<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED JULY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER HORIZON FUND
"... We remain absolutely committed to a disciplined,
quantitative focus. The recent turbulence of the
market reinforces our conviction that over the long term,
keeping clear-sighted and cool-headed is the most sensible course. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
At A GLANCE
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
9
STATISTICS FOR HORIZON 20+
LARGEST HOLDINGS
14
PORTFOLIOS OF
INVESTMENTS
30
REPORT OF
INDEPENDENT AUDITORS
31
FINANCIAL STATEMENTS
33
NOTES TO
FINANCIAL STATEMENTS
39
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER HORIZON FUND TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+ 9.04% 7.98% 7.97%
- --------------------------------------------------------------------------------
HORIZON 10+ 9.75% 8.85% 8.83%
- --------------------------------------------------------------------------------
HORIZON 5 7.74% 7.27% 7.10%
- --------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal value fluctuate. So that when shares are redeemed they may
be worth 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 RANKINGS
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE EQUITY LIPPER CATEGORIES**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+ #117 of 203 funds #137 of 203 funds #138 of 203 funds
1-YEAR
- --------------------------------------------------------------------------------
HORIZON 10+ #188 of 379 funds #214 of 379 funds #215 of 379 funds
1-YEAR
- --------------------------------------------------------------------------------
HORIZON 5 #42 of 78 funds #47 of 78 funds #48 of 78 funds
1-YEAR
- --------------------------------------------------------------------------------
</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
7/31/98 7/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
HORIZON 20+ CLASS A $13.48 $12.89
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS B $13.28 $12.79
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS C $13.29 $12.80
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS A $12.49 $12.01
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS B $12.48 $12.00
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS C $12.44 $11.98
- --------------------------------------------------------------------------------
HORIZON 5 CLASS A $11.26 $11.06
- --------------------------------------------------------------------------------
HORIZON 5 CLASS B $11.28 $11.06
- --------------------------------------------------------------------------------
HORIZON 5 CLASS C $11.27 $11.07
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE YEAR ENDED JULY 31, 1998, THE FUND MADE THE FOLLOWING DISTRIBUTIONS
PER SHARE:
<TABLE>
<CAPTION>
SHORT- LONG-
INCOME DIVIDEND TERM TERM
CLASS CLASS CLASS CAPITAL CAPITAL
A B C GAIN GAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HORIZON 20+ $.0375 -- -- .4200 .0600
- --------------------------------------------------------------------------------
HORIZON 10+ $.2225 $.1220 $.1388 .3600 .0500
- --------------------------------------------------------------------------------
HORIZON 5 $.3500 $.2824 $.2849 .2400 .0300
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
NIFTY FIFTY EFFECT Market scenario in which the stock prices of the largest
companies of the S&P 500 rise at a greater rate than the overall market. In the
1960s and 1970s, the "Nifty Fifty" comprised a select group of 50 large,
dominant companies. Recently, the Nifty Fifty effect has been driven by
investors seeking the greater perceived security of stocks of the largest
companies.
GRAY MONDAY The name used to identify Monday, October 27, 1997. On that day,
turmoil in Southeast Asian markets triggered a one-day drop of 7 percent in the
U.S. equity market.
QUANTITATIVE ANALYSIS Research based on measurable factors, versus qualitative
considerations such as the character of management or employee morale. Examples
of quantitative analysis include the value of assets, the cost of capital, the
historical and projected patterns of sales, costs and profitability; and a wide
range of considerations in the areas of economics.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR OF ARTS AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND HAS A MASTER'S DEGREE IN ECONOMICS FROM BROWN
UNIVERSITY IN PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS
WITH THE HARRIS BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $218 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
It's been a bumpy ride for many investors in the third quarter of 1998. Economic
and political instability in Russia, terrorist bombings and U.S. retaliation
overseas, lingering effects of the "contagion" in Asia, not to mention weak
corporate profits and political scandal in the United States were responsible
for considerable uncertainty and market volatility. A series of market dips and
drops continued to fuel the debate about whether we would finally see the end of
our long-running bull market -- or even plummet into a recession.
But investors who are riding out the stock market's abrupt short-term
adjustments should find comfort in the fact that economic fundamentals continue
to favor financial assets in the U.S. -- particularly Treasury bonds. In a
nutshell, the nation's economy remains strong despite its slowdown in the second
half of the year. Short-term interest rates are expected to remain low -- the
federal funds rate is holding at 5.5 percent and will most likely stay put or
could even move lower during the remainder of the year. There are no major tax
or regulatory threats waiting in the wings. And our economy continues to draw
investors from around the world, although perhaps not as fervently as last year.
The nation's gross domestic product (GDP), which represents the total value of
all goods and services produced within the U.S. economy, grew at an annualized
rate of 1.4 percent in the second quarter of 1998. While this was the slowest
growing quarter in the last three years, it was much stronger than consensus.
Slower growth can be attributed to several one-time factors, including a
domestic correction in inventory levels and the General Motors strike, which has
since been resolved, as well as the long-term loss of trade with Asia.
Real capital spending and employment growth have remained solid. Consumer
confidence remains fairly high. Home sales remain robust. Economic policy
continues to support the nation's fiscal budget surplus projection of $65
billion.
As far as inflation goes, there are two tales to be told. Prices for consumer
goods, as measured by the consumer price index (CPI), are steady. Compare this
to prices for services, which have risen between 3 and 4 percent. For investors,
this difference in pricing flexibility translates into a difference in profit
expectations. Profits of domestic, service firms should be much stronger than
commodity producers dependent on export markets.
Across the Atlantic, Europe's economy appears to be growing at an even pace as
the region progresses toward the Economic and Monetary Union (EMU) slated for
January 1, 1999. One effect of the union may be a slight rise in short-term
interest rates in Europe -- not because there will be an overt change in policy,
but simply because of the convergence of some very disparate interest rates. The
average rate will likely be higher than the relatively attractive rate the
German Central Bank currently offers, for example.
In Asia, which has been making headlines around the world for more than a year
now, the latest news is from Japan, which recently installed a new prime
minister as well as a new finance minister. Much discussion will be focused on
changes in Japan's economic policy, particularly in terms of taxation and
banking reform -- and patience is in order. Most of the changes in taxation will
impact Japan in the first half of 1999. But as far as banking reform goes, those
of us familiar with bank reform in the U.S. know that this will be a two- to
five-year process. Certainly, investors are looking to Japan to spark recovery
for Asia as a whole, which continues to suffer from the "contagion" of low
currency values, seriously reduced consumer spending and general economic
malaise.
Indeed, while its full effects remain to be seen -- and felt -- by the
majority of American businesses and individuals, the Asian economic crisis has
contributed to the general uncertainty of the emotion-driven U.S. markets.
Whether it's an economic crisis abroad or political scandal at home, current
events move the investors who move the markets.
One might conclude that, as a result of 1998's slow corporate profit growth
and turmoil in Russia and Asia, the psychology of the markets is
shifting -- even some of Wall Street's most resolute bulls appear to be
reconsidering their long-held convictions. But with the economy's strong
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 (8/31/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 5.46 5.57 6.3 6.64
PRIME RATE(2)* 8.5 8.5 8.5 8.25
INFLATION RATE(3)* 1.68 1.44 2.22 2.88
THE U.S. DOLLAR(4) 8.19 4.88 8.76 3.32
CAPITAL GOODS ORDERS(5)* 2.81 8.1 8.2 8.2
INDUSTRIAL PRODUCTION(5)* 1.82 4.31 5.03 3.3
EMPLOYMENT GROWTH(6) 2.68 2.57 2.6 2.13
</TABLE>
(1) Falling interest rates in recent years have been a big plus for financial
assets.
(2) The interest rate that commercial lenders charge their best borrowers.
(3) Inflation reduces an investor's real return. In the last five years,
inflation has been as high as 6 percent. The low, moderate inflation of the
last few years has meant high real returns.
(4) Changes in the exchange value of the dollar impact U.S. exporters and the
value of U.S. firms' foreign profits.
(5) These influence corporate profits and equity performance.
(6) An influence on family income and retail sales.
* Data as of July 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
fundamentals in place, that outlook may be premature. In any case, prudent
investors are wise to watch for the following economic warning signs: inflation
in the form of rising wages and/or prices; residual fallout from Asia, which
could appear in the form of reduced sales and earnings for American businesses;
and a continued widening of our trade deficit, an imbalance caused by heightened
American demand for foreign goods and services. In the months to come, investors
are likely to maintain their bias in favor of investments that have historically
been considered more conservative: larger capitalization stocks, U.S. Treasuries
and only the highest-grade corporate bonds.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
September 1, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[FORTUNA PHOTO]
LEAD PORTFOLIO MANAGER PHILIP FORTUNA IS A MANAGING DIRECTOR OF SCUDDER KEMPER
INVESTMENTS, INC. HE JOINED THE ORGANIZATION IN 1986 AS AN INSTITUTIONAL
PORTFOLIO MANAGER. HE IS ALSO THE LEAD PORTFOLIO MANAGER OF KEMPER QUANTITATIVE
EQUITY FUND AND KEMPER VALUE+GROWTH FUND. FORTUNA RECEIVED A BACHELOR'S DEGREE
IN ECONOMICS FROM CARNEGIE MELLON UNIVERSITY AND AN M.B.A. FROM THE UNIVERSITY
OF CHICAGO.
FORTUNA IS ASSISTED BY PORTFOLIO MANAGER KARLA GRANT, A VICE PRESIDENT OF
SCUDDER KEMPER INVESTMENTS WITH EIGHT YEARS OF INVESTMENT EXPERIENCE; AND BY
ROBERT TYMOCZKO, WHO HAS FIVE YEARS OF EXPERIENCE IN QUANTITATIVE ANALYSIS AND
ECONOMIC MODELING.
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.
DURING THE PAST TWELVE MONTHS, MARKET VOLATILITY HAS KEPT INVESTORS ON THEIR
TOES. LEAD PORTFOLIO MANAGER PHILIP FORTUNA AND HIS TEAM DISCUSS HOW THEY
POSITIONED KEMPER HORIZON FUND DURING THIS CHALLENGING PERIOD.
Q THE PAST TWELVE MONTHS HAVE BEEN DOMINATED BY TURBULENCE. COULD YOU GIVE
US SOME INSIGHT AS TO WHY THE MARKET HAS SEEN SUCH A HIGH LEVEL OF VOLATILITY?
A The past year certainly has been characterized by dramatic ups and downs.
Toward the outset of the fiscal year, currency turmoil in Asia sent global
markets into a downward spin. Asia's woes spread to the United States, as
investors wondered whether domestic companies would be able to sustain the high
level of earnings that they had enjoyed over recent years. On October 27, 1997
- -- now referred to as "Gray Monday" -- the anxiety reached a crescendo, and U.S.
equity markets dove 7 percent.
However, as 1997 came to a close, we saw domestic equity markets had
rebounded quickly from the meltdown. The International Monetary Fund's bailout
plans inspired renewed confidence, as did the earnings posted by many American
firms. We entered 1998 on a brisk, positive note.
Nonetheless, as the year progressed, we saw the tides of volatility return
repeatedly to our markets. It became clear that the economic crisis in Asia had
not been resolved fully, and the consequences of this realization hit the U.S.
market in waves. Concerns about an interest-rate hike also dogged the market
during the early portion of the year. These factors contributed to a bounty of
disappointing earnings stories, particularly among smaller-company and
technology stocks.
Q HOW DID THE HORIZON PORTFOLIOS PERFORM IN THIS CHALLENGING ENVIRONMENT?
A For the fiscal year ending July 31, 1998, Kemper Horizon 5 Portfolio
earned 7.74 percent, Kemper Horizon 10+ Portfolio returned 9.75 percent and
Kemper Horizon 20+ Portfolio gained 9.04 percent (Class A shares, unadjusted for
any sales charge). The S&P 500 Index, a large-cap stock index often used as a
proxy for the U.S. equity market, climbed 19.31 percent, while the small-cap
oriented Russell 2000 rose 2.31 percent. The MSCI EAFE Index, a pool of
international stocks, gained 5.75 percent; and the Lehman Brothers
Government/Corporate Bond Index returned 8.06 percent. So, the returns of the
Horizon portfolios landed among the benchmarks. This makes sense, given that the
portfolios mix the asset classes tracked by each index.
Q COULD YOU TELL US MORE ABOUT HOW THE PORTFOLIOS COMBINE BONDS AND DOMESTIC
AND INTERNATIONAL STOCKS? WHAT'S THE GOAL OF THIS APPROACH?
A By allocating assets between stocks and bonds, we seek to provide
shareholders with the opportunity to reap the benefits of diversification. By
investing in a variety of asset classes, we aim to offset losses from one asset
class with gains from another. Kemper Horizon 5 Portfolio, the most conservative
of the trio, holds the majority of its assets in fixed-income securities. It's
designed for investors with a short time horizon. Kemper
5
<PAGE> 6
PERFORMANCE UPDATE
Horizon 10+ Portfolio typically invests roughly 60 percent of its assets in
stocks and 40 percent in bonds. It's designed for investors with a mid-range
time frame of 10 years or more. Kemper Horizon 20+ Portfolio, the most
aggressive of the group, earmarks about 80 percent of assets to equities, and
contains the most international exposure. As its name suggests, its asset
allocation is better suited for investors with time horizons of 20 years or
more.
Q HOW DID THE DIFFERENT ASSET CLASSES IMPACT PERFORMANCE?
A The fund's bond stake added stability against the turbulence in the equity
market. The fixed-income allocation is quality-focused, and holds an average
credit rating of AAA. The duration of the bond portfolio is currently a mild 2.5
years. Although the fund can invest in high yield bonds, we have elected to
avoid them for now; instead we currently favor U.S. Treasuries because of their
greater stability and security and mortgage-backed securities.
The fund's domestic equity exposure is divided between growth and value
stocks. Throughout the past year, we've been increasing the growth/value mix to
70/30, from 60/40. Our analysis paid off -- in the current market, growth stocks
have been rewarded more handsomely than their value counterparts. We favored
large company stocks over small company names, another decision that served the
fund in good stead, as the market turmoil punished the small-caps with a greater
vengeance.
Q GIVEN THE ASIAN TURMOIL OF THE PAST YEAR, A GREAT DEAL OF INVESTOR
ATTENTION HAS TURNED TO INTERNATIONAL MARKETS. HOW DID THE INTERNATIONAL PORTION
OF THE PORTFOLIOS PERFORM?
A Within the portfolios' international stake, we were also well-positioned.
In the first half of the fiscal year, we saw international holdings dampen
gains, but they've come back nicely, and have earned solid returns for the fund.
Our decision to favor Western European markets over Asian ones proved wise.
While Asia is still struggling mightily, the force of strengthening economies
and the potential benefits of unification have propelled Europe. France, Italy,
Germany and the United Kingdom count among the markets that garnered good
performance for the portfolios.
Q WHAT WERE THE FACTORS THAT CAUSED THE PORTFOLIOS TO LAG DURING THE ANNUAL
PERIOD?
A The volatility of the overall market has made many investors nervous.
Rather than keeping focused on fundamentals, many investors rushed headlong to
the perceived safety offered by the largest blue chip names. Much of the overall
market performance has thus been driven by a handful of the largest companies --
the biggest names of the S&P 500 Index. This "flight to enormity" has caused the
prices of this small group of stocks to rise far above price levels which we
feel are reasonable and sustainable. Therefore, our valuation discipline
compelled us to steer clear of the highest-priced names, at the expense of some
short-term gains. We would caution investors against being lulled into an
unreasonable sense of security, just because they may own the mega-cap names.
Their valuations are too high, regardless of the company's size.
Our exposure to certain sectors also caused the portfolios to lag. In the
first half of the fiscal year, the fund's overweighting in technology hurt
returns, as these stocks felt the brunt of the turmoil in Asia. We have seen
many of our technology names rebound, since, however. Throughout the year,
tobacco exposure also clipped gains, as regulatory concerns plagued that
industry. Our exposure to energy also hindered performance, as the fears
stemming out of Asian supply-and-demand issues got the better of many energy
stocks. Nevertheless, we believe a number of stocks in these two industries
continue to offer investors significant upside potential at very attractive
valuations.
Q HOW DO YOU FIND STOCKS IN THIS CHOPPY MARKET CLIMATE?
A We use the same criteria, regardless of market conditions. We seek out
stocks that boast sound valuations. To keep from getting swept away by the
current of an emotional market, we rely heavily on quantitative analysis. Before
making a judgement about whether or not to buy a stock, we scrutinize the
company's operations and fundamentals. We evaluate the stock price relative to
many factors, including book value, cash flow and earnings growth. We place this
information within a larger economic framework, weighing the possible impact of
inflation, economic growth and interest rates.
Q GIVEN THE CHALLENGES THAT THE MARKET HAS POSED OVER THE PAST TWELVE
MONTHS, HOW ARE YOU POSITIONING THE FUND?
A We remain absolutely committed to a disciplined,
6
<PAGE> 7
PERFORMANCE UPDATE
quantitative focus. The recent turbulence of the market reinforces our
conviction that over the long-term, keeping clear-sighted and cool-headed is the
most sensible course.
In fact, we plan to implement more formal quantitative techniques to
uncover and pursue market opportunity. We've always relied on quantitative
measures, however, in the future we will be employing more sophisticated
quantitative models to select securities for the fund. Different models will be
used to select domestic growth stocks, domestic value stocks, and international
stocks. These models focus on the same sort of factors (valuations, earnings
growth, and price momentum) that have historically driven our stock-selection
process.
We believe that this move will allow us to take the quantitative bent of
the fund to the next level. Scudder Kemper Investments has built a strong staff
of quantitative managers and analysts, and we're excited to leverage this
expertise to an even greater degree. The models we're using have been tested
extensively and used in institutional, high net worth and other fund accounts.
Moreover, we've brought on new portfolio managers, Robert Tymoczko and Karla
Grant. (Co-Lead Portfolio Manager William Knapp left the fund's management team
at the end of July 1998).
Q DO YOU EXPECT THE MARKET TURMOIL TO ABATE ANY TIME SOON?
A When it comes to investing, volatility is par for the course. Shorter-term
ups and downs are unavoidable. We can't predict when the market will fully
digest the Asian crisis and return to a more rational approach to valuing
stocks. We're prepared to see more volatility, and have gravitated toward stocks
that we believe are more resilient to the market's downward turns. However, we
believe that many factors support a positive long-term market forecast: the
economy is slowing, inflation has been kept in check, and interest rates remain
low. We hold that a disciplined approach to investing, paired with an emphasis
on diversification, is still a sound route for investors to follow.
7
<PAGE> 8
PERFORMANCE UPDATE
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR PERIODS ENDED JULY 31, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS A 2.75% 14.12% (since 12/29/95)
- -------------------------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS B 4.98 14.78 (since 12/29/95)
- -------------------------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS C 7.97 15.72 (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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 7/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kemper Horizon 20+ Portfolio Class A(1) 10000 10848 14080
9921 10758
10030 12081
10337 13202
14299
14382
- ------------------------------------------------------------------------------------------------------------------------------------
Combined S & P 500 Stock Index 10000 11913 17663
and Lehman Brothers Gov't/ 10398 12160
Corp. Bond Index(1) 10786 14000
11094 15401
17267
17821
- ------------------------------------------------------------------------------------------------------------------------------------
S & P 500 Index(+) 10000 12319 19135
10557 12650
11030 14856
11371 16427
18718
19335
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Gov't/ 10000 10890 11775
Corp. Bond Index(++) 9766 10202
9812 10573
9985 11294
11466
11765
</TABLE>
Kemper Horizon 20+ Portfolio Class B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/29/95 to 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 6/31/98 7/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kemper Horizon 20+ Portfolio 10000 11398.3 13425.4 14897.6 14289.9
Class B(1) 10049.5 11282.1 14853.6
10059 12644.9
10088.4 13796.3
- ------------------------------------------------------------------------------------------------------------------------------------
Combined S & P 500 Stock Index 10000 11913 15401 17821 17663
and Lehman Brothers Gov't/ 10398 12160 17267
Corp. Bond Index(1) 10786 14000
11094 14964
- ------------------------------------------------------------------------------------------------------------------------------------
S & P 500 Index(+) 10000 12319 16427 19335 19135
10557 12650 18718
11030 14856
11371 15969
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Gov't/ 10000 10890 11294 11765 11775
Corp. Bond Index(++) 9766 10202 11466
9812 10573
9985 10943
</TABLE>
Kemper Horizon 20+ Portfolio Class C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class C shares from 12/29/95 to 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kemper Horizon 20+ Portfolio Class C(1) 10000 11406 13443 14596
10495 11290 14870
10600 12652 14925
10895 13792
- ------------------------------------------------------------------------------------------------------------------------------------
Combined S & P 500 Stock Index 10000 11913 15401 17663
and Lehman Brothers Gov't/ 10398 12160 17267
Corp. Bond Index(1) 10786 14000 17821
11094 14964
- ------------------------------------------------------------------------------------------------------------------------------------
S & P 500 Index(+) 10000 12319 16427 19135
10557 12650 18718
11030 14856 19335
11371 15969
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Gov't/ 10000 10890 11294 11775
Corp. Bond Index(++) 9766 10202 11466
9812 10573 11765
9985 10943
</TABLE>
* Average annual total return and total return measure net investment income
and capital gain or loss from portfolio investments over the periods
specified, assuming reinvestment of dividends and, where indicated,
adjustment for the maximum sales charge. The maximum sales charge for
Class A Shares is 5.75%, for Class B Shares, the maximum contingent
deferred sales charge is 4%. Class C Shares have no sales adjustment,
but redemptions within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Share classes invest in the same underlying
portfolio. Average annual return reflects annualized change. 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 Class A Shares and the contingent deferred sales
charge in effect at the end of the period for Class B Shares. Each
portfolio is compared to the Standard & Poor's 500 Stock Index (S&P 500),
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
blended 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 HORIZON 20+
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
HORIZON 20+ ON 7/31/98 ON 7/31/97
- --------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 78% 79%
- --------------------------------------------------------------------------
BONDS 21 20
- --------------------------------------------------------------------------
CASH AND EQUIVALENTS 1 1
- --------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 7/31/98 ON 7/31/97
</TABLE>
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 6.8 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL ELECTRIC Operates in major businesses including power generators, 1.6%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- -------------------------------------------------------------------------------------------------
PHILIP MORRIS The largest cigarette maker in the U.S. Through its Miller 1.5%
Brewing subsidiary, it is also the country's second-largest
brewer. The company is also a major branded food producer
through its Kraft Foods subsidiary.
- -------------------------------------------------------------------------------------------------
CISCO SYSTEMS Largest, most comprehensive supplier of routing software and 1.3%
related systems that direct the flow of data between local
area networks.
- -------------------------------------------------------------------------------------------------
WORLDCOM One of the largest long distance telecommunications 1.3%
companies in the U.S., offering domestic and international
voice, data and video products and services.
- -------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 1.1%
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>
*PORTFOLIO 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, 1998 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
LIFE OF
1-YEAR CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS A 3.46% 11.98% (since 12/29/95)
- --------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS B 5.85 12.70 (since 12/29/95)
- --------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS C 8.83 13.55 (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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 10+ Portfolio Class A(1) 10,000 9,732 9,865 10,124 10,584 10,533 11,553 12,427 12,275 13,298 13,545 13,405
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp. Bond Index(1) 10,000 10,240 10,543 10,817 11,507 11,671 13,143 13,958 14,374 15,817 16,307 16,191
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 10+ Portfolio Class B(1) 10,000 10,316 10,443 10,685 11,152 11,067 12,114 12,999 12,827 13,861 14,085 13,629
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp. Bond Index(1) 10,000 10,240 10,543 10,817 11,507 11,671 13,143 13,958 14,374 15,817 16,307 16,191
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 10+ Portfolio Class C(1) 10,000 10,305 10,445 10,688 11,146 11,061 12,111 12,974 12,796 13,863 14,100 13,899
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp. Bond Index(1) 10,000 10,240 10,543 10,817 11,507 11,671 13,143 13,958 14,374 15,817 16,307 16,191
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp. Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</TABLE>
* Average annual total return and total return measure net investment
income and capital gain or loss from portfolio investments over the periods
specified, assuming reinvestment of dividends and, where indicated,
adjustment for the maximum sales charge. The maximum sales charge for Class
A Shares is 5.75%, for Class B Shares, the maximum contingent deferred
sales charge is 4%. Class C Shares have no sales adjustment, but
redemptions within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Share classes invest in the same underlying
portfolio. Average annual return reflects annualized change. 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 Class A Shares and the contingent deferred sales
charge in effect at the end of the period for Class B Shares. Each
portfolio is compared to the Standard & Poor's 500 Index (S&P 500), 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 blended
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 HORIZON 10+
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
HORIZON 10+ ON 7/31/98 ON 7/31/97
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 58% 60%
- ------------------------------------------------------------------------------
BONDS 40 39
- ------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 1
- ------------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 7/31/98 ON 7/31/97
</TABLE>
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 6.1 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Holdings Percent
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL ELECTRIC Operates in major businesses including power generators, 1.4%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- -------------------------------------------------------------------------------------------------
AEGON, N.V. Based in the Netherlands, AEGON offers a full range of life, 1.4%
accident, health and general insurance products and
associated financial services.
- -------------------------------------------------------------------------------------------------
PHILIP MORRIS The largest cigarette maker in the U.S. Through its Miller 1.2%
Brewing subsidiary, it is also the country's second-largest
brewer. The company is also a major branded food producer
through its Kraft Foods subsidiary.
- -------------------------------------------------------------------------------------------------
UNITED BANK OF SWITZERLAND Union Bank of Switzerland offers banking and financial 1.1%
(UBS) services in domestic and international markets, including
foreign currency and banknote dealing and money-market
investments.
- -------------------------------------------------------------------------------------------------
VIAG, A.G. A Munich, Germany-based company with activities in gas, 1.0%
electricity, chemicals and packaging.
- -------------------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO 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, 1998 (ADJUSTED FOR MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR LIFE OF CLASS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HORIZON 5 PORTFOLIO CLASS A 1.59% 8.35% (since 12/29/95)
- -------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS B 4.27 9.19 (since 12/29/95)
- -------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS C 7.10 10.12 (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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 5
Portfolio Class A(1) 10,000 9,657 9,779 9,980 10,313 10,221 10,959 11,569 11,532 12,232 12,396 12,308
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp.
Bond Index(1) 10,000 10,083 10,299 10,540 11,101 11,181 12,287 12,953 13,348 14,366 14,793 14,719
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp.
Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</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 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 5
Portfolio Class B(1) 10,000 10,236 10,346 10,538 10,870 10,753 11,509 12,129 12,081 12,796 12,948 12,557
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp.
Bond Index(1) 10,000 10,083 10,299 10,540 11,101 11,181 12,287 12,953 13,348 14,366 14,793 14,719
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp.
Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</TABLE>
[LINE GRAPH]
Kemper Horizon 5 Portfolio Class C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in
Class B shares from 12/29/95 to 7/31/98
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 7/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kemper Horizon 5
Portfolio Class C(1) 10,000 10,237 10,347 10,529 10,859 10,744 11,508 12,117 12,058 12,784 12,938 12,836
Combined S&P 500 Stock Index and
Lehman Brothers Gov't/Corp.
Bond Index(1) 10,000 10,083 10,299 10,540 11,101 11,181 12,287 12,953 13,348 14,366 14,793 14,719
S&P 500 Index(+) 10,000 10,557 11,030 11,371 12,319 12,650 14,856 15,969 16,427 18,718 19,335 19,135
Lehman Brothers Gov't/Corp.
Bond Index(++) 10,000 9,766 9,812 9,985 10,890 10,202 10,573 10,943 11,294 11,466 11,765 11,775
</TABLE>
* Average annual total return and total return measure net investment income
and capital gain or loss from portfolio investments over the periods
specified, assuming reinvestment of dividends and, where indicated,
adjustment for the maximum sales charge. The maximum sales charge for
Class A Shares is 5.75%, for Class B Shares, the maximum contingent
deferred sales charge is 4%. Class C Shares have no sales adjustment, but
redemptions within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Share classes invest in the same underlying
portfolio. Average annual return reflects annualized change. 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 Class A Shares and the contingent deferred sales
charge in effect at the end of the period for Class B Shares. Each
portfolio is compared to the Standard & Poor's 500 Index (S&P 500), 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
blended 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 HORIZON 5
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
HORIZON 5 ON 7/31/98 ON 7/31/97
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 38% 40%
- ------------------------------------------------------------------------------
BONDS 60 60
- ------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 --
- ------------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 7/31/98 ON 7/31/97
</TABLE>
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 3.5 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
AEGON, N.V. Based in the Netherlands, AEGON offers a full range of life, 0.9%
accident, health and general insurance products and
associated financial services.
- -------------------------------------------------------------------------------------------------
UNITED BANK OF SWITZERLAND Union Bank of Switzerland offers banking and financial 0.7%
(UBS) services in domestic and international markets, including
foreign currency and banknote dealing and money-market
investments.
- -------------------------------------------------------------------------------------------------
CISCO SYSTEMS Largest, most comprehensive supplier of routing software and 0.7%
related systems that direct the flow of data between local
area networks.
- -------------------------------------------------------------------------------------------------
VIAG, A.G. A Munich, Germany-based company with activities in gas, 0.6%
electricity, chemicals and packaging.
- -------------------------------------------------------------------------------------------------
PHILIP MORRIS The largest cigarette maker in the U.S. Through its Miller 0.6%
Brewing subsidiary, it is also the country's second-largest
brewer. The company is also a major branded food producer
through its Kraft Foods subsidiary.
- -------------------------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
13
<PAGE> 14
PORTFOLIOS OF INVESTMENTS
KEMPER HORIZON FUND
HORIZON 20+, 10+ AND 5
PORTFOLIOS OF INVESTMENTS AT JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
--------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 8.875% 1998 $ -- $ --
SECURITIES--19.3%, 37.1%
AND 54.9%
9.125 1999 -- --
8.875 1999 500 509
8.00 1999 1,280 1,312
7.75 1999 -- --
7.50 1999 540 552
8.875 2000 -- --
8.75 2000 -- --
8.50 2000 4,445 4,693
7.75 2000 -- --
6.75 2000 -- --
5.50 2000 1,300 1,300
8.00 2001 2,900 3,082
6.625 2001 6,165 6,348
6.50 2001 1,810 1,855
6.25 2001 125 127
5.375 2001 500 498
7.875 2004 936 1,048
--------------------------------------------------------------------------
21,324
- ---------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED FHLMC 6.50 2014 625 629
SECURITIES--1.5%, 3.0% GNMA 6.50 2014 975 984
AND 4.9%
--------------------------------------------------------------------------
1,613
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS--20.8%, 40.1% AND 59.8%
(Cost: $23,023, $44,947 and $33,245) 22,937
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--4.1%, AK Steel Holding Corp. 1,000 16
3.4% AND 2.4% AMCOL International 3,300 43
America West Holdings Corp. 2,200 53
(a)Broadcast.Com Inc. 800 44
Broadcom Corp. 1,100 69
(a)Buckeye Technologies, Inc. 1,000 23
(a)Carrier Access Corp. 600 10
Ciba Specialty Chemicals, A.G. 3,700 431
Crown Cork & Seal Co. 2,200 90
Dow Chemical Co. 4,100 372
Eastman Chemical Co. 1,600 91
Georgia-Pacific Corp. 1,500 77
Global Industrial Technologies, Inc. 2,600 35
(a)Lone Star Technologies 1,700 21
Louisiana-Pacific Corp. 14,600 291
(a)Lydall, Inc. 1,900 27
Nucor Corp. 3,000 131
Pitney Bowes, Inc. 1,900 96
Rentokil Initial, PLC 90,204 576
</TABLE>
14
<PAGE> 15
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------- -------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ----------------------------- -------------------------
- --------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- --------------------------------------------------------
<S> <C> <C> <C>
$ -- $ -- $ 770 $ 777
2,450 2,517 1,270 1,305
-- -- -- --
3,050 3,125 1,760 1,804
-- -- 300 308
-- -- 440 450
4,300 4,542 4,607 4,866
500 530 -- --
5,070 5,338 1,500 1,565
100 103 -- --
-- -- 250 255
700 700 -- --
8,715 9,262 4,690 4,985
6,667 6,865 7,220 7,434
3,745 3,838 3,420 3,505
-- -- -- --
700 698 -- --
3,518 3,941 2,785 3,120
- --------------------------------------------------------
41,459 30,374
- --------------------------------------------------------
1,234 1,242 663 667
2,025 2,043 2,000 2,018
- --------------------------------------------------------
3,285 2,685
- --------------------------------------------------------
44,744 33,059
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- --------------------------------------------------------
<S> <C> <C> <C>
700 11 300 5
2,550 33 900 12
1,700 41 600 14
700 38 200 11
900 56 300 19
800 18 400 9
500 8 200 3
7,400 861 2,400 279
1,900 78 700 29
2,800 254 800 73
1,500 85 400 23
1,000 51 -- --
1,900 26 700 9
1,400 18 600 8
12,200 243 3,800 76
1,500 21 600 9
2,000 87 1,200 52
1,600 81 500 25
50,098 320 19,910 127
</TABLE>
15
<PAGE> 16
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------
HORIZON 20+ PORTFOLIO
------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rowan Cos. 22,000 $ 311
(a)Shaw Group 1,200 25
Smith International 2,500 65
Sonoco Products Co. 11,000 322
Technip, S.A. 2,627 322
Timber Co. 12,000 269
Toray Industries 36,000 174
Union Camp Corp. 3,500 149
(a)Waste Management, Inc. 6,010 331
(a)Wyman-Gordon Co. 1,900 31
----------------------------------------------------------------------------------
4,495
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--6.8%, Ball Corp. 1,400 61
5.6% AND 3.4% Birmingham Steel Corp. 2,900 30
Blount International, "A" 1,400 37
Briggs & Stratton Corp. 700 23
Carpenter Technology Corp. 1,600 69
(a)Casella Waste System, Inc. 5,400 159
(a)Cooper Cameron Corp. 10,000 351
(a)Cunningham Graphics International Inc. 9,500 176
Elcor Corp. 1,650 38
Emerson Electric Co. 2,500 149
General Electric Co. 19,300 1,724
(a)Hawk Corp. 6,300 108
Intermet Corp. 3,900 76
Mannesmann, A.G. 7,970 849
Minnesota Mining & Manufacturing 3,900 292
(a)Mueller Industries, Inc. 800 27
Murata Manufacturing 5,000 170
(a)Philips Electronics, N.V. 6,000 490
Quanex Corp. 1,600 44
Raytheon Co. 4,500 249
Robbins & Meyers, Inc. 800 23
Sony Corp. 3,800 323
Stewart & Stevenson Services 2,300 39
Trinity Industries 1,000 40
(a)U.S. Filter Corp. 15,900 429
VIAG, A.G. 780 554
Watts Industries, Inc. 1,800 36
Xerox Corp. 8,500 897
----------------------------------------------------------------------------------
7,463
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER Albany International Corp. 803 16
CYCLICALS--9.4%, American Greetings Corp. 13,700 633
6.3% AND 4.2% Apogee Enterprises, Inc. 1,900 25
(a)AutoZone, Inc. 8,000 274
(a)BJ's Wholesale Club 1,000 37
Borg-Warner Automotive, Inc. 800 38
(a)Bright Horizons Children's Center, Inc. 12,882 311
Brown Group, Inc. 2,200 35
Bush Industries 700 15
(a)Career Education Corp. 5,400 134
(a)Carmike Cinemas 500 13
Carnival Corp. 16,000 591
Carrefour, S.A. 486 305
Cinar Films, Inc. 9,100 205
Circle K Japan Co., Ltd. 4,800 161
</TABLE>
16
<PAGE> 17
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------ ------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------------ ------------------------------------------
- ----------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
11,000 $ 155 8,500 $ 120
900 19 400 8
3,500 91 2,000 52
10,450 306 3,630 106
1,567 192 469 57
11,000 247 4,500 101
19,000 92 8,000 39
3,100 131 900 38
4,977 274 -- --
1,400 23 600 10
- ----------------------------------------------------------------------------------------
3,860 1,314
- ----------------------------------------------------------------------------------------
1,100 48 500 22
2,200 23 900 9
1,200 32 400 11
500 17 200 7
1,200 52 400 17
4,900 144 1,700 50
3,500 123 2,500 88
4,200 78 2,900 54
1,300 30 550 13
-- -- -- --
17,600 1,572 3,500 313
2,100 36 2,500 43
2,900 56 1,300 25
5,910 630 1,270 135
3,300 247 1,000 75
600 21 200 7
6,100 208 1,000 34
3,500 286 -- --
1,200 33 500 14
4,000 221 1,400 77
500 14 300 9
2,600 221 1,000 85
1,600 27 600 10
800 32 300 12
11,700 316 3,700 100
1,600 1,136 500 355
1,400 28 600 12
6,000 633 2,700 285
- ----------------------------------------------------------------------------------------
6,264 1,862
- ----------------------------------------------------------------------------------------
502 10 201 4
8,600 397 2,700 125
1,300 17 500 6
7,000 240 -- --
800 30 300 11
600 28 200 9
4,946 119 2,876 69
1,700 27 600 10
500 11 300 7
3,800 95 400 10
400 10 200 5
8,000 296 4,000 148
363 228 98 61
8,000 180 3,800 85
1,600 54 700 23
</TABLE>
17
<PAGE> 18
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------
HORIZON 20+ PORTFOLIO
--------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Columbia Sportswear Co. 2,400 $ 46
(a)Consolidated Graphics, Inc. 6,700 394
Consolidated Stores Corp. 4,390 148
Dillard Department Stores 12,000 412
(a)Education Management Corp. 5,800 215
Family Dollar Stores, Inc. 30,000 544
First Brands Corp. 1,500 35
Flowserve Corp. 1,327 29
Four Seasons Hotels, Inc. 8,800 266
(a)Friedman's, Inc. 2,200 26
Haggar Apparel Co. 2,800 32
(a)Hearst-Argyle Television, Inc. 9,100 313
Heilig-Meyers 2,800 37
Home Depot -- --
Hudson's Bay Co. 29,600 597
International Flavors & Fragrances, Inc. 2,000 84
Kimberly-Clark de Mexico, S.A. de C.V. 70,800 217
May Department Stores Co. 4,000 257
(a)Men's Wearhouse 7,200 228
Mississippi Chemical Corp. 1,200 19
(a)Neiman-Marcus Group 5,700 188
NIKE 7,100 316
(a)Nine West Group 20,000 446
(a)Outdoor Systems, Inc. 10,293 262
(a)Pacific Sunwear of California 3,750 111
(a)Preview Travel, Inc. 7,200 157
Springs Industries, Inc. 800 31
(a)Sylvan Learning Systems, Inc. 10,850 308
(a)Tommy Hilfiger Corp. 10,000 561
(a)Trammell Crow Co. 7,300 209
Wal-Mart Stores, Inc. 8,000 505
Walt Disney Co. 13,500 465
V.F. Corp. 1,800 85
(a)Valassis Communications 700 27
------------------------------------------------------------------------------------
10,363
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.5%, BBA Group, PLC 34,000 249
1.1% AND 1.0% Fleetwood Enterprises, Inc. 1,100 39
Ford Motor Co. 7,500 427
Harman International Industries 800 31
Honda Motor Co., Ltd. 3,100 116
Magna International, Inc., "A" 2,800 191
Stewart Enterprises, Inc. 9,200 209
Superior Industries International, Inc. 1,100 31
(a)Tower Automotive, Inc. -- --
Tyco International Ltd. 6,000 372
------------------------------------------------------------------------------------
1,665
- ------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--8.7%, (a)American Italian Pasta Co. 3,200 110
7.1% AND 3.7% Applebee's International 1,200 27
Avon Products 7,500 649
Coca Cola Co. 4,000 323
ConAgra 17,000 440
Deluxe Corp. -- --
DIMON, Inc. 1,600 17
Dole Food Company, Inc. -- --
(a)Emmis Broadcasting Corp. 6,000 257
</TABLE>
18
<PAGE> 19
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- ------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- ------------------------------
- -------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1,800 $ 35 700 $ 13
4,600 270 1,800 106
3,281 110 983 33
9,000 309 4,000 137
2,300 85 1,600 59
-- -- 5,000 91
1,100 26 500 12
1,018 22 478 10
7,500 227 2,800 85
1,600 19 600 7
2,000 23 1,000 11
4,400 151 1,800 62
2,100 27 900 12
10,600 444 1,400 59
13,400 270 5,250 106
1,500 63 500 21
48,000 147 29,200 89
4,000 257 900 58
5,400 171 -- --
1,000 16 400 7
6,400 211 1,900 63
9,000 401 -- --
17,000 379 5,000 112
16,893 431 5,775 147
2,550 75 -- --
4,100 89 700 15
600 23 200 8
8,900 253 4,150 118
6,400 359 1,800 101
3,600 103 2,100 60
-- -- -- --
7,800 269 3,600 124
1,400 66 400 19
600 23 300 11
- -------------------------------------------------------------------------------
7,096 2,329
- -------------------------------------------------------------------------------
23,900 175 7,800 57
800 29 300 11
8,000 456 2,800 159
700 28 300 12
2,200 82 1,000 37
-- -- 750 51
2,700 61 1,800 41
-- -- 1,900 53
5,400 124 1,600 37
4,000 248 2,000 124
- -------------------------------------------------------------------------------
1,203 582
- -------------------------------------------------------------------------------
2,300 79 800 28
900 20 500 11
4,000 346 2,000 173
5,000 403 2,000 161
12,000 310 -- --
8,500 290 1,500 51
1,200 13 400 4
5,000 236 -- --
3,000 128 2,100 90
</TABLE>
19
<PAGE> 20
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------
HORIZON 20+ PORTFOLIO
--------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Femsa "B" Fomento Economico Mexicano, S.A. 192,400 $ 603
Koninklijke Ahold, N.V. 19,150 590
(a)Lone Star Steakhouse & Saloon 1,700 19
(a)MSC Industrial Direct 7,000 209
McDonald's Corp. 10,400 695
NBTY, Inc. 9,500 157
Newell Co. 14,200 731
Ocular Sciences, Inc. 7,300 216
PepsiCo 8,800 342
(a)Performance Food Group Co. 1,800 38
Philip Morris Cos. 36,450 1,597
Procter & Gamble Co. 7,000 556
Swisher International Group, Inc. 1,700 11
UST, Inc. 24,000 648
Unilever, N.V., ADR 3,600 250
Universal Corp. 19,000 661
Wendy's International, Inc. 8,700 194
(a)Whole Foods Market 3,800 206
------------------------------------------------------------------------------------
9,546
- ------------------------------------------------------------------------------------------------------------------------
ENERGY--3.5%, AMOCO Corp. 7,000 292
2.6% AND 2.0% Atlantic Richfield Co. 4,700 318
Atmos Energy Corp. 1,500 44
(a)Basin Exploration 1,400 20
British Petroleum 27,686 368
Chevron Corp. 3,000 248
(a)Chieftain International, Inc. 2,000 36
Cross Timbers Oil 1,200 18
Elf Aquitaine 5,941 771
Exxon Corp. 5,000 351
Giant Industries 3,400 55
KCS Energy 2,900 20
(a)Nuevo Energy Co. 1,100 27
Petro-Canada 16,715 241
Praxair, Inc. 3,000 148
Questar Corp. 6,000 112
Repsol, S.A. 5,300 288
Royal Dutch Petroleum Co. 6,104 312
(a)Seitel, Inc. 2,000 27
TNP Enterprises, Inc. 700 22
(a)Tesoro Petroleum Corp. 3,200 51
Texaco, Inc. 1,600 97
(a)Triton Energy Corp. 500 9
(a)USEC Inc. 1,800 26
------------------------------------------------------------------------------------
3,901
- ------------------------------------------------------------------------------------------------------------------------
FINANCE--17.6%, ADVANTA Corp. -- --
13.4% AND 9.8% AEGON, N.V. 8,200 755
AXA-UAP, S.A. 5,100 699
Ambac Financial Group, Inc. 8,000 466
American General Corp. 2,400 164
AmerUS Life Holdings, Inc. 6,300 196
Apartment Investment & Mgt. Co. 608 23
Associated Banc Corp. 1,816 69
Associates First Capital Corp. 1,965 153
</TABLE>
20
<PAGE> 21
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- ------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- ------------------------------
- -------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
70,000 $ 219 20,800 $ 65
11,041 340 3,374 104
1,300 15 500 6
10,200 305 1,200 36
7,000 468 2,000 134
10,000 166 4,700 78
9,200 474 2,700 139
5,400 160 1,200 36
17,000 660 3,500 136
1,300 27 600 13
31,150 1,365 7,950 348
7,000 556 -- --
1,300 8 500 3
13,500 365 6,100 165
2,400 167 800 56
12,000 418 4,000 139
7,000 156 2,400 54
3,200 174 800 43
- -------------------------------------------------------------------------------
7,868 2,073
- -------------------------------------------------------------------------------
5,400 225 1,800 75
4,500 305 1,400 95
1,200 35 400 12
1,000 14 400 6
22,212 295 7,145 95
3,000 248 1,000 83
1,500 27 800 14
900 14 300 5
2,656 344 1,751 227
4,000 281 1,200 84
2,500 41 700 11
2,200 15 1,000 7
900 22 300 7
16,280 235 5,430 78
2,500 123 1,000 49
5,000 93 1,400 26
3,780 206 1,230 67
4,296 219 1,350 69
1,600 22 600 8
600 19 200 6
2,400 38 1,100 18
1,200 73 400 24
400 7 100 2
1,400 20 600 9
- -------------------------------------------------------------------------------
2,921 1,077
- -------------------------------------------------------------------------------
543 8 -- --
16,600 1,528 5,300 488
3,800 521 1,720 236
-- -- 2,000 116
2,600 178 -- --
4,100 128 3,800 119
497 19 165 6
1,386 53 501 19
2,096 163 733 57
</TABLE>
21
<PAGE> 22
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------
HORIZON 20+ PORTFOLIO
-----------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BB&T Corp. 8,000 $ 562
Banc One Corp. 2,749 142
Banco Bilbao Vizcaya, S.A. 35,748 675
Banco Popular Espanol 4,498 361
BankAmerica Corp. 2,400 215
Bank of Ireland 20,661 419
Bank of New York Co. 1,700 109
Bankers Trust New York Corp. 2,000 224
Bear Stearns Cos. 6,000 337
(a)CBT Group, PLC 5,800 336
CITIC Pacific, Ltd. 54,000 87
Chartwell Re Corp. 700 20
Chase Manhattan Corp. 3,200 242
Commercial Federal Corp. 9,700 273
Compass Bancshares 900 37
Crestar Financial Corp. 1,400 95
Cullen Frost Bankers 1,000 53
Del Webb Corp. 3,100 77
Federal Home Loan Mortgage Corp. 17,900 846
Federal National Mortgage Association 20,000 1,240
(a)Financial Federal Corp. 11,500 285
First Union Corp. 5,520 332
Fleet Financial Group, Inc. 1,500 129
Fremont General Corp. 800 46
General Re Corp. 1,500 355
H.F. Ahmanson & Co. 6,300 416
HSBC Holdings, PLC 9,778 239
Hartford Financial Services 10,000 521
Hibernia Corp. 22,500 425
ING Groep, N.V. 11,035 835
Imperial Credit Commercial Mortgage
Investment 2,400 26
Imperial Credit Industries 2,100 44
Jefferson-Pilot Corp. 4,350 245
Kansas City Southern Industries 3,900 192
KeyCorp 2,600 88
LandAmerica Financial Group, Inc. 1,100 60
LaSalle Partners 3,400 134
Long Island Bancorp, Inc. 1,600 92
MGIC Investment Corp. 7,800 418
Mercantile Bancorp, Inc. 576 31
Merrill Lynch & Co. 5,600 546
Morgan Stanley, Dean Witter, Discover & Co. 8,000 696
NationsBank Corp. 13,475 1,075
Norwest Corp. 2,400 86
PNC Bank Corp., N.A. 3,000 162
Philips International Realty Corp. 1,200 20
Protective Life Insurance Co. 8,500 329
Redwood Trust 1,300 20
Reliance Group Holdings, Inc. 2,200 38
Resource Bancshares Mortgage Group 2,520 49
Safeco Corp. 7,100 320
Southern Pacific Funding Corp. 2,300 35
Texas Regional Bankshares 4,300 125
Travelers Group 7,000 469
</TABLE>
22
<PAGE> 23
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- -------------------------------------- -------------------------------
- -------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
3,500 $ 246 2,100 $ 148
1,831 95 750 39
26,592 502 9,717 183
3,800 305 980 79
1,800 161 600 54
14,574 296 6,544 133
1,200 77 500 32
900 101 400 45
7,400 416 2,100 118
1,400 81 1,500 87
32,000 52 11,000 18
500 14 200 6
3,000 227 800 60
6,725 189 3,800 107
650 27 300 12
1,000 68 400 27
800 43 300 16
2,200 55 900 22
14,200 671 4,500 213
16,000 992 5,300 329
11,900 295 3,550 88
4,600 277 1,790 108
1,200 103 400 34
700 40 200 11
-- -- -- --
5,300 350 1,700 112
11,131 272 2,642 64
-- -- 2,000 104
11,500 217 7,500 142
6,419 486 3,156 239
1,800 20 700 8
1,600 33 500 10
6,000 338 1,800 101
3,900 192 -- --
3,400 116 800 27
800 44 300 16
2,800 110 1,400 55
1,200 69 500 29
6,000 322 2,000 107
672 37 151 8
3,100 302 800 78
4,200 366 1,300 113
7,962 635 2,712 216
2,600 93 600 22
2,100 113 900 48
900 15 400 7
5,200 201 3,000 116
1,000 15 500 8
1,700 29 700 12
1,890 37 735 14
2,000 90 -- --
1,800 27 800 12
3,900 113 800 23
8,500 570 1,500 101
</TABLE>
23
<PAGE> 24
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UBS 1,960 $ 851
(a)UniCapital Corp. 8,300 161
United Companies Financial Corp. 1,500 26
(a)United Panam Financial Corp. 6,300 63
Vedior, N.V. 8,515 269
W.R. Berkley Corp. 400 13
Webster Financial Corp. 1,600 49
Wells Fargo & Co. 400 142
Winston Hotels 1,500 17
--------------------------------------------------------------------------------
19,349
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE--9.0%, Abbott Laboratories 13,490 561
8.2% AND 4.9%
(a)ALZA Corp. 23,000 894
American Home Products Corp. 11,000 566
Astra, A.B., ADR 29,800 570
Bristol-Myers Squibb Co. 3,500 399
(a)British Biotech, PLC 39,870 23
C.R. Bard 5,000 203
CVS Corp. 5,440 223
(a)CONMED Corp. 2,200 52
Eli Lilly & Co. 3,000 202
(a)Envoy Corp. 3,500 131
(a)First Health Group Corp. 15,400 379
(a)Genesis Health Ventures 800 13
Glaxo Wellcome, PLC 15,635 483
(a)Hanger Orthopedic Group, Inc. 21,200 360
(a)Hologic, Inc. 2,000 33
Integrated Health Services 600 19
Johnson & Johnson 4,000 309
McKesson Corp. -- --
Merck & Co. 4,900 604
Novartis 222 375
Omnicare, Inc. 4,400 174
Pfizer, Inc. -- --
(a)Province Healthcare Co. 10,300 286
Renal Care Group Inc. 1,700 70
Roche Holding, A.G. 320 344
(a)Safeskin Corp. 9,400 353
Scherer, R.P. 4,500 409
Schering-Plough Corp. 3,500 339
Stryker Corp. 13,000 565
(a)Tenet Healthcare Corp. -- --
United Healthcare Corp. 7,600 429
(a)Xomed Surgical Products, Inc. 6,000 207
Zeneca Group, PLC 7,700 293
--------------------------------------------------------------------------------
9,868
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--13.1%, AMP, Inc. 9,300 273
7.7% AND 5.3% (a)AirTouch Communications -- --
(a)Altron, Inc. 300 4
(a)American Tower Corp. 14,700 353
(a)Applied Materials, Inc. 18,100 606
(a)Bay Networks 19,000 654
Belden, Inc. 1,200 32
(a)Benchmark Electronics 1,400 28
Breed Technologies, Inc. 800 12
(a)Burr Brown Corp. 1,500 29
(a)Cambridge Technology Partners 6,100 258
Canon, Inc. 4,000 91
</TABLE>
24
<PAGE> 25
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------
<S> <C> <C> <C>
2,800 $ 1,215 900 $ 391
7,500 145 3,300 64
1,100 19 500 9
5,000 50 2,100 21
7,702 243 2,909 92
300 10 100 3
1,200 36 400 12
400 142 100 36
1,100 12 500 6
- ------------------------------------------------------------------------
15,015 5,436
- ------------------------------------------------------------------------
9,600 399 3,800 158
13,000 505 4,000 155
4,200 216 3,000 155
19,166 366 5,720 109
5,500 627 1,900 216
34,762 20 8,700 5
8,000 324 2,700 109
4,294 176 1,336 55
1,700 40 600 14
4,000 269 1,200 81
3,100 116 -- --
11,200 276 5,000 123
600 10 300 5
12,001 371 4,182 129
20,600 350 7,800 133
1,500 25 600 10
500 16 300 9
2,350 182 750 58
4,500 363 1,500 121
3,000 370 1,500 185
150 253 66 111
5,800 229 1,000 40
5,000 550 1,500 165
17,000 472 4,600 128
-- -- 700 29
230 248 80 86
6,200 233 2,000 75
3,000 273 -- --
5,000 484 -- --
10,000 434 -- --
8,500 254 -- --
6,700 379 2,200 124
5,000 173 1,000 35
3,190 121 1,870 71
- ------------------------------------------------------------------------
9,124 2,694
- ------------------------------------------------------------------------
7,700 226 2,400 70
6,000 353 -- --
200 2 100 1
12,400 298 6,100 146
8,500 285 4,600 154
5,000 172 -- --
900 24 400 11
1,200 24 400 8
600 9 300 4
1,200 23 450 9
1,400 59 1,500 64
6,000 137 1,000 23
</TABLE>
25
<PAGE> 26
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Cisco Systems 15,150 $ 1,451
Compaq Computer Corp. 25,600 842
Computer Associates International 10,000 332
(a)Computer Sciences Corp. 12,800 819
Cyberian Outpost Inc. 300 6
Diebold 7,600 192
(a)Doubleclick Inc. 3,300 145
(a)EXAR Corp. 800 14
Fuji Photo Film Co., Ltd. 7,000 258
General Cable Corp. 1,500 43
Getronics 6,800 378
(a)HMT Technology Corp. 2,200 20
Hewlett-Packard Co. 4,300 239
Hutchinson Technology 1,000 22
(a)ITT Educational Services 11,500 364
Intel Corp. 14,100 1,191
(a)KLA-Tenor Corp. -- --
Keane, Inc. 4,800 259
(a)Learning Co. 1,700 45
Linear Technology Corp. 8,100 484
(a)MasTec, Inc. 1,000 24
(a)National Semiconductor Corp. 44,000 542
Pittway Corp. 7,100 501
(a)Quantum Corp. 25,400 444
Reynolds & Reynolds Co. 24,500 412
Scientific-Atlanta 100 2
(a)Segue Software, Inc. 4,300 69
(a)Sun Microsystems 20,400 964
(a)Tech-Sym Corp. 1,800 51
Telecom Italia, S.p.A. 76,430 660
(a)Teradyne, Inc. 20,500 470
(a)3Com Corp. 13,500 334
(a)Western Digital Corp. 44,000 490
--------------------------------------------------------------------------------
14,407
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--.2%, Airborne Freight Corp. 800 19
.2% AND .1% FDX Corporate Holding Co. 2,400 146
Myers Industries 2,510 59
Teekay Shipping 600 13
(a)Wisconsin Central Transportation Corp. 1,100 23
--------------------------------------------------------------------------------
260
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--3.6%, GTE Corp. 5,500 299
2.1% AND 1.4% (a)Jones Intercable, Inc. 4,100 110
(a)McLeod USA, Inc. 3,700 138
Telebras, S.A. 4,800 581
Telecom Italia Mobile 85,579 571
Telefonica de Espana, S.A. 17,385 848
(a)WorldCom, Inc. 26,500 1,401
--------------------------------------------------------------------------------
3,948
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS--77.5%,
57.7% AND 38.2%
(Cost: $69,918, $51,646 and $17,194) 85,265
--------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------
<S> <C> <C> <C>
9,975 $ 955 3,900 $ 373
18,700 615 5,800 191
7,500 249 2,500 83
6,600 422 -- --
300 6 100 2
6,300 159 2,000 50
2,800 123 700 31
700 13 300 5
3,400 126 2,000 74
1,200 35 450 13
4,800 267 1,575 88
1,700 15 800 7
3,600 200 1,400 78
700 15 300 6
10,000 316 3,300 104
9,800 827 3,200 270
1,100 33 -- --
1,600 86 -- --
1,300 35 500 13
5,900 353 2,200 132
800 19 300 7
30,000 369 12,000 148
4,000 282 1,900 134
17,200 301 5,400 95
-- -- -- --
100 2 100 2
-- -- 1,800 29
10,000 473 3,700 175
1,300 37 500 14
23,100 199 10,980 95
11,000 252 3,500 80
7,900 196 -- --
-- -- 12,000 133
- ------------------------------------------------------------------------
8,592 2,922
- ------------------------------------------------------------------------
600 14 200 5
2,000 121 600 36
1,950 46 880 21
500 11 200 4
800 16 400 8
- ------------------------------------------------------------------------
208 74
- ------------------------------------------------------------------------
5,000 272 2,000 109
3,000 81 1,200 32
5,000 187 875 33
-- -- -- --
63,229 422 18,282 122
10,700 522 3,090 151
15,300 809 6,500 344
- ------------------------------------------------------------------------
2,293 791
- ------------------------------------------------------------------------
64,444 21,154
- ------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield 5.04% to 5.56%
INSTRUMENTS--1.0% AND .9% Due--August through November 1998
(Cost: $1,059 and $1,000) $1,060 $ 1,059
----------------------------------------------------------------------------------
TOTAL INVESTMENTS--99.3%,
98.7% AND 98.0%
(Cost: $94,000, $97,593 and $50,439) 109,261
----------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--.7%, 1.3% AND 2.0% 815
----------------------------------------------------------------------------------
NET ASSETS--100% $110,076
----------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at July 31,
1998, the unrealized appreciation and depreciation on investments is as follows
(in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
HORIZON 20+ HORIZON 10+ HORIZON 5
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Cost of investments for federal income tax purposes $94,000 $97,593 $50,439
- -----------------------------------------------------------------------------------------------------
Gross unrealized appreciation 19,123 15,154 4,817
- -----------------------------------------------------------------------------------------------------
Gross unrealized depreciation 3,862 2,559 1,043
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation 15,261 12,595 3,774
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
28
<PAGE> 29
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- -------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$1,000 $ 1,000 -- $ --
- -------------------------------------------------------------------------
110,188 54,213
- -------------------------------------------------------------------------
1,499 1,122
- -------------------------------------------------------------------------
$111,687 $55,335
- -------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
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, 1998, the related statements of operations for
the year then ended and the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
fiscal periods since 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, 1998, 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, 1998, 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, 1998
30
<PAGE> 31
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Investments, at value
(Cost: $94,000, $97,593 and $50,439) $109,261 110,188 54,213
- -----------------------------------------------------------------------------------------------------------
Cash 119 489 427
- -----------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 214 144 90
- -----------------------------------------------------------------------------------------------------------
Fund shares sold 442 277 58
- -----------------------------------------------------------------------------------------------------------
Dividends and interest 557 953 694
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 110,593 112,051 55,482
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 47 35 16
- -----------------------------------------------------------------------------------------------------------
Fund shares redeemed 135 96 5
- -----------------------------------------------------------------------------------------------------------
Management fee 54 54 27
- -----------------------------------------------------------------------------------------------------------
Distribution services fee 38 34 18
- -----------------------------------------------------------------------------------------------------------
Administrative services fee 25 23 11
- -----------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 215 120 53
- -----------------------------------------------------------------------------------------------------------
Trustees' fees and other 3 2 17
- -----------------------------------------------------------------------------------------------------------
Total liabilities 517 364 147
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $110,076 111,687 55,335
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Paid-in capital $ 95,215 98,201 51,096
- -----------------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on investments (401) 759 228
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 15,261 12,595 3,774
- -----------------------------------------------------------------------------------------------------------
Undistributed net investment income 1 132 237
- -----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $110,076 111,687 55,335
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -----------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net assets applicable to shares outstanding $ 49,278 58,101 26,449
- -----------------------------------------------------------------------------------------------------------
Shares outstanding 3,656 4,653 2,349
- -----------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 13.48 12.49 11.26
- -----------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $ 14.30 13.25 11.95
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $ 50,252 42,522 23,669
- -----------------------------------------------------------------------------------------------------------
Shares outstanding 3,784 3,408 2,099
- -----------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 13.28 12.48 11.28
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 9,310 10,697 5,006
- -----------------------------------------------------------------------------------------------------------
Shares outstanding 700 860 444
- -----------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 13.29 12.44 11.27
- -----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net assets applicable to shares outstanding $ 1,236 367 211
- -----------------------------------------------------------------------------------------------------------
Shares outstanding 91 29 19
- -----------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 13.62 12.46 11.28
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
31
<PAGE> 32
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------------
Dividends $ 863 660 221
- -------------------------------------------------------------------------------------------------------------
Interest 1,267 2,539 1,836
- -------------------------------------------------------------------------------------------------------------
Total investment income 2,130 3,199 2,057
- -------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 495 495 242
- -------------------------------------------------------------------------------------------------------------
Distribution services fee 350 327 181
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 204 206 101
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 948 527 214
- -------------------------------------------------------------------------------------------------------------
Professional fees 22 25 11
- -------------------------------------------------------------------------------------------------------------
Reports to shareholders 41 43 33
- -------------------------------------------------------------------------------------------------------------
Trustees' fees and other 22 23 30
- -------------------------------------------------------------------------------------------------------------
Total expenses 2,082 1,646 812
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 48 1,553 1,245
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------------------------------------------------------------------
Net realized gain on sales of investments 652 1,056 444
- -------------------------------------------------------------------------------------------------------------
Net realized gain from futures transactions 27 279 84
- -------------------------------------------------------------------------------------------------------------
Net realized gain 679 1,335 528
- -------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments 6,055 5,063 1,289
- -------------------------------------------------------------------------------------------------------------
Net gain on investments 6,734 6,398 1,817
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,782 7,951 3,062
- -------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
------------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
----------------- ---------------- ---------------
1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 48 254 1,553 758 1,245 651
- -----------------------------------------------------------------------------------------------------------
Net realized gain 679 1,937 1,335 1,574 528 664
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 6,055 9,767 5,063 7,921 1,289 2,641
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,782 11,958 7,951 10,253 3,062 3,956
- -----------------------------------------------------------------------------------------------------------
Net equalization credits -- 174 -- 293 -- 148
- -----------------------------------------------------------------------------------------------------------
Distribution from net investment income (124) (207) (1,217) (581) (1,124) (565)
- -----------------------------------------------------------------------------------------------------------
Distribution from net realized gain (2,944) -- (2,477) -- (920) --
- -----------------------------------------------------------------------------------------------------------
Total dividends to shareholders (3,068) (207) (3,694) (581) (2,044) (565)
- -----------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 43,689 32,497 44,030 34,523 23,617 16,330
- -----------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 47,403 44,422 48,287 44,488 24,635 19,869
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Beginning of year 62,673 18,251 63,400 18,912 30,700 10,831
- -----------------------------------------------------------------------------------------------------------
END OF YEAR $110,076 62,673 111,687 63,400 55,335 30,700
- -----------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF YEAR $ 1 356 132 606 237 311
- -----------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
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+, Kemper
Horizon 10+ and Kemper Horizon 5. 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. Exchange traded 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.
FOREIGN CURRENCY TRANSLATION. The books and records
of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the
transactions. The Portfolios include that portion
of the results of operations resulting from changes
in foreign exchange rates with net realized and
unrealized gain (loss) on investments, as
appropriate.
33
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. 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 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's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, each Portfolio paid no federal income
taxes and no federal income tax provision was
required.
DIVIDENDS TO SHAREHOLDERS. Each Portfolio intends
to pay dividends of net investment income as
follows: annually for the Kemper Horizon 20+,
semiannually for the Kemper Horizon 10+, and
quarterly for the Kemper Horizon 5. Each Portfolio
will pay any net realized capital gains at least
annually. Dividends are recorded on the 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. Prior to August 1, 1997,
the Portfolios used equalization accounting to keep
a continuing shareholder's per share interest in
undistributed net investment income unaffected by
shareholder activity. This was accomplished by
allocating a portion of the proceeds from sales and
the cost of redemptions of fund shares to
undistributed net investment income. As of August
1, 1997, the Portfolios discontinued using
equalization. This change has no effect on the
Portfolios' net assets, net asset value per share
or distributions to shareholders. Discontinuing the
use of equalization accounting will result in
simpler financial statements. The cumulative effect
of the discontinuance of equalization accounting
was to decrease undistributed net investment income
and increase paid-in-capital previously reported
through July 31, 1997 by the following amounts (in
thousands):
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT
-------------------------------------------------
<S> <C>
Kemper Horizon 20+ $245
-------------------------------------------------
Kemper Horizon 10+ 390
-------------------------------------------------
Kemper Horizon 5 194
-------------------------------------------------
</TABLE>
34
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The Fund has a management
agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper). Under the Fund's management
agreement each Portfolio pays a monthly management
fee at 1/12 of the 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 management fees of
$1,232,000 for the year ended July 31, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
paid in connection with the distribution of each
Portfolio's Class A shares for the year ended July
31, 1998 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY
RETAINED BY KDI KDI TO FIRMS
--------------- -------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $26,000 303,000
Kemper Horizon 10+ Portfolio 30,000 300,000
Kemper Horizon 5 Portfolio 13,000 156,000
</TABLE>
For services under the distribution services
agreement, each Portfolio pays KDI a fee of .75% of
average daily net assets of Class B and Class C
shares. Pursuant to the agreement, KDI enters into
related selling group agreements with various firms
at various rates for sales of Class B and Class C
shares of each Portfolio. In addition, KDI receives
any contingent deferred sales charges (CDSC) from
redemptions of Class B and Class C shares.
Distribution fees, CDSC and commissions related to
Class B and Class C shares for the year ended July
31, 1998 are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES COMMISSIONS AND
AND CDSC DISTRIBUTION FEES PAID
RECEIVED BY KDI BY KDI TO FIRMS
----------------- ----------------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $423,000 749,000
Kemper Horizon 10+ Portfolio 377,000 625,000
Kemper Horizon 5 Portfolio 202,000 346,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. The Fund has an
administrative services agreement with KDI. For
providing information and administrative services
to Class A, Class B and Class C shareholders, each
Portfolio pays KDI a fee at an annual rate of up to
.25% of average daily net assets of each class. KDI
in turn has various 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, 1998 are as
follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY
THE PORTFOLIOS TO KDI KDI TO FIRMS
---------------------- ------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $204,000 213,000
Kemper Horizon 10+ Portfolio 206,000 212,000
Kemper Horizon 5 Portfolio 101,000 109,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
35
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
service agent of the Fund. Under the agreement,
KSvC received shareholder services fees of
$1,364,000 for the year ended July 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the year ended July 31,
1998, the Fund made no payments to its officers and
incurred trustees' fees of $27,000 to independent
trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the year ended July 31, 1998, 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 $79,957 74,132 40,062
Proceeds from sales 40,782 34,105 18,518
</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 YEAR ENDED
JULY 31, 1998 JULY 31, 1997
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,092 $27,974 1,392 $15,323
------------------------------------------------------------------------------
Class B 1,757 22,828 1,837 19,895
------------------------------------------------------------------------------
Class C 460 6,048 301 3,266
------------------------------------------------------------------------------
Class I 111 568 38 411
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 120 1,458 12 123
------------------------------------------------------------------------------
Class B 110 1,326 6 58
------------------------------------------------------------------------------
Class C 14 171 1 6
------------------------------------------------------------------------------
Class I 3 41 1 13
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (630) (8,322) (248) (2,762)
------------------------------------------------------------------------------
Class B (518) (7,024) (194) (2,256)
------------------------------------------------------------------------------
Class C (82) (1,086) (76) (815)
------------------------------------------------------------------------------
Class I (90) (293) (70) (765)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 80 1,050 7 82
------------------------------------------------------------------------------
Class B (80) (1,050) (7) (82)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $43,689 $32,497
------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,805 $33,563 1,736 $18,250
-----------------------------------------------------------------------------
Class B 1,763 21,466 1,820 19,131
-----------------------------------------------------------------------------
Class C 505 6,176 484 5,055
-----------------------------------------------------------------------------
Class I 33 141 46 490
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 157 1,820 31 337
-----------------------------------------------------------------------------
Class B 124 1,294 17 186
-----------------------------------------------------------------------------
Class C 29 334 3 39
-----------------------------------------------------------------------------
Class I 2 23 1 9
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
SHARES REDEEMED
Class A (717) (8,630) (466) (5,040)
-----------------------------------------------------------------------------
Class B (825) (9,857) (255) (2,788)
-----------------------------------------------------------------------------
Class C (168) (2,084) (82) (882)
-----------------------------------------------------------------------------
Class I (39) (216) (25) (264)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 120 1,523 14 150
-----------------------------------------------------------------------------
Class B (120) (1,523) (14) (150)
-----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $44,030 $34,523
-----------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1998 JULY 31, 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,976 $21,743 845 $ 8,504
-------------------------------------------------------------------------------
Class B 1,414 15,661 1,343 13,437
-------------------------------------------------------------------------------
Class C 242 2,675 286 2,897
-------------------------------------------------------------------------------
Class I 7 83 2 23
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 78 850 23 236
-------------------------------------------------------------------------------
Class B 84 908 26 265
-------------------------------------------------------------------------------
Class C 18 198 4 38
-------------------------------------------------------------------------------
Class I 1 9 1 4
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SHARES REDEEMED
Class A (858) (9,364) (274) (2,800)
-------------------------------------------------------------------------------
Class B (729) (8,043) (538) (5,514)
-------------------------------------------------------------------------------
Class C (97) (1,089) (73) (743)
-------------------------------------------------------------------------------
Class I (1) (14) (2) (17)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 83 919 15 150
-------------------------------------------------------------------------------
Class B (83) (919) (14) (150)
-------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $23,617 $16,330
-------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES The Portfolios have entered into exchange traded
CONTRACTS financial futures contracts in order to take
advantage of anticipated market conditions and, as
such, bear the risk that arises from entering into
these contracts.
At the time a Portfolio enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Portfolios and the broker as the
market value of the futures contract fluctuates.
At July 31, 1998, the market value of assets
pledged by the Portfolios to cover margin
requirements for open futures positions was
$35,000 for Kemper Horizon 20+, $75,000 for Kemper
Horizon 10+ and $103,000 for Kemper Horizon 5. The
Portfolios also have liquid assets in their
portfolios in excess of the face amount of open
futures contracts. At July 31, 1998, the
Portfolios had the following futures open with
expirations in September, 1998:
<TABLE>
<CAPTION>
CONTRACT GAIN AT
TYPE AMOUNT POSITION 7/31/98
--------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO:
S&P 500 Index $1,657,000 Long $28,000
--------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO:
S&P 500 Index 1,105,000 Long 18,000
--------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO:
S&P 500 Index 552,000 Long 9,000
--------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------
CLASS A
-----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
KEMPER HORIZON -------------- JULY 31,
20+ PORTFOLIO 1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $12.89 9.72 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .12 .18
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.07 3.15 .04
- -------------------------------------------------------------------------------
Total from investment operations 1.11 3.27 .22
- -------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .04 .10 --
- -------------------------------------------------------------------------------
Distribution from net realized gain .48 -- --
- -------------------------------------------------------------------------------
Total dividends .52 .10 --
- -------------------------------------------------------------------------------
Net asset value, end of period $13.48 12.89 9.72
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.04% 33.90 2.32
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------
Expenses 2.00% 1.69 1.48
- -------------------------------------------------------------------------------
Net investment income .49% 1.08 1.51
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------
CLASS B
---------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
-------------- JULY 31,
1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $12.79 9.65 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) .03 .11
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.00 3.15 .04
- -------------------------------------------------------------------------------
Total from investment operations .97 3.18 .15
- -------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income -- .04 --
- -------------------------------------------------------------------------------
Distribution from net realized gain .48 -- --
- -------------------------------------------------------------------------------
Total dividends .48 .04 --
- -------------------------------------------------------------------------------
Net asset value, end of period $13.28 12.79 9.65
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.98% 33.01 1.58
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------
Expenses 2.79% 2.47 2.26
- -------------------------------------------------------------------------------
Net investment income (loss) (.30)% .30 .73
- -------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------
CLASS C
-----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
KEMPER HORIZON -------------- JULY 31,
20+ PORTFOLIO 1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $12.80 9.67 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.05) .04 .13
- -------------------------------------------------------------------------------
Net realized and unrealized gain 1.02 3.13 .04
- -------------------------------------------------------------------------------
Total from investment operations .97 3.17 .17
- -------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income -- .04 --
- -------------------------------------------------------------------------------
Distribution from net realized gain .48 -- --
- -------------------------------------------------------------------------------
Total dividends .48 .04 --
- -------------------------------------------------------------------------------
Net asset value, end of period $13.29 12.80 9.67
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.97% 32.80 1.79
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED
- -------------------------------------------------------------------------------
Expenses 3.03% 2.48 2.23
- -------------------------------------------------------------------------------
Net investment income (loss) (.54)% .29 .76
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------
CLASS I
-----------------------------------
YEAR ENDED APRIL 8
JULY 31, TO
-------------- JULY 31,
1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $12.96 9.73 10.03
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17 .19 .07
- -------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) 1.09 3.17 (.37)
- -------------------------------------------------------------------------------
Total from investment operations 1.26 3.36 (.30)
- -------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .12 .13 --
- -------------------------------------------------------------------------------
Distribution from net realized gain .48 -- --
- -------------------------------------------------------------------------------
Total dividends .60 .13 --
- -------------------------------------------------------------------------------
Net asset value, end of period $13.62 12.96 9.73
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.29% 34.84 (2.99)
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------
Expenses .85% 1.04 .73
- -------------------------------------------------------------------------------
Net investment income 1.64% 1.73 2.32
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED JULY DECEMBER 29, 1995
31, TO
----------------- JULY 31,
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in
thousands) $110,076 62,673 18,251
- -----------------------------------------------------------------------------
Portfolio turnover rate (annualized) 44% 130 122
- -----------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
40
<PAGE> 41
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------
CLASS A
-----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
KEMPER HORIZON -------------- JULY 31,
10+ PORTFOLIO 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------
Net asset value, beginning of period $12.01 9.60 9.50
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income .24 .25 .20
- --------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .87 2.36 (.04)
- --------------------------------------------------------------------------------
Total from investment operations 1.11 2.61 .16
- --------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .22 .20 .06
- --------------------------------------------------------------------------------
Distribution from net realized gain .41 -- --
- --------------------------------------------------------------------------------
Total dividends .63 .20 .06
- --------------------------------------------------------------------------------
Net asset value, end of period $12.49 12.01 9.60
- --------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 9.75% 27.43 1.70
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------
Expenses 1.48% 1.51 1.48
- --------------------------------------------------------------------------------
Net investment income 2.26% 2.36 2.40
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
CLASS B
----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
-------------- JULY 31,
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------
Net asset value, beginning of period $12.00 9.60 9.50
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .16 .17
- -------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .86 2.35 (.04)
- -------------------------------------------------------------------------------
Total from investment operations 1.01 2.51 .13
- -------------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .12 .11 .03
- -------------------------------------------------------------------------------
Distribution from net realized gain .41 -- --
- -------------------------------------------------------------------------------
Total dividends .53 .11 .03
- -------------------------------------------------------------------------------
Net asset value, end of period $12.48 12.00 9.60
- -------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.85% 26.25 1.38
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------
Expenses 2.36% 2.36 2.26
- -------------------------------------------------------------------------------
Net investment income 1.38% 1.51 1.62
- -------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------
CLASS C
----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
KEMPER HORIZON -------------- JULY 31,
10+ PORTFOLIO 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------
Net asset value, beginning of period $11.98 9.60 9.50
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .14 .17
- ---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .87 2.34 (.04)
- ---------------------------------------------------------------------------
Total from investment operations 1.01 2.48 .13
- ---------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .14 .10 .03
- ---------------------------------------------------------------------------
Distribution from net realized gain .41 -- --
- ---------------------------------------------------------------------------
Total dividends .55 .10 .03
- ---------------------------------------------------------------------------
Net asset value, end of period $12.44 11.98 9.60
- ---------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.83% 25.97 1.39
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses 2.39% 2.61 2.23
- ---------------------------------------------------------------------------
Net investment income 1.35% 1.26 1.65
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
CLASS I
----------------------------------
YEAR ENDED APRIL 8
JULY 31, TO
-------------- JULY 31,
1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------
Net asset value, beginning of period $11.97 9.57 9.83
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income .35 .26 .09
- ---------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .84 2.40 (.26)
- ---------------------------------------------------------------------------
Total from investment operations 1.19 2.66 (.17)
- ---------------------------------------------------------------------------
Less dividends
Distribution from net investment
income .29 .26 .09
- ---------------------------------------------------------------------------
Distribution from net realized gain .41 -- --
- ---------------------------------------------------------------------------
Total dividends .70 .26 .09
- ---------------------------------------------------------------------------
Net asset value, end of period $12.46 11.97 9.57
- ---------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 10.47% 28.09 (1.74)
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses .99% 1.06 .73
- ---------------------------------------------------------------------------
Net investment income 2.75% 2.81 3.21
- ---------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY DECEMBER 29, 1995
31, TO
----------------- JULY 31,
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in
thousands) $111,687 63,400 18,912
- ------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 37% 126 87
- ------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
42
<PAGE> 43
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------
CLASS A
-------------------------------------------
DECEMBER 29, 1995
YEAR ENDED JULY 31, TO
KEMPER HORIZON ----------------------- JULY 31,
5 PORTFOLIO 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------
Net asset value, beginning of period $11.06 9.57 9.50
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .35 .34 .25
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .47 1.45 (.07)
- ------------------------------------------------------------------------------------
Total from investment operations .82 1.79 .18
- ------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .35 .30 .11
- ------------------------------------------------------------------------------------
Distribution from net realized gain .27 -- --
- ------------------------------------------------------------------------------------
Total dividends .62 .30 .11
- ------------------------------------------------------------------------------------
Net asset value, end of period $11.26 11.06 9.57
- ------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.74% 19.02 1.84
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------
Expenses 1.64% 1.51 1.48
- ------------------------------------------------------------------------------------
Net investment income 3.28% 3.30 3.20
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
CLASS B
-------------------------------------------
DECEMBER 29, 1995
YEAR ENDED JULY 31, TO
----------------------- JULY 31,
1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------
Net asset value, beginning of period $11.06 9.57 9.50
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .30 .27 .21
- ------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) .47 1.44 (.07)
- ------------------------------------------------------------------------------------
Total from investment operations .77 1.71 .14
- ------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .28 .22 .07
- ------------------------------------------------------------------------------------
Distribution from net realized gain .27 -- --
- ------------------------------------------------------------------------------------
Total dividends .55 .22 .07
- ------------------------------------------------------------------------------------
Net asset value, end of period $11.28 11.06 9.57
- ------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.27% 18.15 1.44
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------
Expenses 2.17% 2.15 2.26
- ------------------------------------------------------------------------------------
Net investment income 2.75% 2.66 2.42
- ------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 44
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------
CLASS C
----------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
KEMPER HORIZON -------------- JULY 31,
5 PORTFOLIO 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------
Net asset value, beginning of period $11.07 9.57 9.50
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income .28 .28 .21
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss) .47 1.43 (.07)
- ---------------------------------------------------------------------------
Total from investment operations .75 1.71 .14
- ---------------------------------------------------------------------------
Less dividends
Distribution from net investment income .28 .21 .07
- ---------------------------------------------------------------------------
Distribution from net realized gain .27 -- --
- ---------------------------------------------------------------------------
Total dividends .55 .21 .07
- ---------------------------------------------------------------------------
Net asset value, end of period $11.27 11.07 9.57
- ---------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 7.10% 18.13 1.45
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses 2.18% 2.16 2.23
- ---------------------------------------------------------------------------
Net investment income 2.74% 2.65 2.45
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
CLASS I
----------------------------------
YEAR ENDED APRIL 8
JULY 31, TO
-------------- JULY 31,
1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------
Net asset value, beginning of period $11.06 9.58 9.69
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income .41 .32 .08
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss) .47 1.49 (.11)
- ---------------------------------------------------------------------------
Total from investment operations .88 1.81 (.03)
- ---------------------------------------------------------------------------
Less dividends
Distribution from net investment income .39 .33 .08
- ---------------------------------------------------------------------------
Distribution from net realized gain .27 -- --
- ---------------------------------------------------------------------------
Total dividends .66 .33 .08
- ---------------------------------------------------------------------------
Net asset value, end of period $11.28 11.06 9.58
- ---------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 8.29% 19.27 (.31)
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------
Expenses 1.03% 1.20 .73
- ---------------------------------------------------------------------------
Net investment income 3.89% 3.61 4.11
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 29, 1995
JULY 31, TO
----------------- JULY 31,
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $ 55,335 30,700 10,831
- --------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 43% 150 57
- --------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5 Portfolio paid distributions
of $.06, $.05, and $.03 per share, respectively, from net long-term capital
gains during the year ended July 31, 1998, of which 50%, 40% and 33% represent
20% rate gains, respectively.
Pursuant to Section 852 of the Internal Revenue Code, Kemper Horizon 20+
Portfolio, 10+ Portfolio and 5 Portfolio designate $142,000, $932,000, and
$301,000, respectively, as capital gain dividends for the year ended July 31,
1998, of which 0%, 84%, and 84% represent 20% rate gains, respectively.
For corporate shareholders of Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5
Portfolio 65%, 24% and 11%, respectively, of the income dividends paid during
the year ended July 31, 1998 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
45
<PAGE> 46
NOTES
46
<PAGE> 47
NOTES
47
<PAGE> 48
TRUSTEES
OFFICERS
DANIEL PIERCE
Chairman and Trustee
JAMES E. AKINS
Trustee
ARTHUR R. GOTTSCHALK
Trustee
FREDERICK T. KELSEY
Trustee
FRED B. RENWICK
Trustee
JOHN B. TINGLEFF
Trustee
EDMOND D. VILLANI
Trustee
JOHN G. WEITHERS
Trustee
MARK S. CASADY
President
PHILIP J. COLLORA
Vice President and
Secretary
JOHN R. HEBBLE
Treasurer
PHILIP S. FORTUNA
Vice President
JERARD K. HARTMAN
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
STEVEN H. REYNOLDS
Vice President
LINDA J. WONDRACK
Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
<TABLE>
<S> <C>
..........................................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..........................................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419557
Kansas City, MO 64141
..........................................................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania Avenue
Kansas City, MO 64105
..........................................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
..........................................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
</TABLE>
KEMPER LOGO
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 (9/98) 1055590
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
TRUSTEES&OFFICERS
