<PAGE> 1
SEMI-ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED JANUARY 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(Sm)
[LOGO]
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER HORIZON FUND
"... Overall, the last six months were a
testament to the wisdom of maintaining
a broadly allocated portfolio. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
STATISTICS FOR HORIZON 20+
LARGEST HOLDINGS
9
STATISTICS FOR HORIZON 10+
LARGEST HOLDINGS
10
STATISTICS FOR HORIZON 5
LARGEST HOLDINGS
11
SHAREHOLDERS'
MEETING
12
PORTFOLIOS OF
INVESTMENTS
26
FINANCIAL STATEMENTS
28
NOTES TO
FINANCIAL STATEMENTS
34
FINANCIAL HIGHLIGHTS
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER HORIZON FUND
TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 1998
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+ 1.03% 0.42% 0.50%
- --------------------------------------------------------------------------------
HORIZON 10+ 1.72% 1.28% 1.50%
- --------------------------------------------------------------------------------
HORIZON 5 1.98% 1.83% 1.74%
- --------------------------------------------------------------------------------
</TABLE>
Returns are historical and do not represent future performance. Returns and net
asset value fluctuate. Shares are redeemable at current net asset value, which
may be more or less than original cost.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the period
noted, securities prices fluctuated. For additional information, see the
Prospectus and Statement of Additional Information and the Financial Highlights
at the end of this report.
- --------------------------------------------------------------------------------
KEMPER HORIZON FUND
LIPPER RANKINGS**
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THEIR RESPECTIVE LIPPER CATEGORIES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+ #88 of #112 of #111 of
1-YEAR 198 funds 198 funds 198 funds
- --------------------------------------------------------------------------------
HORIZON 10+ #264 of #307 of #299 of
1-YEAR 361 funds 361 funds 361 funds
- --------------------------------------------------------------------------------
HORIZON 5 #46 of #51 of #51 of
1-YEAR 66 funds 66 funds 66 funds
- --------------------------------------------------------------------------------
</TABLE>
** Lipper Analytical Services, Inc. rankings are based upon changes in net asset
value with all dividends reinvested and do not include the effect of sales
charges and, if they had, results may have been less favorable. Rankings are
historical and do not reflect future performance. The portfolios are compared to
their respective Lipper categories as follows: Flexible Portfolio, Balanced and
Income.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
1/31/98 7/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
HORIZON 20+ CLASS A $12.49 $12.89
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS B $12.35 $12.79
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS C $12.37 $12.80
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS A $11.66 $12.01
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS B $11.65 $12.00
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS C $11.67 $11.98
- --------------------------------------------------------------------------------
HORIZON 5 CLASS A $10.81 $11.06
- --------------------------------------------------------------------------------
HORIZON 5 CLASS B $10.83 $11.06
- --------------------------------------------------------------------------------
HORIZON 5 CLASS C $10.83 $11.07
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD ENDED JANUARY 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 -- -- $.42 $.06
- --------------------------------------------------------------------------------
HORIZON 10+ $.1325 $.0813 $.0663 $.36 $.05
- --------------------------------------------------------------------------------
HORIZON 5 $.19 $.1549 $.1543 $.24 $.03
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
[MATURITY QUALITY DIAGRAM]
Source: Morningstar, Inc., Chicago, IL (312) 696-6000. (Morningstar Style Box
is based on a portfolio date as of January 31, 1998.) The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book
ratio relative to the S&P 500, as well as the size of the companies in which
it invests, or median market capitalization. Please note that style boxes do
not represent an exact assessment of risk and do not represent future
performance. Please consult the prospectus for a description of investment
policies.
GROWTH STOCK The stock of a company whose earnings growth has consistently
exceeded the growth rate of the overall market and whose growth is expected to
continue or accelerate.
MARKET CAPITALIZATION A measure of the size of a publicly traded company,
capitalization is determined by multiplying the current share price by the
number of shares outstanding. The market capitalization of a company has a
bearing on its perceived earnings potential and risk. Small capitalization
companies (less than $1 billion) may present the potential for greater growth
than larger, more established companies. On the other hand, the stock of small
cap companies may be more volatile and therefore a greater risk to capital.
VALUE STOCK The stock of a company that is out of favor with investors because
the market does not expect it to experience earnings growth or an improving
price.
<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. HE IS ALSO A MEMBER OF THE INVESTMENT POLICY AND STRATEGY COMMITTEE
FOR KEMPER FUNDS.
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 ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPLEXES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
Despite ongoing stock market volatility, the economic climate for mutual fund
investors has been fairly positive in the first quarter of 1998. Steady U.S.
economic growth bolstered by stable interest rates has created a positive
environment for both equity and fixed-income investing -- and we expect this to
continue.
The U.S. economy, as measured by the gross domestic product (GDP) growth
rate, in the fourth quarter of 1997 grew 3.9 percent. With 3.8 percent GDP
growth for all of 1997, the economy produced $7.19 trillion of output. For the
first quarter of 1998, we estimate the economy to grow at a 3.4 percent rate,
representing a modest slowdown. Momentum for the year, in fact, should slip to a
rate of 2.5 percent.
Although the economy will continue to slow in the months ahead, the outlook
is still positive. Employment growth is expected to remain steady. Both bonds
and equities have continued to perform well, thereby boosting consumer
confidence and spending. The housing market has been noteworthy, with new home
sales reaching an all-time high for this point in the economic cycle and housing
starts remain high relative to demographic trends.
Output prices, as measured by the Consumer Price Index (CPI), remain stable
at 1.5 to 2 percent year over year. When the rate of inflation remains stable
and as low as it has, the risk of higher interest rates is reduced and the real
return on financial assets grows. It is unlikely that the Fed will raise
interest rates in the second quarter.
Seemingly in defiance of our diplomatic struggles with Iraq, political
scandal at home and a few major earnings disappointments particularly in the
technology sector, the market managed to hit several new heights in the first
quarter. U.S. corporate profit growth and earnings continued to boost stock
prices, making the market all the more attractive to investors.
Much of the market activity in the first quarter can be attributed to
today's service-based economy. With the arrival of annual and holiday bonuses
at the end of the fourth quarter -- compensation for a good year's work -- the
first quarter has established itself as a time for American employees to either
spend or stash away these lump sum earnings in Individual Retirement Accounts
(IRAs) and other investments.
One factor that affected the U.S. market in 1997 appears to be having a
diminished influence in the new year. The East Asian market crisis now appears
for most Asian countries to be subsiding. East Asia's economic difficulties did
not affect global production or employment nearly as much as the markets had
anticipated. Consequently, most investors did not feel the serious repercussions
that had been feared. Obviously, investors with heavy concentrations in the
region suffered the largest losses. But the markets were anticipating a greater
global impact -- and this has not yet come to pass. Further impacts may occur or
orders on shipments already made may find no ultimate buyer. Then again, as we
move into the second quarter of 1998, many East Asian countries appear to have
already recovered from the crisis. Some Asian currencies have stabilized and
several Asian stock markets have rebounded. Korea and Malaysia are two countries
where this has happened. The perception of an Asian "contagion" or flu
throughout the region is fading fast -- and investors in general seem to be
staying in the game.
At the end of February, the U.S. federal budget deficit essentially
vanished. Recent efforts to reduce the deficit, combined with higher federal
revenues due to the robust economy, have left us with a budget surplus for
fiscal 1998. This stable fiscal environment is characterized by a reduction
in Treasury financing, which tends to have a downward effect on interest rates.
Lower interest rates fuel consumer spending, which clearly benefits the
marketplace in the form of higher corporate revenues and earnings. One result
of higher earnings is higher stock prices, which can ultimately benefit
investors.
The last time the U.S. enjoyed a budget surplus was 1969. After nearly 30
years of being in the red, we very well may notice a new shift in psychology
about the Treasury market and the issuance of Treasury securities. In the past,
investors worried about deficits that were out of control and expected higher
interest rates on Treasuries. High interest rates are the bane of fixed-income
investing, so a balanced budget can be expected to have a positive effect.
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 (2/28/98) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1) 5.57 6.21 6.69 6.27
PRIME RATE(2) 8.5 8.5 8.3 8.25
INFLATION RATE(3)* 1.57 2.72 3.03 2.72
THE U.S. DOLLAR(4)* 9.32 10.1 7.67 0.82
CAPITAL GOODS ORDERS(5)* 13.77 11.53 5.8 11.19
INDUSTRIAL PRODUCTION(5)* 5.47 5.03 4.57 2.93
EMPLOYMENT GROWTH(6) 2.6 2.31 2.14 1.83
</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 January 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
On the global front, current economic fundamentals tend to favor the U.S.,
with the dollar continuing to be a safe haven for investors. International
investors want to participate in U.S. economic growth, which, at 3.8 percent for
1997, was better than the economic growth in both Europe and Japan. Europe's
1997 growth rate remained fairly steady at 2 to 3 percent. Japan experienced a
growth rate last year of 1 percent. U.S. real interest rates have also been more
attractive than those of most other countries, enticing foreign investors to buy
U.S. Treasuries.
We anticipate the positive economic environment to continue into the second
quarter of 1998. The budget surplus should hold for at least the near term.
President Clinton's initiatives for increased spending and more tax credits
haven't come to fruition. In fact, proponents of spending control have continued
to squelch spending programs on Capitol Hill. All the while, fiscal policy has
remained steady.
With solid economic growth, lower interest rates, low inflation and a
record-setting stock market, it is no wonder that investor expectations are
high. But, are investors expecting too much?
It is important to recognize that although from a macroeconomic perspective
the economy is strong, there are some microeconomic challenges that could
threaten in the months to come. These include health care reform and shifts in
the political landscape at home and continuing conflicts or new developments
abroad. For example, the European Monetary Union (EMU) appears to be proceeding
as we would expect. But within six months to a year after the EMU is
established, tensions may indeed mount as countries try to adapt to the new
structure. Each of these issues could affect our strong, yet reactive
marketplace. Be sure to stay tuned.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
/s/ JOHN E. SILVIA
JOHN E. SILVIA
March 12, 1998
4
<PAGE> 5
PERFORMANCE UPDATE
[KNAPP PHOTO]
WILLIAM KNAPP JOINED SCUDDER KEMPER INVESTMENTS, INC. IN 1992 AS A QUANTITATIVE
ANALYST. KNAPP IS ALSO PORTFOLIO MANAGER OF KEMPER HORIZON FUND. HE RECEIVED HIS
B.S. AND GRADUATED MAGNA CUM LAUDE AT DRAKE UNIVERSITY AND HAS HIS M.S. AT THE
UNIVERSITY OF WISCONSIN-MADISON. HE ALSO EARNED HIS PH.D. AT THE UNIVERSITY OF
WISCONSIN-MADISON WITH AN EMPHASIS IN INDUSTRIAL ORGANIZATION AND FINANCE.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
IN AN ENVIRONMENT NOTABLE FOR EXTREME VOLATILITY, EACH OF THE HORIZON
PORTFOLIOS POSTED POSITIVE RETURNS DURING THE FIRST SIX MONTHS OF THE FISCAL
YEAR.
Q BILL, WHAT'S BEEN THE MOST STRIKING CHARACTERISTIC OF THE INVESTMENT
MARKETS OVER THE LAST SIX MONTHS?
A Without a doubt, it was the markets' volatility. The final quarter of 1997
saw global stock markets gyrate widely, including a 6.87 percent decline for the
S&P 500 Index on October 27. For the most part, this volatility was prompted by
the free-fall of currencies in nearly all Southeast Asian countries. The
troubles in Asian economies cast doubt on whether the strong earnings of
American companies would continue at the strong pace that had underpinned the
bull market of the last couple of years. As the currencies of Thailand,
Singapore, Malaysia and other countries came under fire, the U.S. stock market
felt the impact. However, during the ensuing months, investors had a chance to
digest the news. As a result of the bailout plans proposed by the International
Monetary Fund, and the fact that many American companies posted solid earnings,
concerns over the effects of the Asian crisis began to fade. In fact, as January
1998 drew to a close, the U.S. stock market was again chugging ahead toward new
record highs.
Q HOW DID THE HORIZON PORTFOLIOS PERFORM IN THE MIDST OF THIS TURMOIL?
A I'm pleased to report that the portfolios performed just as they were
designed to. As you can see on the chart below, each portfolio declined less
than the market on October 27, the day on which stocks suffered their biggest
decline.
The chart reflects historical information on a specific day and is not
representative of future results on other days during the period. Due to the
relatively short life of Kemper Horizon Fund, the table does not reflect results
over a full market cycle or the relative potential for appreciation of the fund
versus the market. Typically, lower risk implies lower return potential.
The portfolios' bond positions were primarily responsible for the calming
effect, since international stocks tended to be down as much, if not more, than
the U.S. stock market. Bond performance was helped by a flight to stable assets
during the Asian turbulence.
The relative outperformance of bonds also accounts for the somewhat
"backward" returns of the portfolios over the first six months of the fiscal
year. The Horizon 5
KEMPER HORIZON FUND SHAREHOLDERS EXPERIENCED LESS VOLATILITY
- --------------------------------------------------------------------------------
PERCENT DECLINE ON OCTOBER 27 FOR THE S&P 500 AND KEMPER HORIZON FUND
Percentage
less than
Returns S&P 500
- --------------------------------------------------------------------------------
S&P 500 Stock Index -6.87%
Horizon 20+ -4.51% 34%
Horizon 10+ -3.71% 46%
Horizon 5 -2.00% 29%
- --------------------------------------------------------------------------------
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report, as stated on the cover. The
manager's views are subject to change at any time; based on market and other
conditions.
5
<PAGE> 6
PERFORMANCE UPDATE
Portfolio Class A actually outperformed the others with a 1.98 percent gain for
the six month period since it had the least exposure to stocks. The Horizon 10+
Class A gained 1.72 percent, and the Horizon 20+ Class A trailed both with a
1.03 percent return. Normally, the Horizon 20+ Portfolio, with its greater stock
allocation, would tend to be the best performer.
Overall, the last six months were a testament to the wisdom of maintaining a
broadly allocated portfolio.
Q HOW DID THE VARIOUS MARKETS IN WHICH THE FUND INVESTS PERFORM OVER THE
LAST SIX MONTHS?
A The chart below tells the tale. Finally, we've seen the market's rally
begin to broaden away from the heavy large cap growth stock bias it's
displayed during the last 18 months or so. Small cap stocks started to show
signs of life. The effect of the Asian problems can be seen plainly in the EAFE
Index's negative return and the relatively strong performance of U.S. bonds. Q
Q HOW SUCCESSFUL WERE YOU IN EITHER CAPITALIZING ON OR LESSENING THE EFFECT
OF THE MARKETS' VOLATILITY?
A Overall, we were successful in positioning the portfolios to come through
the volatility in good shape. We did a great job anticipating problems in Asia
and were therefore underweighted in the region. The portfolio's international
stocks were still a drag on performance, but not nearly to the extent they
would have been if the portfolio had been more heavily invested in the trouble
spots.
In addition, our bias toward growth stocks rather than value stocks helped us,
as growth stocks tended to be the better performers overall. In fact, we changed
our growth/value mix from 60/40 to 65/35, and that move proved beneficial.
One move that didn't prove beneficial at the time was an increase in the
fund's weighting in technology stocks. These stocks were hit extremely hard by
the Asia fallout because many of these firms do the bulk of their manufacturing
in Asia. We had a fairly neutral technology weighting at the beginning of the
fiscal year, and we boosted that weighting in November because we thought the
stocks were extremely inexpensive and that the concerns over Asia were overdone.
After all, while many of the technology components are assembled overseas, most
of the demand is from America and Europe, economies that were still going
strong. Unfortunately, tech stocks continued to decline through the end of the
year, and we felt the effect of that. But in January, our convictions were
vindicated as tech stocks led the rally back toward new stock market highs.
Again, our long-term focus helped us recapture much of the previous losses.
Q WHERE DO YOU BELIEVE THE MARKETS ARE HEADED IN 1998?
A We think it will be another positive year for stocks. Certainly there are
reasons to be cautious. As of this writing, tensions with Iraq continue to be
LARGE CAPITALIZATION STOCKS OUTPERFORMED OTHER ASSET CLASSES
RETURNS OF ASSET CLASSES IN WHICH KEMPER HORIZON FUND INVESTS FOR THE SIX-MONTH
PERIOD ENDED JANUARY 31, 1998
[BAR GRAPH]
<TABLE>
<S> <C>
Large company stocks (1) ............. 3.56%
Small company stocks (2) ............. 6.10%
International stocks (3) ............. -5.69%
Corporate/governmental
bonds (4) .......................... 5.12%
</TABLE>
Source: Lipper Analytical Services, Inc. Data does not reflect performance of
the funds' allocation to the asset classes.
(1) The Standard & Poor's 500 Stock Index is an unmanaged index generally
representative of the U.S. stock market.
(2) The Russell 2000 Index is a capitalization weighted price only index which
is comprised of 2000 of the smallest stocks (on the basis of capitalization) in
the Russell 3000 Index.
(3) The EAFE Index (Morgan Stanley Capital International Europe, Australasia,
Far East Index) is an unmanaged index generally accepted as a benchmark for
major overseas markets.
(4) The Lehman Brothers Government/Corporate Bond Index is an unmanaged index
comprised of intermediate and long-term government and investment grade
corporate debt securities.
6
<PAGE> 7
PERFORMANCE UPDATE
problematic, and the extent of the slowdown in Asia remains unclear. But the
most important factors continue to be very positive. Economies in America and
Europe seem poised to maintain solid, steady growth. The direction of interest
rates is biased downward, particularly if problems in Asia keep economic growth
from snowballing. And finally, inflation remains a non-issue. All in all, it's
an excellent environment for financial assets, particularly growth stocks, which
don't need powerful economic growth to sustain earnings.
For our part, we intend to further emphasize small company stocks, since they
are still inexpensive compared to their large cap cousins, and we will likely
increase our international exposure, since the declines of last quarter have
created some compelling values.
Overall, we believe the portfolios' broad asset allocation should help
insulate them from extreme volatility, while enabling them to benefit from
exposure to the areas of the market that are performing the best.
7
<PAGE> 8
STATISTICS FOR HORIZON 20+
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
HORIZON 20+ ON 1/31/98 ON 7/31/97
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 83% 79%
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 17 20
- ---------------------------------------------------------------------------
CASH AND EQUIVALENTS -- 1
- ---------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 1/31/98 ON 7/31/97
</TABLE>
- --------------------------------------------------------------------------------
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 7.9 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 2.1%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
- -------------------------------------------------------------------------------------------------
GENERAL ELECTRIC Operates in major businesses including power generators, 1.6%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- -------------------------------------------------------------------------------------------------
UST Manufactures and sells moist snuff, wine and other products. 1.5%
- -------------------------------------------------------------------------------------------------
INTEL Engaged in the design, development, manufacture and sale of 1.4%
advanced microcomputer components, such as integrated
circuits and related products.
- -------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 1.3%
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.
8
<PAGE> 9
STATISTICS FOR HORIZON 10+
PORTFOLIO COMPOSITION*
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
HORIZON 10+ ON 1/31/98 ON 7/31/97
<S> <C> <C>
COMMON STOCKS 58% 60%
- -------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 42 39
- -------------------------------------------------------------------------
CASH AND EQUIVALENTS -- 1
- -------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 1/31/98 ON 7/31/97
</TABLE>
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 5.7 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 1.5%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
- -------------------------------------------------------------------------------------------------
GENERAL ELECTRIC Operates in major businesses including power generators, 1.3%
appliances, lighting, plastics, medical systems, aircraft
engines, financial services and broadcasting.
- -------------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------------
UST Manufactures and sells moist snuff, wine and other products. 1.0%
- -------------------------------------------------------------------------------------------------
CISCO SYSTEMS The largest, most comprehensive supplier of routing software 0.8%
and related systems that direct the flow of data between
local area networks, this company is a play on the explosive
growth of the Internet.
- -------------------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
9
<PAGE> 10
STATISTICS FOR HORIZON 5
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
HORIZON 5 ON 1/31/98 ON 7/31/97
<S> <C> <C> <C>
COMMON STOCKS 38% 40%
- -------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 60 60
- -------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 --
- -------------------------------------------------------------------------
100% 100%
[PIE CHART] [PIE CHART]
ON 1/31/98 ON 7/31/97
</TABLE>
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 3.4 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
HOLDINGS PERCENT
<S> <C> <C>
PHILIP MORRIS Largest cigarette maker in the U.S. Through its Miller 0.9%
Brewing subsidiary, it is also the country's second largest
brewer. This company is also a major branded food producer
through its Kraft Foods subsidiaries.
- -------------------------------------------------------------------------------------------------
UST Manufactures and sells moist snuff, wine and other products. 0.7%
- -------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE Often referred to as "Fannie Mae," this is a private 0.6%
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.
- -------------------------------------------------------------------------------------------------
INTEL Engaged in the design, development, manufacture and sale of 0.6%
advanced microcomputer components, such as integrated
circuits and related products.
- -------------------------------------------------------------------------------------------------
CISCO SYSTEMS The largest, most comprehensive supplier of routing software 0.6%
and related systems that direct the flow of data between
local area networks, this company is a play on the explosive
growth of the Internet.
- -------------------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
10
<PAGE> 11
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 11, 1997, special shareholders' meeting was held and adjourned as
necessary. Kemper Horizon Fund shareholders were asked to vote on six separate
issues: election of the nine members to the Board of Trustees, ratification of
Ernst & Young LLP as independent auditors, approval of new investment management
agreement with Scudder Kemper Investments, Inc., approval of new sub-advisory
agreement with Zurich Investment Management Limited, approval of changes in
policies to permit master/feeder fund structure and approval of new rule 12B-1
distribution plan with Zurich Kemper Distributors, Inc. for Class B shares and
Class C shares. The following are the results for each issue:
1) Election of Trustees
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
James E. Atkins 7,357,387 83,064
Arthur R. Gottschalk 7,359,825 80,625
Frederick T. Kelsey 7,367,496 72,954
Daniel Pierce 7,361,712 78,739
Fred B. Renwick 7,367,496 72,954
John B. Tingleff 7,367,496 72,954
Edmond D. Villani 7,360,552 79,899
John B. Weithers 7,367,496 72,954
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
7,243,778 66,597 130,077
</TABLE>
3) Approval of new investment management agreement with Scudder Kemper
Investments, Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Horizon 20+ 2,732,295 34,727 56,906
Horizon 10+ 2,764,240 23,323 39,664
Horizon 5 1,407,932 22,562 53,921
</TABLE>
4) Approval of new sub-advisory agreement with Zurich Kemper Value Advisors,
Inc.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Horizon 20+ 2,711,452 43,574 68,901
Horizon 10+ 2,761,525 11,853 53,849
Horizon 5 1,414,146 9,650 60,620
</TABLE>
5) Approval of changes in policies to permit master/feeder fund structure
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
Horizon 20+ 2,671,262 112,409 124,920
Horizon 10+ 2,758,868 99,899 112,211
Horizon 5 1,524,789 34,273 91,097
</TABLE>
6) Approval of new rule 12B-1 distribution plan with Zurich Kemper Distributors,
Inc.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Horizon 20+
Class B 1,381,470 19,629 43,359 3,456
Class C 116,923 3,295 3,673 2,108
Horizon 10+
Class B 1,264,108 8,890 37,189 20,401
Class C 287,734 16 2,722 19,735
Horizon 5
Class B 707,837 2,789 39,021 18,803
Class C 188,530 0 5,821 0
</TABLE>
11
<PAGE> 12
PORTFOLIOS OF INVESTMENTS
KEMPER HORIZON FUND
HORIZON 20+, 10+ AND 5
PORTFOLIOS OF INVESTMENTS AT JANUARY 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND COUPON PRINCIPAL
CORPORATE OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 8.875% 1998 $ -- $ --
SECURITIES--14.8%, 9.125 1999 100 104
39.0% AND 53.5% 8.875 1999 500 517
8.00 1999 1,280 1,329
7.75 1999 -- --
7.50 1999 540 559
8.875 2000 -- --
8.75 2000 -- --
8.50 2000 2,045 2,176
7.75 2000 -- --
6.75 2000 445 458
6.625 2001 2,865 2,975
6.25 2001 125 128
6.00 2001 2,900 3,123
7.875 2004 436 494
-----------------------------------------------------------------------------
11,863
- ------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED FHLMC 6.50 2014 625 991
SECURITIES--2.0%,
4.3% AND 6.1%
GNMA 6.50 2015 975 634
-----------------------------------------------------------------------------
1,625
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS--.1%, Marriott International 6.75 2003 110 113
.3% AND .4%
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND
CORPORATE OBLIGATIONS--16.9%, 43.6% AND 60.0%
(Cost: $13,495, $33,730 and $26,292) 13,601
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--4.0%, AK Steel Holding Corp. 1,600 29
3.1% AND 1.9% AMCOL International 3,300 47
(a)Buckeye Technologies Inc. 500 20
Carpenter Technology Corp. 1,600 70
Champion International Corp. 2,400 123
Crown Cork & Seal Co. 3,000 148
Dow Chemical Co. 4,100 369
Eastman Chemical Co. 3,200 191
Georgia-Pacific Corp. 1,500 83
(a)Global Industrial Technologies, Inc. 2,600 43
Louisana-Pacific Corp. 6,600 132
(a)Lydall, Inc. 1,900 38
Mississippi Chemical Corp. 300 5
Myers Industries 2,510 43
Nucor Corp. 3,000 143
Praxair, Inc. 3,000 124
Rentokil Initial, PLC 90,204 423
(a)Shaw Group 700 15
Sonoco Products Co. 10,000 355
Technip, S.A. 2,627 273
Timber Co. 8,500 198
Toray Industries 36,000 177
Union Camp Corp. 3,500 200
--------------------------------------------------------------------------------
3,249
</TABLE>
12
<PAGE> 13
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$ -- $ -- $ 770 $ 790
2,450 2,562 1,270 1,328
-- -- -- --
3,050 3,167 1,760 1,828
1,030 1,072 300 312
-- -- 440 455
4,300 4,621 5,607 6,026
500 540 700 756
3,220 3,425 3,600 3,858
100 105 -- --
-- -- 250 257
4,767 4,949 3,470 3,603
-- -- -- --
7,720 8,315 1,890 2,036
1,474 1,669 2,035 2,304
- --------------------------------------------------------------------------------
30,425 23,553
- --------------------------------------------------------------------------------
1,234 1,251 663 672
2,025 2,058 2,000 2,033
- --------------------------------------------------------------------------------
3,309 2,705
- --------------------------------------------------------------------------------
230 237 160 165
- --------------------------------------------------------------------------------
33,971 26,423
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1,400 25 600 11
2,550 36 900 13
400 16 200 8
1,200 52 400 17
2,200 113 600 31
2,500 124 1,200 59
2,800 252 800 72
3,000 179 900 54
1,000 55 -- --
1,900 31 700 11
5,000 100 2,300 46
1,500 30 600 12
200 4 100 2
1,950 34 880 15
2,000 95 1,200 57
2,500 104 1,000 41
50,098 235 19,910 93
500 11 300 7
9,500 337 3,300 117
1,567 163 469 49
6,000 140 2,000 47
19,000 93 8,000 39
3,100 177 900 51
- --------------------------------------------------------------------------------
2,406 852
</TABLE>
13
<PAGE> 14
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL GOODS--5.9%, Applied Industrial Technologies 5,000 $ 133
4.6% AND 2.4% Ball Corp. 1,400 46
Blount International, "A" 1,400 35
Briggs & Stratton Corp. 700 31
Casella Waste System, Inc. 7,600 188
Elcor Corp. 1,650 41
Emerson Electric Co. 2,500 151
General Electric Co. 16,800 1,302
Intermet Corp. 3,900 65
(a)Littelfuse, Inc. 8,600 232
Mannesmann, A.G. 797 454
(a)Mueller Industries, Inc. 400 22
Murata Manufacturing 5,000 145
Noble International, Ltd. 1,400 10
Pacific Scientific Co. 2,700 68
Quanex Corp. 1,600 47
Raytheon Co. 4,500 235
Simpson Industries 2,000 24
Sony Corp. 3,800 351
Stewart & Stevenson Services 2,300 56
Trinity Industries 1,000 45
(a)USA Waste Services 7,310 269
(a)U.S. Filter Corp. 12,900 419
Watts Industries, Inc. 1,800 50
(a)Wyman-Gordon Co. 700 12
Xerox Corp. 3,500 281
----------------------------------------------------------------------------------
4,712
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER (a)American Coin Merchandising 12,500 198
CYCLICALS--11.1%, American Greetings Corp. 13,700 593
6.8% AND 5.0% (a)AutoZone 8,000 219
(a)BJ's Wholesale Club 1,000 30
(a)Bright Horizons Children's Center, Inc. 11,200 224
Brown Group, Inc. 2,200 32
Bush Industries 700 18
(a)CapStar Hotel Co. 5,400 181
Career Education Corp. 2,800 56
(a)Carmike Cinemas 500 15
Carnival Corp. 8,000 447
Carrefour, S. A. 486 263
Circle K Japan Co., Ltd. 4,400 217
(a)Consolidated Graphics, Inc. 6,700 273
(a)Consolidated Stores Corp. 4,390 181
Dillard Department Stores 8,000 281
(a)Education Management Corp. 5,800 187
Femsa "B" Fomento Economico Mexicano, S.A 59,200 370
Finish Line 2,000 25
Four Seasons Hotels, Inc. 8,800 259
(a)Friedman's, Inc. 2,600 37
Haggar Apparel Co. 3,000 41
(a)Hearst-Argyle Television, Inc. 7,600 207
Heilig-Meyers 2,800 36
Hertz Corp. 5,700 228
(a)Hollywood Entertainment Corp. 3,000 29
Homebase Inc. 900 6
Hudson's Bay Co. 17,600 311
(a)MGM Grand 10,000 358
May Department Stores Co. 4,000 210
</TABLE>
14
<PAGE> 15
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
3,250 $ 86 1,100 $ 29
1,100 36 500 16
1,200 30 400 10
500 22 200 9
3,600 89 2,200 54
1,200 30 450 11
1,900 115 -- --
12,600 977 3,000 233
2,900 48 1,300 22
5,600 151 1,200 32
591 337 127 72
300 16 100 5
6,100 177 1,000 29
1,200 9 400 3
2,000 50 1,000 25
1,200 35 500 15
4,000 209 1,400 73
1,600 19 800 10
2,600 240 1,000 92
1,600 39 600 15
800 36 300 14
6,127 225 2,150 79
9,700 315 2,700 88
1,400 39 600 17
600 10 300 5
3,000 241 1,200 96
- ------------------------------------------------------------------------------------
3,581 1,054
- ------------------------------------------------------------------------------------
6,000 95 3,100 49
8,600 372 2,700 117
7,000 192 3,000 82
800 24 300 9
4,300 86 2,500 50
1,700 25 600 9
500 13 300 8
3,200 107 1,500 50
2,000 40 400 8
400 12 200 6
4,000 223 2,000 112
363 196 98 53
1,500 74 700 35
3,000 122 1,400 57
3,281 135 983 40
4,000 141 3,000 105
2,300 74 1,600 52
35,000 219 10,400 65
1,600 20 600 8
5,400 159 2,200 65
1,900 27 700 10
2,200 30 1,000 14
3,400 93 1,800 49
2,100 27 900 12
2,600 104 2,000 80
2,000 19 800 8
700 5 300 2
13,400 237 5,250 93
5,500 197 3,000 107
4,000 210 900 47
</TABLE>
15
<PAGE> 16
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Men's Wearhouse 4,800 $ 172
(a)Neiman-Marcus 4,700 159
NIKE 14,100 565
(a)Nine West Group 20,000 514
(a)Outdoor Systems, Inc. 6,863 165
(a)Preview Travel, Inc. 2,900 45
(a)SOS Staffing Services 5,300 94
(a)SportsLine USA, Inc. 5,800 123
Springs Industries, Inc. 800 42
(a)Tommy Hilfiger Corp. 11,000 479
(a)Toys R Us 8,000 214
Trammell Crow Co. 7,300 194
V.F. Corp. 1,800 77
(a)Valassis Communications 700 24
Walt Disney Co. 4,500 480
---------------------------------------------------------------------------------
8,879
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.6%, BBA Group, PLC 34,000 199
1.1% AND .8% Breed Technologies, Inc. 800 14
Fleetwood Enterprises 1,100 46
Ford Motor Co. 7,500 382
Harman International Industries 800 31
Honda Motor Co., Ltd. 3,100 113
Magna International, Inc., "A" 2,800 164
MascoTech, Inc. 1,300 25
Superior Industries International 7,000 185
U.S. Industries 5,700 160
---------------------------------------------------------------------------------
1,319
- ---------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--9.7%, (a)American Italian Pasta Co. 3,200 85
6.5% AND 4.3% Applebee's International 1,200 20
Arbor Drugs 8,550 176
Avon Products 7,500 450
(a)Boston Chicken 2,500 15
Coca Cola Co. 4,000 259
(a)Corn Products International 5,700 182
DIMON, Inc. 1,600 33
(a)Emmis Broadcasting Corp. 4,400 211
First Brands Corp. 1,500 42
Flowserve Corp. 1,327 35
Independent Newspapers, PLC 45,536 284
Kimberly-Clark de Mexico, S.A. de C.V. 70,800 309
Koninklijke Ahold, N.V. 9,950 274
(a)Lone Star Steakhouse & Saloon 1,700 31
McDonald's Corp. 10,400 490
(a)MSC Industrial Direct 3,500 156
Newell Co. 12,200 501
Ocular Sciences, Inc. 2,800 75
PepsiCo 6,800 245
(a)Performance Food Group 1,800 38
Philip Morris Cos. 40,350 1,675
Procter & Gamble Co. 7,000 549
UST, Inc. 36,000 1,242
Unilever, N.V., ADR 3,600 205
(a)Whole Foods Market 3,800 191
---------------------------------------------------------------------------------
7,773
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
<S> <C> <C> <C>
3,600 $ 129 -- $ --
3,600 122 1,300 44
7,700 308 2,300 92
4,000 103 5,000 128
8,663 208 3,150 76
2,400 37 700 11
3,600 64 900 16
4,300 91 600 13
600 32 200 11
7,400 322 3,300 144
6,000 161 2,000 54
3,600 96 2,100 56
1,400 60 400 17
600 21 300 10
2,600 277 1,200 128
- ------------------------------------------------------------------------------------
5,309 2,202
- ------------------------------------------------------------------------------------
23,900 140 7,800 46
600 11 300 5
800 33 300 12
8,000 408 2,800 143
700 27 300 12
2,200 80 1,000 36
-- -- 750 44
1,000 19 400 8
4,000 106 1,000 26
2,600 73 1,600 45
- ------------------------------------------------------------------------------------
897 377
- ------------------------------------------------------------------------------------
2,300 61 800 21
900 15 500 8
6,750 139 2,100 43
-- -- 2,000 120
1,800 11 700 4
3,000 194 1,000 65
3,800 122 1,100 35
1,200 25 400 8
3,000 144 1,400 67
1,100 30 500 14
1,018 27 478 13
17,151 107 6,942 43
48,000 209 29,200 127
11,041 304 3,374 93
1,300 24 500 9
3,500 165 2,600 123
5,100 228 600 27
8,200 337 3,200 131
3,600 96 1,200 32
5,000 180 2,500 90
1,300 27 600 13
27,750 1,152 9,250 384
4,500 353 -- --
23,500 811 9,300 321
2,400 137 800 46
3,200 161 800 40
- ------------------------------------------------------------------------------------
5,059 1,877
</TABLE>
17
PORTFOLIOS OF Investments
<PAGE> 18
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY--4.5%, AMOCO Corp. 3,500 $ 285
3.6% AND 2.2% Atlantic Richfield Co. 4,200 312
Atmos Energy Corp. 1,500 43
Basin Exploration, Inc. 1,100 17
British Petroleum 27,446 371
Chevron Corp. 3,000 224
(a)Chieftain International, Inc. 2,000 40
(a)Dawson Geophysical Co. 9,800 154
Elf Aquitaine 3,941 445
Enron Corp. -- --
Exxon Corp. 5,000 297
Giant Industries 3,400 58
KCS Energy 2,900 49
Kerr-McGee Corp. 2,000 125
(a)Nuevo Energy Co. 1,100 40
Petro-Canada 16,715 296
Questar Corp. 3,000 125
Repsol, S.A. 5,300 227
Royal Dutch Petroleum 6,104 319
(a)Seitel, Inc. 2,000 28
(a)Tesoro Petroleum Corp. 3,200 51
Texaco 1,600 83
(a)Triton Energy Corp. 500 14
----------------------------------------------------------------------------------
3,603
- ----------------------------------------------------------------------------------------------------------------------
FINANCE--16.4%, ADVANTA Corp. -- --
12.1% AND 7.5% Ambassador Apartments, Inc. 1,100 23
American General Corp. 2,400 135
American International Group 1,800 199
AmerUS Life Holdings, Inc. 5,500 189
ARM Financial Corp. 5,400 134
Associated Banc Corp. 1,453 75
Astoria Financial Corp. 700 36
AXA-UAP, S.A. 3,400 283
BB&T Corp. 2,000 118
Banco Bilbao Vizcaya 11,916 417
Banco Popular Espanol 4,498 340
Banc One Corp. 2,500 140
BankAmerica Corp. 2,400 171
Bankers Trust New York Corp. 2,000 209
Bank of Ireland 20,661 321
Bank of New York Co. 1,700 92
Bear Stearns Cos. 6,000 251
Chartwell Re Corp. 700 24
Chase Manhattan Corp. 1,600 171
CITIC Pacific, Ltd. 54,000 155
Commercial Federal Corp. 7,300 237
Compass Bancshares 900 39
Crestar Financial Corp. 1,400 73
Cullen Frost Bankers 1,000 55
Del Webb Corp. 3,100 84
Executive Risk 3,100 221
Federal Home Loan Mortgage Corp. 11,200 498
Federal National Mortgage Association 16,500 1,019
Financial Federal Corp. 9,900 201
First Commerce Corp. 1,200 83
First Union Corp. 5,520 265
Fleet Financial Group, Inc. 1,500 107
</TABLE>
18
<PAGE> 19
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
2,700 $ 220 900 $ 73
3,200 238 1,000 74
1,200 34 400 11
800 12 300 5
22,019 298 7,083 96
3,000 224 1,000 75
1,500 30 800 16
7,300 115 3,000 47
2,656 300 751 85
-- -- 800 33
4,000 237 1,200 71
2,500 43 700 12
2,200 37 1,000 17
1,700 106 400 25
900 33 300 11
16,280 288 5,430 96
2,500 104 700 29
3,780 162 1,230 53
4,296 225 1,350 71
1,600 22 600 8
2,400 38 1,100 18
1,200 62 400 21
400 11 200 6
- ------------------------------------------------------------------------------------
2,839 953
- ------------------------------------------------------------------------------------
1,000 30 -- --
900 19 300 6
2,600 147 -- --
1,800 199 600 66
4,100 141 2,500 86
4,500 112 2,500 62
1,109 57 401 21
600 31 200 10
1,700 141 720 60
1,500 88 600 35
8,864 310 3,239 113
3,800 287 980 74
1,665 93 1,683 94
1,800 128 600 43
900 94 400 42
14,574 226 6,544 102
1,200 65 500 27
5,400 226 2,100 88
500 17 200 7
1,500 161 400 43
32,000 92 11,000 32
5,625 183 2,400 78
650 28 300 13
1,000 52 400 21
800 44 300 16
2,200 60 900 24
1,800 128 800 57
9,500 423 3,000 134
13,300 821 4,400 272
7,600 154 2,550 52
900 63 200 14
4,600 221 1,790 86
1,200 86 400 29
</TABLE>
19
<PAGE> 20
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fremont General Corp. 800 $ 41
General Re Corp. 3,000 624
H.F. Ahmanson & Co. 4,500 262
HSBC Holdings, PLC 9,778 217
Hartford Financial Services 4,000 360
Hibernia Corp. 17,500 334
ING Groep, N.V. 7,335 336
Imperial Credit Commercial Mortgage Investment -- --
Imperial Credit Industries 3,400 58
Jefferson-Pilot Corp. 2,900 237
Kansas City Southern Industries 3,900 117
KeyCorp 1,300 85
LaSalle Partners 3,400 113
Lawyers Title Insurance Corp. 1,100 39
Long Island Bancorp 1,600 72
MGIC Investment Corp. 7,800 527
Mercantile Bancorp 576 29
Merrill Lynch & Co. 5,600 354
Morgan Stanley, Dean Witter, Discover & Co. 8,000 467
NationsBank 13,475 808
Norwest Corp. 2,400 88
PNC Bank Corp. 3,000 155
PennCorp Financial Group 1,100 35
Protective Life Insurance Co. 3,100 195
Redwood Trust 1,300 27
Reliance Group Holdings, Inc. 2,200 31
Resource Bancshares Mortgage Group 2,520 41
Safeco Corp. 5,100 255
(a)Southern Pacific Funding Corp. 2,300 31
Texas Regional Bankshares 4,300 129
Travelers Group 3,000 149
United Companies Financial Corp. 1,500 19
Vedior, N.V. 8,515 190
W.R. Berkley Corp. 400 16
Washington Mutual, Inc. 3,000 193
Webster Financial Corp. 800 49
Wells Fargo & Co. 400 124
Winston Hotels 1,500 20
----------------------------------------------------------------------------------
13,192
- ------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--10.6%, Abbott Laboratories 6,745 478
7.5% AND 5.0% ALZA Corp. 23,000 819
American Home Products Corp. 5,500 525
(a)Apria Healthcare Group 1,600 21
Astra, A.B., ADR 29,800 540
Baxter International 2,500 139
Boston Scientific Corp. 4,000 203
Bristol-Myers Squibb Co. 3,500 349
(a)British Biotech, PLC 39,870 89
C.R. Bard 5,000 155
(a)CONMED Corp. 2,200 48
(a)Dura Pharmaceuticals 4,100 163
First Health Group Corp. 7,700 367
(a)Genesis Health Ventures 800 22
Glaxo Wellcome, PLC
ADR 4,700 253
common 15,635 420
(a)Hanger Orthopedic Group 12,500 173
</TABLE>
20
<PAGE> 21
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
700 $ 36 200 $ 10
1,000 208 300 62
3,500 204 1,000 58
11,131 247 2,642 59
-- -- -- --
11,500 219 7,500 143
6,419 294 3,156 145
1,000 15 400 6
1,600 29 500 9
2,500 204 700 57
3,900 117 -- --
1,700 111 400 26
2,800 93 1,400 47
800 28 300 11
1,200 54 500 22
6,000 406 2,000 135
672 34 151 8
3,100 196 800 50
4,200 245 1,300 76
7,963 478 2,713 163
2,600 95 600 22
2,100 108 900 46
800 25 300 9
2,100 132 900 57
1,000 21 500 10
1,700 24 700 10
1,890 31 735 12
5,600 280 1,000 50
1,800 25 800 11
3,900 117 800 24
-- -- -- --
1,100 14 500 6
7,702 172 2,909 65
300 12 100 4
1,300 84 700 45
600 37 200 12
400 124 100 31
1,100 15 500 7
- ------------------------------------------------------------------------------------
9,461 3,315
- ------------------------------------------------------------------------------------
4,800 340 1,900 135
13,000 463 6,000 214
4,100 391 1,500 143
1,200 15 400 5
19,166 347 5,720 104
1,500 83 500 28
-- -- -- --
3,000 299 900 90
1,700 37 600 13
34,762 78 8,700 19
8,000 248 2,700 84
3,000 119 900 36
5,600 267 2,500 119
600 16 300 8
3,600 194 1,400 75
12,001 322 4,182 112
9,100 126 5,800 80
</TABLE>
21
<PAGE> 22
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a)Healthworld Corp. 19,700 $ 266
Integrated Health Services 600 17
Johnson & Johnson 4,000 268
Mallinckrodt Group 9,700 344
Merck & Co. 4,900 575
Novartis 222 381
(a)PAREXEL International Corp. 4,900 169
RehabCare Group 7,200 172
Roche Holding, A.G. 32 333
(a)Safeskin Corp. 4,700 266
(a)Sofamor-Danek Group 4,500 282
United Healthcare Corp. 7,600 390
Zeneca Group, PLC 7,700 308
------------------------------------------------------------------------------------
8,535
- ------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--16.0%, AMP, Inc. 8,200 328
10.2% AND 7.1% (a)Adaptec, Inc. 5,000 112
(a)Advanced Fibre Communications 3,000 89
(a)Altron, Inc. 700 10
(a)Analog Devices 8,300 245
(a)Applied Materials, Inc. 15,100 495
(a)Atmel Corp. 29,000 469
Belden, Inc. 8,400 320
(a)Benchmark Electronics 1,400 36
(a)Burr Brown Corp. 1,000 35
Canon, Inc. 4,000 97
(a)Cisco Systems 15,150 955
Compaq Computer Corp. 24,600 740
(a)Computer Sciences Corp. 6,900 586
Diebold 7,900 393
(a)Electroglas 500 7
(a)EXAR Corp. 800 15
Fuji Photo Film Co., Ltd. 7,000 294
(a)General Cable Corp. 1,000 39
Getronics 6,800 230
(a)HADCO Corp. 200 8
HMT Technology Corp. 2,200 24
Hewlett-Packard Co. 2,000 120
(a)Hutchinson Technology 1,000 25
Intel Corp. 14,100 1,142
(a)Jones Intercable, Inc. 3,900 62
(a)KLA-Tenor Corp. -- --
(a)Keane, Inc. 4,800 195
(a)Learning Co. 2,700 42
Linear Technology Corp. 5,800 384
(a)Microchip Technology 14,600 337
(a)Parametric Technology Corp. 8,100 411
Pittway Corp. 7,100 458
(a)Quantum Corp. 25,400 619
(a)Read-Rite Corp. 1,400 21
Reynolds & Reynolds Co. 29,500 586
Scientific Atlanta 3,300 51
(a)Sun Microsystems 20,400 978
(a)3Com Corp. 21,500 711
(a)Tech-Sym Corp. 1,800 47
Telecom Italia Spa 40,230 279
(a)Teradyne, Inc. 16,500 652
World Access, Inc. 5,100 129
----------------------------------------------------------------------------------
12,776
</TABLE>
22
<PAGE> 23
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
8,800 $ 119 4,700 $ 63
500 14 300 9
2,350 157 750 50
5,700 202 1,100 39
4,000 469 1,500 176
150 257 66 113
3,100 107 1,400 48
4,800 115 1,200 29
23 239 8 83
3,100 175 1,000 57
2,700 169 1,600 100
6,700 343 2,200 113
3,190 128 1,870 75
- ------------------------------------------------------------------------------------
5,839 2,220
- ------------------------------------------------------------------------------------
7,000 280 2,100 84
3,000 67 -- --
2,300 68 1,300 39
500 7 200 3
4,300 127 3,300 97
8,500 279 3,600 118
17,000 275 6,500 105
6,100 233 2,900 111
1,200 31 400 10
800 28 300 11
6,000 146 1,000 24
9,975 629 3,900 246
14,700 442 5,800 174
4,300 365 2,000 170
5,200 259 2,500 124
400 6 200 3
700 13 300 6
3,400 143 2,000 84
800 31 300 12
4,800 163 1,575 53
100 4 100 4
1,700 18 800 9
2,000 120 600 36
700 18 300 8
7,300 591 3,200 259
2,900 46 1,200 19
1,100 41 -- --
1,600 65 -- --
2,100 33 800 12
2,800 186 1,700 113
8,000 185 4,000 92
5,200 264 1,700 86
4,000 258 1,900 123
17,200 419 5,400 132
1,100 16 500 7
15,000 298 6,300 125
2,500 39 1,100 17
10,000 479 3,700 177
15,900 526 5,000 165
1,300 34 500 13
23,100 160 10,980 76
11,000 435 3,500 138
3,500 89 1,300 33
- ------------------------------------------------------------------------------------
7,916 3,118
</TABLE>
23
<PAGE> 24
PORTFOLIOS OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
HORIZON 20+
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION--.2%, Airborne Freight Corp. 1,000 $ 71
.2% AND .1%
(a)America West Airlines 2,200 48
Borg-Warner Automotive, Inc. 800 43
------------------------------------------------------------------------------------
162
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.5%, Florida Progress Corp. 3,500 134
2.5% AND 1.4% GTE Corp. 5,500 300
Telecom Italia Mobile 85,579 408
Telefonica de Espana, S.A. 17,385 569
Veba, A.G. 6,355 439
(a)WorldCom, Inc. 26,500 949
------------------------------------------------------------------------------------
2,799
------------------------------------------------------------------------------------
TOTAL COMMON STOCKS--83.5%, 58.2% AND 37.7%
(Cost: $58,056, $38,332 and $14,310) 66,999
------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
MONEY MARKET Yield 4.87% and 5.48%
INSTRUMENTS--.1% AND .6% Due--February and March 1998
(Cost: $50 and $498) $50 50
------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.5%,
102.4% AND 97.7%
(Cost: $71,601, $72,560 and $40,602) 80,650
------------------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS
LIABILITIES--(.5)%, (2.4)% AND 2.3% (422)
------------------------------------------------------------------------------------
NET ASSETS--100% $80,228
------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
Based on the cost of investments for federal income tax purposes at January 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 $ 71,601 $ 72,560 $ 40,602
- -----------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 11,015 8,563 3,034
- -----------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 1,966 1,304 574
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation 9,049 7,259 2,460
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
24
<PAGE> 25
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
HORIZON 10+ HORIZON 5
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
800 $ 57 300 $ 21
1,700 37 600 13
600 32 200 11
- ------------------------------------------------------------------------------------
126 45
- ------------------------------------------------------------------------------------
3,000 115 1,000 38
5,000 273 2,000 109
63,229 302 18,282 87
10,700 350 3,090 101
4,753 329 840 58
15,300 548 6,500 233
- ------------------------------------------------------------------------------------
1,917 626
- ------------------------------------------------------------------------------------
45,350 16,639
- ------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
$500 498 -- --
79,819 43,062
- ------------------------------------------------------------------------------------
(1,860) 994
- ------------------------------------------------------------------------------------
$77,959 $44,056
- ------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
- -------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments, at value
(Cost: $71,601, $72,560 and $40,602) $ 80,650 79,819 43,062
- -------------------------------------------------------------------------------------------------------
Cash -- 652 785
- -------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 4,350 122 76
- -------------------------------------------------------------------------------------------------------
Fund shares sold 49 474 28
- -------------------------------------------------------------------------------------------------------
Dividends and interest 365 754 555
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 85,414 81,821 44,506
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -------------------------------------------------------------------------------------------------------
Cash overdraft 3,323 -- --
- -------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 1,693 3,703 343
- -------------------------------------------------------------------------------------------------------
Fund shares redeemed -- -- 14
- -------------------------------------------------------------------------------------------------------
Management fee 40 36 20
- -------------------------------------------------------------------------------------------------------
Distribution services fee 26 25 15
- -------------------------------------------------------------------------------------------------------
Administrative services fee 14 14 8
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 76 68 37
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 14 16 13
- -------------------------------------------------------------------------------------------------------
Total liabilities 5,186 3,862 450
- -------------------------------------------------------------------------------------------------------
NET ASSETS $80,228 77,959 44,056
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------
Paid-in capital $71,040 70,087 41,187
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (297) (160) (29)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 9,049 7,259 2,460
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 436 773 438
- -------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $80,228 77,959 44,056
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Net assets applicable to shares outstanding $35,752 37,128 18,573
- -------------------------------------------------------------------------------------------------------
Shares outstanding 2,863 3,185 1,718
- -------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 12.49 11.66 10.81
- -------------------------------------------------------------------------------------------------------
Maximum offering price per share
(net asset value, plus 6.10% of
net asset value or 5.75% of offering price) $ 13.25 12.37 11.47
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $38,237 32,757 20,962
- -------------------------------------------------------------------------------------------------------
Shares outstanding 3,096 2,811 1,935
- -------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 12.35 11.65 10.83
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 5,324 7,662 4,386
- -------------------------------------------------------------------------------------------------------
Shares outstanding 431 657 405
- -------------------------------------------------------------------------------------------------------
Net asset value and redemption price
(subject to contingent deferred sales charge) per share
(net assets / shares outstanding) $ 12.37 11.67 10.83
- -------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net assets applicable to shares outstanding $ 915 412 135
- -------------------------------------------------------------------------------------------------------
Shares outstanding 73 35 13
- -------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
(net assets / shares outstanding) $ 12.53 11.64 10.82
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
26
<PAGE> 27
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends $ 339 263 88
- -------------------------------------------------------------------------------------------------------
Interest 541 1,035 792
- -------------------------------------------------------------------------------------------------------
Total investment income 880 1,298 880
- -------------------------------------------------------------------------------------------------------
Expenses:
Management fee 205 199 102
- -------------------------------------------------------------------------------------------------------
Distribution services fee 146 143 79
- -------------------------------------------------------------------------------------------------------
Administrative services fee 81 81 43
- -------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 328 194 83
- -------------------------------------------------------------------------------------------------------
Professional fees 18 21 9
- -------------------------------------------------------------------------------------------------------
Reports to shareholders 21 25 17
- -------------------------------------------------------------------------------------------------------
Trustees' fees and other 24 29 15
- -------------------------------------------------------------------------------------------------------
Total expenses 823 692 348
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 57 606 532
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on sales of investments 786 801 236
- -------------------------------------------------------------------------------------------------------
Net realized gain from futures transactions 32 35 36
- -------------------------------------------------------------------------------------------------------
Net realized gain 818 836 272
- -------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (157) (273) (25)
- -------------------------------------------------------------------------------------------------------
Net gain on investments 661 563 247
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 718 1,169 779
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 1998 (unaudited) and for the year ended
July 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
---------------- ---------------- ---------------
1998 1997 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income $ 57 254 606 758 532 651
- -----------------------------------------------------------------------------------------------------------
Net realized gain 818 1,937 836 1,574 272 664
- -----------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) (157) 9,767 (273) 7,921 (25) 2,641
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 718 11,958 1,169 10,253 779 3,956
- -----------------------------------------------------------------------------------------------------------
Net equalization credits 146 174 185 293 136 148
- -----------------------------------------------------------------------------------------------------------
Distribution from net investment income (123) (207) (624) (581) (541) (565)
- -----------------------------------------------------------------------------------------------------------
Distribution from net realized gain (2,945) -- (2,477) -- (920) --
- -----------------------------------------------------------------------------------------------------------
Total dividends to shareholders (3,068) (207) (3,101) (581) (1,461) (565)
- -----------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 19,759 32,497 16,306 34,523 13,902 16,330
- -----------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 17,555 44,422 14,559 44,488 13,356 19,869
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Beginning of period 62,673 18,251 63,400 18,912 30,700 10,831
- -----------------------------------------------------------------------------------------------------------
END OF PERIOD $80,228 62,673 77,959 63,400 44,056 30,700
- -----------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF PERIOD $ 436 356 773 606 438 311
- -----------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
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 Horizon 20+, Horizon 10+ and
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. Financial futures and
options thereon are valued at the settlement price
established each day by the board of trade or
exchange on which they are traded. Forward foreign
currency contracts are valued at the forward rates
prevailing on the day of valuation. Other
securities and assets are valued at fair value as
determined in good faith by the Board of Trustees.
CURRENCY TRANSLATION. The books and records of the
Portfolios are maintained in U.S. dollars. All
assets and liabilities initially expressed in
foreign currency values are converted into U.S.
dollar values at the mean between the bid and
offered quotations of such currencies against U.S.
dollars as last quoted by a recognized dealer. If
such quotations are not readily available, the
rates of exchange are determined in good faith by
the Board of Trustees. Income and expenses and
purchases and sales of investments are translated
into U.S. dollars at the rates of exchange
prevailing on the respective dates of such
transactions. The Portfolios include that portion
of the results of operations resulting from
28
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
changes in foreign exchange rates with net realized
and unrealized gain (loss) on investments.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, and interest income is recorded
on the accrual basis and includes discount
amortization on fixed income securities. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
EXPENSES. Expenses arising in connection with a
specific Portfolio are allocated to that Portfolio.
Other Fund expenses are allocated among the
Portfolios in proportion to their relative net
assets.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the earlier of 3:00 p.m. Chicago
time or the close of the Exchange. The net asset
value per share is determined separately for each
class by dividing the Portfolio's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. Each Portfolio has complied
with the special provisions of the Internal Revenue
Code available to investment companies for the six
months ended January 31, 1998.
DIVIDENDS TO SHAREHOLDERS. Each Portfolio intends
to pay dividends of net investment income as
follows: annually for the Horizon 20+, semiannually
for the Horizon 10+, and quarterly for the Horizon
5. Each Portfolio will pay any net realized capital
gains at least annually. Dividends are recorded on
ex-dividend date. Dividends are determined in
accordance with income tax principles which may
treat certain transactions differently from
generally accepted accounting principles.
EQUALIZATION ACCOUNTING. A portion of proceeds from
sales and cost of redemptions of Portfolio shares
is credited or charged to undistributed net
investment income so that income per share
available for distribution is not affected by sales
or redemptions of shares.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES INVESTMENT MANAGER COMBINATION. Effective December
31, 1997, Zurich Insurance Company, the parent of
Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc.
(Scudder), another major investment manager. As a
result of this transaction, the operations of ZKI
were combined with Scudder to form a new global
investment organization named Scudder Kemper
Investments, Inc. (Scudder Kemper). The transaction
resulted in the termination of the Fund's
investment management agreement with ZKI, however,
a new investment management agreement between the
Fund and Scudder Kemper was approved by the Fund's
Board of Trustees and by the Fund's shareholders.
The new management agreement, which was effective
December 31, 1997, is the same in all material
respects as the previous management agreement,
except that Scudder Kemper is the new investment
adviser to the Fund. In addition, the names of the
Fund's principal underwriter and
29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
shareholder service agent were changed to Kemper
Distributors, Inc. (KDI) and Kemper Service Company
(KSvC), respectively.
MANAGEMENT AGREEMENT. Under the Fund's management
agreement each Portfolio pays a management fee at
an annual rate of .58% of the first $250 million of
average daily net assets declining to .42% of
average daily net assets in excess of $12.5
billion. The Fund incurred management fees of
$506,000 for the six months ended January 31, 1998.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The Fund has an underwriting and
distribution services agreement with KDI.
Underwriting commissions paid in connection with
the distribution of each Portfolio's Class A shares
for the six months ended January 31, 1998 are as
follows:
<TABLE>
<CAPTION>
COMMISSIONS
COMMISSIONS ALLOWED BY
RETAINED BY KDI KDI TO FIRMS
--------------- -------------
<S> <C> <C>
Horizon 20+ $14,000 101,000
Horizon 10+ 14,000 100,000
Horizon 5 6,000 50,000
</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 six months ended
January 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>
Horizon 20+ $ 171,000 316,000
Horizon 10+ 161,000 232,000
Horizon 5 88,000 91,000
</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 six months ended January 31,
1998 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY ASF PAID BY
THE PORTFOLIOS TO KDI KDI TO FIRMS
---------------------- ------------
<S> <C> <C>
Horizon 20+ $ 81,000 85,000
Horizon 10+ 81,000 80,000
Horizon 5 43,000 42,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the Fund's custodian and
transfer agent, KSvC is the shareholder service
agent of
30
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
the Fund. Under the agreement, KSvC received
shareholder services fees of $515,000 for the six
months ended January 31, 1998.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Fund are also officers or directors of
Scudder Kemper. During the six months ended January
31, 1998, the Fund made no payments to its officers
and incurred trustees' fees of $12,000 to
independent trustees.
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS
For the six months ended January 31, 1998,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
----------- ----------- ---------
<S> <C> <C> <C>
Purchases $38,923 30,119 17,157
Proceeds from sales 21,272 14,368 5,242
</TABLE>
- --------------------------------------------------------------------------------
5 CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of the Portfolios (in thousands):
HORIZON 20+
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 912 $11,908 1,392 $15,323
------------------------------------------------------------------------------
Class B 749 9,326 1,837 19,895
------------------------------------------------------------------------------
Class C 141 1,753 301 3,266
------------------------------------------------------------------------------
Class I 79 143 38 411
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 120 1,456 12 123
------------------------------------------------------------------------------
Class B 110 1,324 6 58
------------------------------------------------------------------------------
Class C 14 171 1 6
------------------------------------------------------------------------------
Class I 3 41 1 13
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (190) (2,382) (248) (2,762)
------------------------------------------------------------------------------
Class B (251) (3,461) (194) (2,256)
------------------------------------------------------------------------------
Class C (32) (411) (76) (815)
------------------------------------------------------------------------------
Class I (76) (109) (70) (765)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 27 333 7 82
------------------------------------------------------------------------------
Class B (27) (333) (7) (82)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $19,759 $32,497
------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
HORIZON 10+
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 970 $11,172 1,736 $18,250
-----------------------------------------------------------------------------
Class B 610 7,139 1,820 19,131
-----------------------------------------------------------------------------
Class C 171 2,000 484 5,055
-----------------------------------------------------------------------------
Class I 28 78 46 490
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 125 1,428 31 337
-----------------------------------------------------------------------------
Class B 114 1,293 17 186
-----------------------------------------------------------------------------
Class C 24 276 3 39
-----------------------------------------------------------------------------
Class I 2 19 1 9
-----------------------------------------------------------------------------
SHARES REDEEMED
Class A (250) (2,901) (466) (5,040)
-----------------------------------------------------------------------------
Class B (327) (3,744) (255) (2,788)
-----------------------------------------------------------------------------
Class C (32) (381) (82) (882)
-----------------------------------------------------------------------------
Class I (28) (73) (25) (264)
-----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 52 683 14 150
-----------------------------------------------------------------------------
Class B (52) (683) (14) (150)
-----------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $16,306 $34,523
-----------------------------------------------------------------------------
</TABLE>
HORIZON 5
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1998 JULY 31, 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 988 $10,560 845 $ 8,504
-------------------------------------------------------------------------------
Class B 592 6,387 1,343 13,437
-------------------------------------------------------------------------------
Class C 126 1,346 286 2,897
-------------------------------------------------------------------------------
Class I 14 17 2 23
-------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 54 572 23 236
-------------------------------------------------------------------------------
Class B 64 683 26 265
-------------------------------------------------------------------------------
Class C 13 144 4 38
-------------------------------------------------------------------------------
Class I 1 6 1 4
-------------------------------------------------------------------------------
SHARES REDEEMED
Class A (440) (4,693) (274) (2,800)
-------------------------------------------------------------------------------
Class B (88) (949) (538) (5,514)
-------------------------------------------------------------------------------
Class C (15) (160) (73) (743)
-------------------------------------------------------------------------------
Class I (14) (11) (2) (17)
-------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 46 499 15 150
-------------------------------------------------------------------------------
Class B (46) (499) (14) (150)
-------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $13,902 $16,330
-------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6 FINANCIAL FUTURES
CONTRACTS The Portfolios have entered into exchange traded
financial futures contracts in order to take
advantage of anticipated market conditions and, as
such, bear the risk that arises from entering into
these contracts.
At the time a Portfolio enters into a futures
contract, it is required to make a margin deposit
with its custodian. Subsequently, gain or loss is
recognized and payments are made on a daily basis
between the Portfolios and the broker as the market
value of the futures contract fluctuates. At
January 31, 1998, the market value of assets
pledged by the Portfolios to cover margin
requirements for open futures positions were
$77,000 for Horizon 20+, $105,000 for Horizon 10+
and $108,000 for Horizon 5 for the following
financial futures contracts owned by the
Portfolios.
<TABLE>
<CAPTION>
CONTRACT EXPIRATION GAIN AT
TYPE AMOUNT POSITION MONTH 1/31/98
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HORIZON 20+:
S&P 500 Index $1,438,000 Long March '98 $44,000
----------------------------------------------------------------------------
HORIZON 10+:
S&P 500 Index $5,633,000 Long March '98 $46,000
----------------------------------------------------------------------------
HORIZON 5:
S&P 500 Index $ 944,000 Long March '98 $44,000
----------------------------------------------------------------------------
</TABLE>
33
<PAGE> 34
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
SIX MONTHS DECEMBER 29, SIX MONTHS DECEMBER 29,
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED 1995 TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
HORIZON 20+ 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.89 9.72 9.50 12.79 9.65 9.50
- ------------------------------------------------------------------------------- ---------------------------------------
Income from investment operations:
Net investment income (loss) .04 .12 .18 (.02) .03 .11
- ------------------------------------------------------------------------------- ---------------------------------------
Net realized and unrealized gain .08 3.15 .04 .06 3.15 .04
- ------------------------------------------------------------------------------- ---------------------------------------
Total from investment operations .12 3.27 .22 .04 3.18 .15
- ------------------------------------------------------------------------------- ---------------------------------------
Less dividends
Distribution from net investment
income .04 .10 -- -- .04 --
- ------------------------------------------------------------------------------- ---------------------------------------
Distribution from net realized gain .48 -- -- .48 -- --
- ------------------------------------------------------------------------------- ---------------------------------------
Total dividends .52 .10 -- .48 .04 --
- ------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of period $12.49 12.89 9.72 12.35 12.79 9.65
- ---------------------------------------------------------------------------- -------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.03% 33.90 2.32 .42 33.01 1.58
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------------
Expenses 1.77% 1.69 1.48 2.71 2.47 2.26
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income (loss) .72% 1.08 1.51 (.22) .30 .73
- ------------------------------------------------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS I
SIX MONTHS DECEMBER 29, SIX MONTHS APRIL 8,
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.80 9.67 9.50 12.96 9.73 10.03
- ------------------------------------------------------------------------------- ---------------------------------------
Income from investment operations:
Net investment income (loss) (.02) .04 .13 .08 .19 .07
- ------------------------------------------------------------------------------- ---------------------------------------
Net realized and unrealized gain
(loss) .07 3.13 .04 .09 3.17 (.37)
- ------------------------------------------------------------------------------- ---------------------------------------
Total from investment operations .05 3.17 .17 .17 3.36 (.30)
- ------------------------------------------------------------------------------- ---------------------------------------
Less dividends
Distribution from net investment
income -- .04 -- .12 .13 --
- ------------------------------------------------------------------------------- ---------------------------------------
Distribution from net realized gain .48 -- -- .48 -- --
- ------------------------------------------------------------------------------- ---------------------------------------
Total dividends .48 .04 -- .60 .13 --
- ------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of period $12.37 12.80 9.67 12.53 12.96 9.73
- ---------------------------------------------------------------------------- -------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .50% 32.80 1.79 1.46 34.84 (2.99)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------------
Expenses 2.82% 2.48 2.23 1.00 1.04 .73
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income (loss) (.33)% .29 .76 1.49 1.73 2.32
- ------------------------------------------------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS DECEMBER 29,
ENDED YEAR ENDED 1995 TO
JANUARY 31, JULY 31, JULY 31,
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $80,228 62,673 18,251
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 57% 130 122
- ----------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions $ .0504 .0491 .0417
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
34
<PAGE> 35
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
SIX MONTHS DECEMBER 29, SIX MONTHS DECEMBER 29,
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED 1995 TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
HORIZON 10+ 1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.01 9.60 9.50 12.00 9.60 9.50
- ------------------------------------------------------------------------------- ---------------------------------------
Income from investment operations:
Net investment income .13 .25 .20 .08 .16 .17
- ------------------------------------------------------------------------------- ---------------------------------------
Net realized and unrealized gain
(loss) .06 2.36 (.04) .06 2.35 (.04)
- ------------------------------------------------------------------------------- ---------------------------------------
Total from investment operations .19 2.61 .16 .14 2.51 .13
- ------------------------------------------------------------------------------- ---------------------------------------
Less dividends
Distribution from net investment
income .13 .20 .06 .08 .11 .03
- ------------------------------------------------------------------------------- ---------------------------------------
Distribution from net realized gain .41 -- -- .41 -- --
- ------------------------------------------------------------------------------- ---------------------------------------
Total dividends .54 .20 .06 .49 .11 .03
- ------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of period $11.66 12.01 9.60 11.65 12.00 9.60
- ---------------------------------------------------------------------------- -------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.72% 27.43 1.70 1.28 26.25 1.38
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------------------
Expenses 1.56% 1.51 1.48 2.42 2.36 2.26
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income 2.22% 2.36 2.40 1.36 1.51 1.62
- ------------------------------------------------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS I
SIX MONTHS DECEMBER 29, SIX MONTHS APRIL 8,
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.98 9.60 9.50 11.97 9.57 9.83
- ------------------------------------------------------------------------------- ---------------------------------------
Income from investment operations:
Net investment income .11 .14 .17 .18 .26 .09
- ------------------------------------------------------------------------------- ---------------------------------------
Net realized and unrealized gain
(loss) .06 2.34 (.04) .06 2.40 (.26)
- ------------------------------------------------------------------------------- ---------------------------------------
Total from investment operations .17 2.48 .13 .24 2.66 (.17)
- ------------------------------------------------------------------------------- ---------------------------------------
Less dividends
Distribution from net investment
income .07 .10 .03 .16 .26 .09
- ------------------------------------------------------------------------------- ---------------------------------------
Distribution from net realized gain .41 -- -- .41 -- --
- ------------------------------------------------------------------------------- ---------------------------------------
Total dividends .48 .10 .03 .57 .26 .09
- ------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of period $11.67 11.98 9.60 11.64 11.97 9.57
- ---------------------------------------------------------------------------- -------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.50% 25.97 1.39 2.13 28.09 (1.74)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------------------------------------------
Expenses 2.18% 2.61 2.23 1.30 1.06 .73
- ------------------------------------------------------------------------------- ---------------------------------------
Net investment income 1.60% 1.26 1.65 2.48 2.81 3.21
- ------------------------------------------------------------------------------- ---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 29, 1995
JANUARY 31, JULY 31, TO
1998 1997 JULY 31, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $77,959 63,400 18,912
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 38% 126 87
- ---------------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions $ .0505 .0494 .0413
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
SIX MONTHS DECEMBER 29, SIX MONTHS DECEMBER 29,
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED 1995 TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
HORIZON 5 1998 1997 1996 1998 1998 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.06 9.57 9.50 11.06 9.57 9.50
- ------------------------------------------------------------------------------------ -------------------------------------
Income from investment operations:
Net investment income .18 .34 .25 .16 .27 .21
- ------------------------------------------------------------------------------------ -------------------------------------
Net realized and unrealized gain (loss) .03 1.45 (.07) .03 1.44 (.07)
- ------------------------------------------------------------------------------------ -------------------------------------
Total from investment operations .21 1.79 .18 .19 1.71 .14
- ------------------------------------------------------------------------------------ -------------------------------------
Less dividends
Distribution from net investment income .19 .30 .11 .15 .22 .07
- ------------------------------------------------------------------------------------ -------------------------------------
Distribution from net realized gain .27 -- -- .27 -- --
- ------------------------------------------------------------------------------------ -------------------------------------
Total dividends .46 .30 .11 .42 .22 .07
- ------------------------------------------------------------------------------------ -------------------------------------
Net asset value, end of period $10.81 11.06 9.57 10.83 11.06 9.57
- ------------------------------------------------------------------------------- ----------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.98% 19.02 1.84 1.83 18.15 1.44
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 1.60% 1.51 1.48 2.17 2.15 2.26
- ------------------------------------------------------------------------------------ -------------------------------------
Net investment income 3.42% 3.30 3.20 2.85 2.66 2.42
- ------------------------------------------------------------------------------------ -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS I
SIX MONTHS DECEMBER 29, SIX MONTHS APRIL 8
ENDED YEAR ENDED 1995 TO ENDED YEAR ENDED TO
JANUARY 31, JULY 31, JULY 31, JANUARY 31, JULY 31, JULY 31,
1998 1997 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.07 9.57 9.50 11.06 9.58 9.69
- ------------------------------------------------------------------------------------ -------------------------------------
Income from investment operations:
Net investment income .15 .28 .21 .07 .32 .08
- ------------------------------------------------------------------------------------ -------------------------------------
Net realized and unrealized gain (loss) .03 1.43 (.07) .17 1.49 (.11)
- ------------------------------------------------------------------------------------ -------------------------------------
Total from investment operations .18 1.71 .14 .24 1.81 (.03)
- ------------------------------------------------------------------------------------ -------------------------------------
Less dividends
Distribution from net investment income .15 .21 .07 .21 .33 .08
- ------------------------------------------------------------------------------------ -------------------------------------
Distribution from net realized gain .27 -- -- .27 -- --
- ------------------------------------------------------------------------------------ -------------------------------------
Total dividends .42 .21 .07 .48 .33 .08
- ------------------------------------------------------------------------------------ -------------------------------------
Net asset value, end of period $10.83 11.07 9.57 10.82 11.06 9.58
- ------------------------------------------------------------------------------- ----------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.74% 18.13 1.45 2.23 19.27 (.31)
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 2.12% 2.16 2.23 1.23 1.20 .73
- ------------------------------------------------------------------------------------ -------------------------------------
Net investment income 2.90% 2.65 2.45 3.79 3.61 4.11
- ------------------------------------------------------------------------------------ -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 29, 1995
JANUARY 31, JULY 31, TO
1998 1997 JULY 31, 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets at end of period (in thousands) $44,056 30,700 10,831
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 28% 150 57
- ---------------------------------------------------------------------------------------------------------
Average commission rate paid per share on stock transactions $ .0494 .0476 .0460
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS FOR ALL PORTFOLIOS:
Total returns do not reflect the effect of any sales charges.
Per share data for the period ended July 31, 1996 was determined based on
average shares outstanding.
Data for the period ended January 31, 1998 is unaudited.
For the fiscal period ended July 31, 1996, the investment manager agreed to
reduce its management fee and absorb certain operating expenses of the
Portfolios. If these expense waivers had not been in effect, the expense ratio
of each share class would have increased by .06% of average net assets for
Horizon 20+, .04% for Horizon 10+ and .05% for Horizon 5. There would have been
a corresponding decrease in the net investment income ratio for the period. The
waivers were discontinued on August 1, 1996.
36
<PAGE> 37
37
NOTES
<PAGE> 38
38
NOTES
<PAGE> 39
39
NOTES
<PAGE> 40
TRUSTEES AND OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY STEVEN H. REYNOLDS
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA LINDA J. WONDRACK
Trustee Vice President, Vice President
ARTHUR R. GOTTSCHALK Secretary and Treasurer JOHN R. HEBBLE
Trustee JERARD K. HARTMAN Assistant Treasurer
FREDERICK T. KELSEY Vice President MAUREEN E. KANE
Trustee WILLIAM M. KNAPP Assistant Secretary
FRED B. RENWICK Vice President CAROLINE PEARSON
Trustee THOMAS W. LITTAUER Assistant Secretary
JOHN B. TINGLEFF Vice President ELIZABETH C. WERTH
Trustee ANN M. MCCREARY Assistant Secretary
EDMOND D. VILLANI Vice President
Trustee KATHRYN L. QUIRK
JOHN G. WEITHERS Vice President
Trustee
- --------------------------------------------------------------------------------
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
Kansas City, MO 64105
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago,
IL 60606-5808
www.kemper.com
[KEMPER FUNDS LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
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 - 3 (3/98) 1044920
