July 31, 1996 was determined based on
average shares outstanding.
For the fiscal period ended July 31, 1996, the investment manager agreed to
reduce its management fee and absorb certain operating expenses of the
Portfolios. If these expense waivers had not been in effect, the expense ratio
of each share class would have increased by .06% of average net assets for
Horizon 20+, .04% for Horizon 10+ and .05% for Horizon 5. There would have been
a corresponding decrease in the net investment income ratio for the period. The
waivers were discontinued on August 1, 1996.
42
<PAGE> 43
NOTES
43
<PAGE> 44
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
STEPHEN B. TIMBERS DANIEL BUKOWSKI
President and Trustee Vice President
JAMES E. AKINS WILLIAM M. KNAPP
Trustee Vice President
ARTHUR R. GOTTSCHALK CHARLES R. MANZONI, JR.
Trustee Vice President
FREDERICK T. KELSEY JOHN E. NEAL
Trustee Vice President
FRED B. RENWICK STEVEN H. REYNOLDS
Trustee Vice President
JOHN B. TINGLEFF PHILIP J. COLLORA
Trustee Vice President and
Secretary
JOHN G. WEITHERS
Trustee JEROME L. DUFFY
Treasurer
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT ZURICH 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
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
INVESTMENT MANAGER ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless preceded
or accompanied by a Kemper Horizon
Fund prospectus.
KHF-2 (9/97) 1036880 [KEMPER FUNDS LOGO]
