<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
SEMIANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
[LOGO] ENDED JANUARY 31, 1999
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER HORIZON FUND
"... Our disciplined approach precluded us from
investing in the high-priced growth stocks that drove the market. Instead, we're
placing a greater emphasis on
value-oriented stocks. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
Contents
3
Economic Overview
5
Performance Update
9
Statistics for Horizon 20+ Largest Holdings
10
Statistics for Horizon 10+ Largest Holdings
11
Statistics for Horizon 5 Largest Holdings
12
Portfolios of Investments
28
Financial Statements
30
Notes to Financial Statements
35
Financial Highlights
42
Shareholders' Meeting
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER HORIZON FUND TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
HORIZON 20+ 1.08% 0.76% 0.53%
HORIZON 10+ 2.68% 2.22% 2.21%
HORIZON 5 2.87% 2.51% 2.60%
- --------------------------------------------------------------------------------
</TABLE>
Returns and rankings are historical and do not guarantee future results.
Investment returns and principal values will fluctuate so that shares, when
redeemed, may be worth more or less than original cost.
* Total return measures net investment income and capital gain or loss from
portfolio investments, assuming reinvestment of all dividends. During the
period noted, securities prices fluctuated. For additional information, see
the Prospectus and Statement of Additional Information or the Financial
Highlights at the end of this report.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
1/31/99 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
HORIZON 20+ CLASS A $13.59 $13.48
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS B $13.36 $13.28
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS C $13.34 $13.29
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS A $12.59 $12.49
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS B $12.58 $12.48
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS C $12.54 $12.44
- --------------------------------------------------------------------------------
HORIZON 5 CLASS A $11.27 $11.26
- --------------------------------------------------------------------------------
HORIZON 5 CLASS B $11.28 $11.28
- --------------------------------------------------------------------------------
HORIZON 5 CLASS C $11.28 $11.27
- --------------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON FUND
RANKINGS AS OF 1/31/99
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE EQUITY LIPPER CATEGORIES**
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+ #148 of #158 of #160 of
1-YEAR 209 funds 209 funds 209 funds
- --------------------------------------------------------------------------------
HORIZON 20+ #102 of #110 of #114 of
3-YEAR 154 funds 154 funds 154 funds
- --------------------------------------------------------------------------------
HORIZON 10+ #296 of #313 of #326 of
1-YEAR 418 funds 418 funds 418 funds
- --------------------------------------------------------------------------------
HORIZON 10+ #245 of #271 of #274 of
3-YEAR 291 funds 291 funds 291 funds
- --------------------------------------------------------------------------------
HORIZON 5 #48 of #51 of #50 of
1-YEAR 92 funds 92 funds 92 funds
- --------------------------------------------------------------------------------
HORIZON 5 #33 of #36 of #37 of
3-YEAR 43 funds 43 funds 43 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: Kemper Horizon 20+ --
Flexible Portfolio, Kemper Horizon 10+ -- Balanced Portfolio and Kemper
Horizon 5 -- Income Portfolio.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD ENDED JANUARY 31, 1999, THE FUND PAID THE FOLLOWING DIVIDENDS
PER SHARE:
<TABLE>
<CAPTION>
LONG-TERM
INCOME DIVIDEND CAPITAL
CLASS A CLASS B CLASS C GAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HORIZON 20+ $.0150 -- -- $.0200
- --------------------------------------------------------------------------------
HORIZON 10+ $.1200 $.0647 $.0626 $.1100
- --------------------------------------------------------------------------------
HORIZON 5 $.1850 $.1559 $.1558 $.1200
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
YOUR FUND'S STYLE
- --------------------------------------------------------------------------------
MORNINGSTAR EQUITY STYLE BOX
- --------------------------------------------------------------------------------
Source: Data by Morningstar, Inc. Chicago, IL 312-696-6000. The Equity Style Box
placement is based on a fund's price-to-earnings and price-to-book ratios
relative to the S&P 500, as well as the size of the companies in which it
invests, or median market capitalization.
The style box represents a snapshot of a fund's portfolio on a single day.
Please note that style boxes do not represent an exact assessment of risk and do
not represent future performance. The fund's portfolio changes from day-to-day.
A longer-term view is represented by the fund's Morningstar category, which is
based on its actual investment style as measured by its underlying portfolio
holdings over the past three years. Please consult the prospectus for a
description of investment policies.
IMF AND G7 NATIONS Two international groups focusing on international economics
and monetary policy. The International Monetary Fund (IMF) is an agency of the
United Nations. The Group of Seven (G7) is an economic alliance of seven leading
nations, including the United States.
QUANTITATIVE APPROACH An investment strategy that focuses on statistical
analysis and calculations of stock and economic data. Quantitative investing
often involves sophisticated computer modeling.
TWO-TIER MARKET Describes a security market in which the majority of gains are
earned by a small group of companies. In 1998, a two-tier market existed in
which only the largest growth-style stocks enjoyed particularly robust gains.
VALUE STOCKS Value stocks are considered to be bargain stocks because they are
perceived as undervalued and attractively priced relative to a measure of their
true worth, such as earnings potential, book value, cash flow or dividend yield.
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS WITH THE HARRIS
BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
IN THE WORLD, MANAGING MORE THAN $280 BILLION IN ASSETS FOR INSTITUTIONAL AND
CORPORATE CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL
FUND INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE
OF INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION
OF PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
DEAR KEMPER FUNDS SHAREHOLDER:
If you think the first quarter of 1999 has seemed rather anticlimactic compared
to 1998, you're not alone. The year began with a quiet bang in the U.S. stock
market, with the Dow Jones Industrial Average hitting an all-time high of 9643
points in the first week of January. While stock market volatility has
continued, it seems to be phasing investors less and less. Even global events
are being taken in stride. Europe's Economic and Monetary Union (EMU) was
launched without much notice. And when Brazil's economy recently took a turn for
the worse, Wall Street was only mildly concerned. Also contributing to today's
laid-back attitude -- the impeachment trial of President Clinton has all but
fizzled into obscurity without significantly affecting the U.S. economy or
markets.
Indeed, the U.S. economy looks good. The fundamentals by which we measure the
state of the economy remain strong. We continue to see solid consumer spending
growth, continued investment spending and low inflation. This suggests that
there are no internal problems for continued U.S. economic growth.
Additionally, we can expect the Federal Reserve Board to keep short-term
interest rates steady. On February 3, the Fed left interest rates unchanged. It
is likely that this "hands-off" approach will continue at the Fed's March 30
meeting, particularly if U.S. inflation remains in check and there is a degree
of financial instability in the international arena.
The U.S. budget surplus for 1998 came in at $60 billion, with another budget
surplus of between $80 billion and $100 billion expected for fiscal 1999. Growth
in the nation's gross domestic product (GDP), which represents the total value
of all goods and services produced within the U.S. economy, has remained steady.
GDP, driven by consumer spending, is expected to grow at an annualized rate of
approximately 3 to 3.5 percent in 1999. We also anticipate modest capital
spending growth and inventory growth.
The consumer price index (CPI) remains in the vicinity of 2 percent. However,
energy prices, which were down 6 to 7 percent last year and helped keep the CPI
down, are unlikely to remain so low this year. For 1999, inflation should
register at 2 to 2.5 percent.
Employment growth has slowed to 2 percent, but combined with real wage growth
of between 2 percent and 2.5 percent, produces real income growth between 4
percent and 5 percent. In addition, gains in household net worth, which tends to
fuel consumer spending, are on the rise. Banks appear to be only a little less
willing to lend in 1999, so the threat of a general credit crunch is minimal. As
a result of all these factors, consumer spending should continue to grow this
year.
On a less positive note, corporate profits have slowed in 1999, growing at a
rate of 1 percent to 3 percent on a year-over-year basis. As a result, we may
see a slowdown in capital spending this year. The current U.S. account deficit
is rising, which suggests the U.S. economy is increasingly dependent on foreign
capital inflows to finance its economic activity. This is acceptable as long as
foreign money continues to flow in. But if foreign investors, particularly the
Japanese, no longer wish to invest in the United States, we can expect pressure
on interest rates and the dollar, as well as increased uncertainty and market
volatility.
Given the events of the last two years, investors may be comforted by the fact
that the U.S. markets and economy have withstood the test of tumultuous times.
While certain countries, such as Malaysia, Indonesia, Brazil and Russia, are
still suffering from economic crises, others, including the Philippines, South
Korea, Thailand and China, continue to recover and grow. As long as the Fed and
the Group of Eight leading industrial nations (G8) are committed to avoiding
recession on national and global levels respectively, investors have a good
chance of experiencing a more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as some analysts expected.
Indeed, Asian turmoil has not affected U.S. export
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 (2/28/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate(1) 5 5.34 5.57 6.42
Prime rate(2) 7.75 8.5 8.5 8.25
Inflation rate(3) 1.6 1.68 1.63 3.04
The U.S. dollar(4) -1.53 8.17 5.05 7.67
Capital goods orders(5)* 5.53 3.05 12.61 3.93
Industrial production(5)* 1.72 2.71 5.92 6.44
Employment growth(6) 2.23 2.69 2.78 2.47
</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, 1999.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
volumes as much as it has lowered import prices and helped reduce global
interest rates.
Ultimately, Europe's recently inaugurated EMU is likely to bring more
flexibility and growth potential for the region. European equities may be the
beneficiaries of increased spending, as governments seek to ease fiscal and
monetary policy, foster growth and reduce unemployment. It's going to be
interesting to watch as the monetary union continues to evolve. One lesson for
investors -- particularly those with international holdings -- is to diversify.
With the democratization of the world, the globalization of trade and more free
market economies at our fingertips, international markets are becoming more and
more attractive. But if you subscribe to the concept of international
investment, be cautious -- don't put all of your investment eggs in one basket
(i.e. country or region).
Other key elements to watch in 1999: the race for the next presidency and
information technology preparedness for the year 2000. And remember, while it is
nearly impossible to predict the next big crisis, preparedness through
diversification and risk management are key.
Thank you for choosing to invest with Kemper Funds. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/S/ John E. Silvia
John E. Silvia
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN E. SILVIA AS OF MARCH 8, 1999, AND
MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
[FORTUNA PHOTO]
LEAD PORTFOLIO MANAGER PHILIP FORTUNA IS A MANAGING DIRECTOR OF SCUDDER KEMPER
INVESTMENTS, INC. HE JOINED THE ORGANIZATION IN 1986 AS AN INSTITUTIONAL
PORTFOLIO MANAGER. FORTUNA RECEIVED A BACHELOR'S DEGREE IN ECONOMICS FROM
CARNEGIE MELLON UNIVERSITY AND MASTER'S OF BUSINESS ADMINISTRATION FROM THE
UNIVERSITY OF CHICAGO.
FORTUNA IS SUPPORTED BY PORTFOLIO MANAGERS ALMOND GODUTI, SHAHRAM TAJBAKHSH AND
ROBERT TYMOCZKO.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGEMENT
TEAM ONLY THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER.
THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
BELOW, THE MANAGEMENT TEAM OF KEMPER HORIZON FUND PROVIDES AN OVERVIEW OF THE
INVESTMENT CLIMATE AND THE FACTORS THAT DROVE THE FUND'S PERFORMANCE DURING THE
SEMIANNUAL PERIOD. THE TEAM ALSO DESCRIBES THEIR QUANTITATIVE INVESTMENT
DISCIPLINE, AND WHERE THEY ARE FINDING ATTRACTIVE INVESTMENT OPPORTUNITIES.
Q BEFORE WE DISCUSS THE PERFORMANCE OF THE PORTFOLIOS, COULD YOU PROVIDE US
WITH A BRIEF OVERVIEW OF THE ECONOMIC CLIMATE, AND THE KEY EVENTS THAT DROVE THE
MARKET?
A During the semiannual period, the markets were extremely volatile. As we
entered the semiannual period in August 1998, investors were jittery about
uncertain U.S. economic growth and corporate-earnings strength. Investors were
also dogged by worries about the possible impact of the Asian economic turmoil
on the global marketplace.
Against this climate of anxiety, the Russian debt default in late August
sent markets into a tailspin. Stocks of all types suffered, but financial
services stocks took the worst hit. Investors were afraid that financial service
institutions could have exposure to the defaulted debt. The questionable
economic strength of Latin America and Brazil were additional sources of
concern.
Yet, after the correction, the domestic stock market continued to rumble
upward, though in practical terms, the rally was confined to a small group of
the largest stocks. (We'll discuss this phenomenon in greater detail later in
this report.) Many investors returned to the markets, buoyed by a view that the
G7 nations and IMF (see Terms To Know) responded in an organized and cohesive
fashion. Investor sentiment also rose as the Federal Reserve cut interest rates
repeatedly in the weeks following the August correction, with the central banks
of more than 30 nations following suit.
Technology stocks outperformed all through the period, but spiked even
higher in December and January, fueled by the growth potential of the Internet.
Q IN GENERAL TERMS, HOW DID DIFFERENT TYPES OF STOCK PERFORM?
A Investor emotion and anxiety drove much of the market's activity, leading
to large-cap, growth-stock dominance. We saw a continuance of the narrow,
two-tier market (see Terms To Know) that emerged in late 1997, after the Asian
markets tumbled. Investors continued rushing into mega-cap growth stocks that
offered perceived safe-haven status.
In contrast, small-cap stocks and value stocks (see Terms To Know) were
all but ignored. We can get a good sense of the trends by comparing various
indexes. For instance, during the semiannual period, the Russell 1000 index, a
benchmark for large-company stocks, gained 14.59 percent, while the Russell 2000
index, a benchmark for small-company stocks, gained only 2.40 percent.
We can see how far large-cap growth stocks sprinted ahead of other types
of stocks by comparing the performances of various indexes:
LARGE-CAP GROWTH STOCKS DOMINATED THE MARKET
BENCHMARK RETURNS FOR THE SIX-MONTH PERIOD ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
6-MONTH TOTAL RETURN
INDEX REPRESENTATIVE OF: 8/1/98 - 1/31/99
<S> <C> <C>
- --------------------------------------------------------------------------------
RUSSELL 1000 GROWTH Large-Cap Growth 22.8%
- --------------------------------------------------------------------------------
RUSSELL 1000 VALUE Large-Cap Value 5.79%
- --------------------------------------------------------------------------------
RUSSELL 2000 GROWTH Small-Cap Growth 9.45%
- --------------------------------------------------------------------------------
RUSSELL 2000 VALUE Small-Cap Value -5.02%
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
PERFORMANCE UPDATE
Q AGAINST THE VOLATILE BACKDROP YOU'VE DESCRIBED, HOW DID THE KEMPER HORIZON
FUND PORTFOLIOS PERFORM FOR THE SEMIANNUAL PERIOD?
A For the six-month period ended January 31, 1999, Kemper Horizon 5
Portfolio posted the highest return, 2.87 percent. Kemper Horizon 10+ Portfolio
gained 2.68 percent. Kemper Horizon 20+ Portfolio earned 1.08 percent. (All
returns are for Class A shares, unadjusted for any sales charge.) During the
past six months, the equity markets were more volatile than the fixed-income
markets. As a result, the greater fixed-income exposure in Horizon 5 Portfolio
provided an added degree of shelter.
Q EACH KEMPER HORIZON FUND PORTFOLIO IS TAILORED TO A SPECIFIC INVESTMENT
TIME HORIZON. COULD YOU RECAP THE ASSET ALLOCATIONS OF EACH FUND?
A Certainly. Let's look at each fund's target allocation, and review for
whom each portfolio may be most appropriate:
- - KEMPER HORIZON 5 PORTFOLIO -- This portfolio is the most conservative of the
group, and may be most appropriate for investors with an investment time
horizon of at least five years. Because of this cautious focus, Kemper Horizon
5 Portfolio has the greatest fixed-income exposure, and the least foreign-
stock exposure. The target allocation of Kemper Horizon 5 Portfolio is 60
percent in fixed-income securities, and 40 percent in stocks.
- - KEMPER HORIZON 10+ PORTFOLIO -- Designed for investors with a time horizon of
at least 10 years, Kemper Horizon 10+ Portfolio holds a greater percentage of
it assets in stocks than does Kemper Horizon 5 Portfolio. The target
allocation of Kemper Horizon 10+ Portfolio is 60 percent in stocks and 40
percent in fixed-income securities.
- - KEMPER HORIZON 20+ PORTFOLIO -- Kemper Horizon 20+ Portfolio is the least
conservative portfolio, designed for investors with a time horizon of 20 years
or more. Because the portfolio is designed to pursue goals that are relatively
far down the road, its allocation is the most aggressive. Our optimal
allocation for Kemper Horizon 20+ Portfolio is 80 percent in stocks and 20
percent in fixed-income securities.
Within the stock components of each portfolio, we diversify further. We
seek to allocate 70 percent to domestic stocks, and 30 percent to international
stocks. For example, in Kemper Horizon 20+ Portfolio the domestic stocks make
up 56 percent and the foreign stocks make up 22 percent of the portfolio.
Kemper Horizon 10+ Portfolio's stock breakdown consists of 44 percent domestic
stocks and 15 percent foreign stocks. And in Kemper Horizon 5 Portfolio the
domestic stock allocation is 29 percent and the foreign stock allocation is 11
percent. Among these domestic portions, we earmark 70 percent to large-cap
stocks and 30 percent to small-cap stocks.
While we frequently rebalance the portfolios to keep them close to the
targets, they won't always match up exactly, due to continuous market
fluctuations.
Q WHY IS DIVERSIFICATION AMONG ASSET CLASSES IMPORTANT? HOW CAN THE FUNDS
USE DIVERSIFICATION TO POTENTIALLY BENEFIT INVESTORS?
A Diversification across asset classes seeks to reduce overall portfolio
volatility. Typically, different types of investments perform differently in a
given market climate. For instance, growth-style and value-style stocks have
tended to rise and fall counter-cyclically, as have large-cap and small-cap
stocks. Often, domestic stocks and bonds and international stocks have not moved
in tandem. Statistically, this diversification has led to a reduced level of
expected risk in the portfolio and, over multiple year investment horizons,
higher expected returns for a given level of risk (of course past performance is
no guarantee of future results, and diversification neither protects against
losses or assures higher returns).
Q IN THE PREVIOUS ANNUAL REPORT, YOU NOTED THAT YOU WERE SHIFTING THE FUND
TO A QUANTITATIVE APPROACH (SEE TERMS TO KNOW). IN YOUR OPINION, WHAT ARE THE
BENEFITS OF A QUANTITATIVE STRATEGY?
A We feel that our quantitative strategy helps us make disciplined
investment decisions, based on thorough, rigorous research.
Our quantitative models leverage more than a decade of testing,
development and real-time implementation. The models draw upon the expertise
and ideas of countless individuals across the organization. Through
quantitative modeling, we are able to evaluate countless statistics, including
price trends, earnings growth, balance sheet data and analyst expectations.
This allows us to thoroughly track thousands of stocks. In this sort of
fast-paced market climate, we believe that comprehensive research can make a
tremendous difference.
Our stock selection strategy is driven by independent research, not by
what the Wall Street herd is doing. In volatile market climates, many investors
get caught up in emotion, and lose sight of fundamentals. We believe that a
quantitative strategy keeps us focused on logical, long-term investment goals.
Q HOW DO YOU USE QUANTITATIVE TECHNIQUES TO MANAGE THE EQUITY PORTIONS OF
KEMPER HORIZON FUND PORTFOLIOS?
A Currently, we are using 14 separate models to select
6
<PAGE> 7
PERFORMANCE UPDATE
stocks. There are two domestic models, one for large-cap stocks and one-for
small-cap stocks. We also employ 12 country- and region-specific models for the
international component of the funds. Because we recognize that certain types of
measures are more or less important for different types of stocks, we believe
that it is essential to have multiple customized models.
We're also implementing quantitative techniques to make sure that we're
not losing sight of the forest through the trees. We evaluate how stocks could
work together, as a cohesive whole, in support of the risk/return parameters
we've set.
Q YOU'VE NOTED THAT INTERNATIONAL ECONOMIC TURMOIL HAS BEEN CONSIDERABLE. IN
LIGHT OF THIS TURBULENT GLOBAL CLIMATE, HOW HAVE YOU BEEN MANAGING THE
INTERNATIONAL COMPONENT OF THE PORTFOLIOS?
A Through the international allocation, we seek to provide thorough
diversification, while emphasizing more established foreign countries.
Our strategy is to add value through stock selection, not active country
allocation. We set the portfolios' country weightings to closely mirror those
of the MSCI World ex U.S. Index. (This index comprises the stock markets
worldwide, excluding the United States.)
Because the index is market-cap weighted, the countries with the largest
market capitalizations enjoy proportionately larger representation. Therefore,
the portfolios have minimal exposure to the smallest, more risky emerging
markets; and instead favor the established Western European nations and Japan.
Consistent with our risk-conscious approach, our stock selection favors
larger-cap, value-oriented stocks. During the semiannual period, our
quantitative models led us to strong performing stocks from France, Australia
and Japan.
Q EACH PORTFOLIO INCLUDES FIXED-INCOME HOLDINGS. WHAT SORT OF BONDS DID YOU
FAVOR, AND WHY?
A Through the fixed-income components, we're trying to add a degree of
shelter from equity turbulence. Throughout the semiannual period, we favored
short-duration U.S. Treasury Bonds. Duration is a measurement of a fund's
sensitivity to interest rate moves. The shorter the duration, the less sensitive
the bond is to interest rate changes. Because interest rates remained fairly
stable, a longer average duration could have proven more profitable, but would
have also carried more risk. We opted for a more-cautious approach.
We're pleased to report that during August's market downslide, the
fixed-income holdings helped mitigate declines.
Q WHAT HELD THE FUND BACK DURING THE SEMIANNUAL PERIOD?
A The domestic-stock allocation of each portfolio is targeted to be 70/30
between large- and small-company stocks. For the semiannual period, the
portfolios' relative performance was hindered by exposure to the smaller-caps.
Although small-caps have lagged, we believe that they offer far more reasonable
valuations than do the mega-cap names that the market has favored recently.
Additionally, our disciplined approach precluded us from investing in the
high-priced growth stocks that drove the market. Instead, we're placing a
greater emphasis on value-oriented stocks. For instance, we steered clear of
many of the untested Internet names that sparked December and January's
technology rally. We believe that for most of these stocks, their time in the
sun will be short-lived. Our models support a more prudent, long-term approach.
Q GIVEN THE CHALLENGES OF THE MARKET, WHERE ARE YOU FINDING ATTRACTIVE
STOCKS?
A In broad terms, we feel that the mega-cap stocks are extremely overvalued.
Every company has a certain underlying value, and we believe the market is not
pricing many of these mega-caps accordingly. Large-caps could slide fast if
earnings are not met. Undervalued stocks generally have less room to fall if the
market falters.
Right now, we're finding more appealing opportunities among stocks in the
lower end of the Russell 1000's market-cap range. On the basis of their more
reasonable valuations, we believe that small-caps have the potential to wrest
the upper hand from large-caps.
We're also looking for stocks with good downside risk potential. That's
one reason that we have high exposure to consumer staples stocks. Typically,
these stocks are more defensive and have tended to better withstand market
turmoil. Here, we're favoring stocks from a variety of subsectors, including
specialty retailing, tobacco, restaurants and food stocks.
Quality technology stocks remain an important theme in the portfolios.
As we mentioned, we are cautious about fledgling Internet stocks, instead
preferring established, attractively valued companies that are benefiting from
the Internet's growth, such as Sun Microsystems. We are also finding attractive
opportunities in telecommunications stocks, such as ADC Telecommunications.
In keeping with our value orientation, financial services stocks are well
represented in the portfolios. August's market slide brought the stock prices of
many quality companies to levels that our models found opportunistic. In keeping
with our
7
<PAGE> 8
PERFORMANCE UPDATE
risk-conscious approach, we've gravitated toward insurance-oriented companies
rather than money-center banks. Insurance companies tend to have less
international exposure, while offering steadier earnings.
Within the health care arena, we're focusing on medical supplies and
products. Often, the valuations of these stocks are more appealing than those
of the large pharmaceutical firms. Several of the fund's health care stocks
- -- including Amgen and Hanger Orthopedic Group -- delivered strong gains during
the semiannual period.
We also feel that foreign stocks offer compelling prospects. The
formation of the European Union creates a positive long-term climate for the
economies of Western Europe. Additionally, relative to the overpriced domestic
mega-caps, the valuations of international stocks seem far more reasonable.
International financial services and utility stocks are among those holding
particular appeal.
Q HOW DO YOU FEEL ABOUT THE GLOBAL ECONOMIC CLIMATE? IS THE WORST BEHIND US?
A We do believe that volatility will continue. There are still many issues
within the global economy that must be addressed. Problems in Brazil, Latin
America and Asia could certainly spill over and cause a negative impact on the
U.S. market. We would also caution investors to not think of the domestic
economy as an oasis. Wishful thinking does not generate total returns. We feel
that investors with long-term time horizons follow a far more prudent route by
placing their confidence in disciplined diversification.
And while we do take a cautious view of the short-term market climate, we
feel strongly that the markets do offer long-term potential. Moreover, we
believe that through their convenient, disciplined diversification, the Kemper
Horizon Fund portfolios provide shareholders with good opportunities for
pursuing their time-specific goals.
8
<PAGE> 9
STATISTICS FOR HORIZON 20+ LARGEST HOLDINGS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HORIZON 20+ ON 1/31/99 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 78% 78%
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 20 21
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 1
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 1/31/99 7/31/98
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 5.3 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
HOLDING PERCENT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
ADC TELECOMMUNICATIONS, INC. Provider of hardware and software systems 1.2%
designed for communications networks, including
Internet/data, video and voice networks.
- -----------------------------------------------------------------------------------------
INTEL CORP. Engaged in the design, development, manufacture 1.1%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- -----------------------------------------------------------------------------------------
VIACOM, INC. Operates in the following industries: 1.1%
entertainment, networking and broadcasting,
video, theme parks, and publishing.
- -----------------------------------------------------------------------------------------
AETNA, INC. Global provider of insurance and financial 1.0%
services, including annuity products,
investment-advisory and asset-management
services.
- -----------------------------------------------------------------------------------------
AMES DEPARTMENT STORES, INC. Operates a chain of discount department stores, 0.9%
selling brand-name goods.
- -----------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
9
<PAGE> 10
LARGEST HOLDINGS STATISTICS FOR HORIZON 10+
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HORIZON 10+ ON 1/31/99 ON 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 59% 58%
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 39 40
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 2
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 1/31/99 ON 7/31/98
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 4.0 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
HOLDING PERCENT
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INTEL CORP. Engaged in the design, development, manufacture 0.9%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- ---------------------------------------------------------------------------------------------
SUN MICROSYSTEMS Provides high performance workstations, servers 0.9%
and networking software for the engineering,
scientific, commercial and technical industries.
- ---------------------------------------------------------------------------------------------
AMGEN, INC. Develops and manufactures biotechnology products. 0.8%
- ---------------------------------------------------------------------------------------------
TJX COMPANIES, INC. Operates discount specialty retailing chains, 0.7%
including T.J. Maxx, Marshalls and Winners
Apparel, as well as mail-order retailer
Chadwick's of Boston.
- ---------------------------------------------------------------------------------------------
RYAN'S FAMILY STEAK HOUSES, Operates a chain of restaurants in the Midwest 0.7%
INC. and southern United States.
- ---------------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
10
<PAGE> 11
STATISTICS FOR HORIZON 5 LARGEST HOLDINGS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HORIZON 5 ON 1/31/99 ON 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 40% 38%
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 58 60
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 2
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 1/31/99 ON 7/31/98
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 3.1 PERCENT OF TOTAL NET ASSETS ON JANUARY 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
HOLDING PERCENT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
QANTAS AIRWAYS, LTD. Australian-based long-distance airline company, 0.7%
engaged in the transportation of passengers and
freight. Subsidiaries operate regional Australian
airlines.
- -----------------------------------------------------------------------------------------
SUZUKEN CO., LTD. Leading Japanese pharmaceutical wholesaler. 0.6%
- -----------------------------------------------------------------------------------------
ADC TELECOMMUNICATIONS, INC. Provider of hardware and software systems 0.6%
designed for communications networks, including
Internet/data, video and voice networks.
- -----------------------------------------------------------------------------------------
INTEL CORP. Engaged in the design, development, manufacture 0.6%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- -----------------------------------------------------------------------------------------
AMERITECH CORP. Provider of telecommunications services, 0.6%
including local and long-distance, paging and
mobile telephone services, business consulting
and directory publishing.
- -----------------------------------------------------------------------------------------
</TABLE>
* Portfolio composition and holdings are subject to change.
11
<PAGE> 12
PORTFOLIOS OF INVESTMENTS
KEMPER HORIZON FUND
HORIZON 20+, 10+ AND 5
Portfolio of Investments at January 31, 1999 (unaudited)
(DOLLARS IN THOUSANDS)
[CAPTION]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY Notes 9.125% 1999 $ -- $ --
SECURITIES--19.0%, 36.9% 8.875 1999 500 501
AND 53.6% 8.00 1999 1,280 1,303
7.75 1999 -- --
7.50 1999 540 551
8.875 2000 -- --
8.75 2000 -- --
8.50 2000 4,445 4,690
7.75 2000 -- --
6.75 2000 -- --
5.50 2000 1,300 1,321
8.00 2001 2,900 3,109
6.625 2001 6,165 6,452
6.50 2001 4,320 4,495
6.25 2001 125 129
5.375 2001 500 507
6.25 2002 -- --
7.875 2004 936 1,085
---------------------------------------------------------------------
24,143
- ------------------------------------------------------------------------------------------------------------------------
MORTGAGED BACKED FHLMC 6.50 2014 625 630
SECURITIES--1.3%, GNMA 6.50 2014 975 986
2.5% AND 4.5% ---------------------------------------------------------------------
1,616
---------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS--20.3%, 39.4% AND 58.1%
(Cost: $25,635, $51,594 and $34,423) 25,759
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC INDUSTRIES--6.0%, AK Steel Holding Corp. -- --
2.3% AND 2.1% AMCOL International Corp. 3,300 29
Arbed, S.A. 3,600 260
BASF, A.G. 20,800 769
Bayer, A.G. -- --
(a) Bethlehem Steel Corp. 13,200 114
(a) Buckeye Technologies, Inc. -- --
Burmah Castrol, PLC 21,900 290
(a) Comalco, Ltd. 171,800 615
(a) Compania Espanola de Petroleos, S.A. -- --
Crown Cork & Seal Co., Inc. 2,200 70
Dow Chemical Co. 4,100 361
Eastman Chemical Co. 1,600 65
Elcor Corp. 1,650 57
FPB Holding, A.G. 3,868 748
Fletcher Challenge Building 166,100 279
Henkel KGaA 6,600 454
(a) Genlyte Group, Inc. 60,000 1,076
(a) Lone Star Technologies, Inc. -- --
Mississippi Chemical Corp. -- --
Myers Industries, Inc. 2,510 63
Nucor Corp. 3,000 147
Praxair, Inc. 3,000 97
(a) Ryerson Tull, Inc. 10,600 99
</TABLE>
12
<PAGE> 13
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- ---------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- ---------------------------------
- -------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$2,450 $ 2,480 $1,270 $ 1,286
-- -- -- --
3,050 3,104 1,760 1,791
-- -- 300 307
-- -- 440 449
4,300 4,523 4,607 4,846
500 530 -- --
5,070 5,330 1,500 1,558
100 103 -- --
-- -- 250 256
700 711 -- --
8,715 9,343 3,090 3,312
6,667 6,978 7,220 7,556
7,420 7,721 6,935 7,217
-- -- -- --
700 710 -- --
2,700 2,825 -- --
3,518 4,079 2,785 3,229
- -------------------------------------------------------------------------------
48,437 31,807
- -------------------------------------------------------------------------------
1,234 1,245 663 669
2,025 2,047 2,000 2,022
- -------------------------------------------------------------------------------
3,292 2,691
- -------------------------------------------------------------------------------
51,729 34,498
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
-- -- 300 6
2,550 22 900 8
-- -- -- --
15,800 584 5,900 218
1,200 46 -- --
9,900 85 -- --
-- -- 400 5
9,200 122 1,900 25
175,900 629 38,600 138
-- -- 1,800 67
1,900 60 700 22
2,800 247 800 70
1,500 61 400 16
1,300 45 550 19
1,277 247 652 126
120,000 202 19,300 32
-- -- 1,700 117
-- -- 1,600 29
-- -- 600 8
1,000 12 400 5
1,950 49 880 22
2,000 98 1,200 59
2,500 81 1,000 32
-- -- -- --
</TABLE>
13
<PAGE> 14
PORTFOLIOS OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------
HORIZON 20+ PORTFOLIO
-----------------------------
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rohm & Haas Co. -- $ --
Sumitomo Osaka Cement Co., Ltd. 157,000 306
Taiheiyo Cement Corp. 228,000 541
Technip, S.A. 2,627 233
UPM-Kymmene, OYJ 10,600 277
V.F. Corp. 1,800 77
Valhi, Inc. 7,300 81
Vulcan Materials Co. 3,900 536
-------------------------------------------------------------------------
7,644
- --------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--5.8%, Albany International Corp. -- --
6.0% AND 2.3% (a) Alliant Techsystems "A" 4,500 395
Allied Signal, Inc. -- --
(a) American Power Conversion Corp. -- --
(a) Avondale Industries, Inc. -- --
Ball Corp. 9,300 418
Blount International, Inc. 1,400 36
Briggs & Stratton Corp. 700 38
Carpenter Technology Corp. 1,600 48
Chart Industries, Inc. 44,900 354
Columbus McKinnon Corp. -- --
(a) Cooper Cameron Corp. -- --
Emerson Electric Co. 2,500 145
Excel Industries, Inc. 5,900 144
Flowserve Corp. 1,327 22
General Binding Corp. 600 19
General Cable Corp. 1,500 28
Gleason Corp. -- --
Ingersoll-Rand Co. 14,900 708
Kvaerner Industrier A.S., "A" -- --
LaFarge Corp. -- --
Lincoln Electric Holdings, Inc. 4,700 163
(a) MSC Industrial Direct 7,000 181
Man, A.G. 400 108
Mannesmann, A.G. 7,970 1,128
Minnesota Mining & Manufacturing Co. 3,900 303
(a) Mueller Industries, Inc. -- --
Okuma Corp. 112,000 568
Penta-Ocean Construction -- --
Pitney Bowes, Inc. 1,900 131
Premark International, Inc. 16,700 572
Quanex Corp. 1,600 32
(a) RTI International Metals -- --
Reliance Steel & Aluminum 10,400 285
(a) Rexam, PLC -- --
Robbins & Myers, Inc. -- --
(a) SLI, Inc. 20,700 569
Scana Corp. -- --
Scotsman Industries, Inc. 30,400 568
(a) Shaw Group, Inc. -- --
Skanska, A.B., "B" -- --
(a) Superior Services, Inc. 1,100 18
Swire Pacific, Ltd., "A" 60,000 257
(a) Valassis Communications, Inc. 700 36
Valmet, OYJ -- --
Watts Industries, Inc., "A" 1,800 26
(a) Williams, PLC -- --
(a) Wyman-Gordon Co. 1,900 16
-----------------------------------------------------------------------------
7,316
</TABLE>
14
<PAGE> 15
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1,500 $ 47 -- $ --
-- -- -- --
-- -- 42,000 100
1,567 139 469 42
3,000 78 1,500 39
1,400 60 400 17
11,600 128 4,800 53
-- -- -- --
- -----------------------------------------------------------------------------
3,042 1,275
- -----------------------------------------------------------------------------
-- -- 206 4
700 61 600 53
8,000 312 -- --
4,700 240 -- --
-- -- 200 6
800 36 700 32
1,200 31 400 10
500 27 200 11
1,200 36 400 12
12,800 101 -- --
-- -- 2,400 54
3,500 82 -- --
-- -- -- --
-- -- -- --
1,018 17 478 8
-- -- 2,200 68
1,500 28 450 8
45,500 771 -- --
4,200 199 -- --
3,000 60 -- --
5,600 219 2,000 78
38,800 820 -- --
10,200 264 1,200 31
300 81 100 27
5,910 836 1,270 180
3,300 256 1,000 78
1,500 38 200 5
87,000 441 19,000 96
429,000 762 93,000 165
1,600 110 500 34
8,700 298 3,700 127
1,200 24 500 10
12,700 157 -- --
12,400 339 200 5
122,341 195 -- --
-- -- 300 7
18,900 520 2,900 80
-- -- 3,400 94
-- -- -- --
-- -- 400 6
2,200 64 -- --
-- -- 1,900 31
55,000 236 10,000 43
600 31 300 15
7,600 76 -- --
1,400 20 600 9
9,200 48 -- --
1,400 12 600 5
- -----------------------------------------------------------------------------
7,848 1,392
</TABLE>
15
<PAGE> 16
PORTFOLIOS OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------
HORIZON 20+ PORTFOLIO
----------------------------
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER CYCLICALS -- American Greetings Corp. 13,700 $ 541
10.5%, 9.5% AND 5.6% (a) Ames Department Stores 38,200 1,175
(a) AutoZone, Inc. 8,000 271
(a) Avis Rent A Car, Inc. 20,500 548
(a) BJ's Wholesale Club 1,000 45
(a) Best Buy Co., Inc. 1,700 154
Borg-Warner Automotive, Inc. 800 39
Brown Group, Inc. 2,200 35
(a) Budget Group, Inc. -- --
Burlington Coat Factory 57,900 829
Bush Industries, Inc. -- --
(a) Cellstar Corp. 12,400 147
(a) Central Garden & Pet Co. 10,500 169
(a) Chattem, Inc. 600 23
Dillard's, Inc. 12,000 298
Douglas Holding, A.G. 1,100 62
(a) Education Management Corp. -- --
(a) Electronic Arts, Inc. -- --
Etablissements Economiques du Casino
Guichard-Perrachon, S.A. -- --
Family Dollar Stores, Inc. 30,000 563
(a) Finish Line, Inc., "A" 15,400 141
(a) Friedman's, Inc., "A" -- --
(a) Genesco, Inc. -- --
Hartmarx Corp. 30,000 150
Hillenbrand Industries, Inc. 2,200 103
Hollinger International, Inc. -- --
Home Depot -- --
International Flavors & Fragrances, Inc. -- --
Kingfisher, PLC 61,900 632
Longs Drug Stores 3,300 126
(a) Mail-Well, Inc. 5,200 68
May Department Stores Co. 4,000 242
(a) Men's Wearhouse, Inc. 7,200 213
(a) Mirage Resorts, Inc. 14,900 213
(a) Mohawk Industries, Inc. -- --
(a) MotivePower Industries, Inc. 11,300 354
(a) Neiman Marcus 5,700 140
Newell Co. 14,200 590
(a) Nine West Group, Inc. 20,000 275
(a) Nortek, Inc. 6,800 189
(a) Pacific Sunwear of California 3,750 95
Penton Media, Inc. 7,100 149
(a) Personnel Group of America, Inc. 21,400 296
Pillowtex Corp. 6,000 132
(a) Rental Service Corp. -- --
Rentokil Initial, PLC 90,204 667
(a) Sankyo Co., Ltd. -- --
(a) Sola International, Inc. 29,500 492
Sony Corp. -- --
(a) Stage Stores, Inc. -- --
Stewart Enterprises, Inc. 9,200 161
(a) Sylvan Learning Systems, Inc. 10,850 342
TJX Companies, Inc. -- --
(a) Tower Automotive, Inc. -- --
(a) Viacom "B" 15,900 1,352
Wal-Mart Stores, Inc. 8,000 688
(a) Wet Seal "A" 13,100 493
(a) Whole Foods Market 3,800 122
-----------------------------------------------------------------------------
13,324
</TABLE>
16
<PAGE> 17
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
8,600 $ 340 2,700 $ 107
8,100 249 8,800 271
7,000 237 -- --
2,200 59 -- --
800 36 300 13
6,900 626 500 45
600 29 200 10
1,700 27 600 10
3,600 52 -- --
5,600 80 14,400 206
-- -- 300 4
43,100 512 21,900 260
16,900 271 4,200 67
-- -- -- --
9,000 223 4,000 99
8,600 483 300 17
4,600 139 -- --
4,900 207 1,500 63
3,600 350 -- --
-- -- 5,000 94
24,100 221 4,600 42
1,600 20 -- --
23,600 176 30,400 226
30,000 150 -- --
-- -- -- --
-- -- 1,400 18
10,600 640 1,400 85
1,500 65 500 22
46,300 473 15,600 159
15,100 579 400 15
-- -- 1,200 16
4,000 242 900 54
5,400 160 -- --
45,200 647 15,500 222
-- -- 900 35
-- -- 2,000 63
6,400 158 1,900 47
9,200 382 2,700 112
17,000 234 5,000 69
-- -- -- --
2,550 65 -- --
4,000 84 1,900 40
18,300 253 -- --
-- -- -- --
1,100 27 2,400 58
50,098 370 19,910 147
54,800 921 -- --
1,700 28 3,400 57
1,600 117 -- --
50,400 403 9,900 79
2,700 47 1,800 32
8,900 280 4,150 131
32,200 952 -- --
5,400 136 1,600 40
900 76 1,300 111
-- -- -- --
13,500 508 3,900 147
3,200 103 800 26
- -----------------------------------------------------------------------------
12,437 3,319
</TABLE>
17
<PAGE> 18
PORTFOLIOS OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------
HORIZON 20+ PORTFOLIO
--------------------------
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER DURABLES--1.9%, AAR Corp. -- $ --
1.3% AND 1.5% BBA Group, PLC -- --
Coachmen Industries, Inc. 18,800 470
DaimlerChrysler, A.G. 374 39
(a) Ducommun, Inc. -- --
(a) Fairchild Corp., "A" 19,300 258
Fiat, SpA 71,800 232
Fleetwood Enterprises, Inc. 1,100 41
Ford Motor Co. 7,500 461
Honda Motor Co., Ltd. 3,100 115
Intermet Corp. 3,900 52
Renault, S.A. 7,100 396
Standard Pacific Corp. 25,200 353
-------------------------------------------------------------------------
2,417
- --------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 7.0%, Adolph Coors Co. 4,800 307
4.9% AND 3.3% (a) American Italian Pasta Co. -- --
Applebee's International 1,200 26
Booker, PLC 11,500 10
Clorox Co. 523 65
ConAgra 10,600 345
DIMON, Inc. -- --
Dole Food Company, Inc. -- --
Farmer Brothers Co. 500 104
Harman International Industries, Inc. 800 34
Imperial Tobacco Group, PLC 99,000 1,144
Koninklijke Ahold, N.V. 19,150 745
(a) Lone Star Steakhouse & Saloon -- --
McDonald's Corp. 10,400 820
Michael Foods, Inc. 39,700 888
(a) Ocular Sciences, Inc. 7,300 170
(a) Performance Food Group Co. 1,800 53
Philip Morris Cos. 20,450 961
(a) Ryan's Family Steak Houses, Inc. 42,700 590
Seaboard Corp. 1,500 627
SEITA 8,700 495
Springs Industries, Inc., "A" 800 33
UST, Inc. 24,000 756
Universal Corp. 19,000 576
Wendy's International 8,700 207
-------------------------------------------------------------------------
8,956
- --------------------------------------------------------------------------------------------------------------------
ENERGY -- 2.9%, Ashland, Inc. 4,300 204
3.0% AND 1.1% Atlantic Richfield Co. 4,700 270
Atmos Energy Corp. 1,500 45
BG, PLC 155,700 966
Chevron Corp. 3,000 224
Elf Aquitaine -- --
Ente Nazionale Idrocarburi, SpA 131,400 780
Exxon Corp. -- --
(a) Nabors Industries, Inc. 3,700 46
(a) Plains Resources, Inc. -- --
Questar Corp. 6,000 100
Repsol, S.A. 5,300 288
(a) Seitel, Inc. 2,000 26
(a) Tesoro Petroleum Corp. 3,200 35
Texaco, Inc. 1,600 76
TransCanada PipeLine, Ltd. 13,700 195
(a) UTI Energy Corp. 60,200 418
-----------------------------------------------------------------------------
3,673
</TABLE>
18
<PAGE> 19
PORTFOLIOS OF Investments
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
6,500 $ 126 -- $ --
23,900 149 7,800 49
-- -- 7,700 193
1,247 129 -- --
-- -- 4,200 60
17,900 239 3,600 48
-- -- 12,700 41
800 30 300 11
8,000 491 2,800 172
2,200 82 1,000 37
2,900 39 1,300 17
-- -- -- --
27,900 391 20,100 281
- ------------------------------------------------------------------------------
1,676 909
- ------------------------------------------------------------------------------
500 32 1,300 83
2,300 64 -- --
900 20 500 11
-- -- 2,900 3
383 48 174 22
12,000 390 -- --
-- -- 300 2
5,000 152 -- --
-- -- 1,000 207
700 29 300 13
79,400 918 24,100 278
11,041 429 3,374 131
-- -- 500 4
7,000 552 2,000 158
26,200 586 2,000 45
5,400 126 1,200 28
2,600 77 600 18
15,750 740 4,950 233
68,400 945 7,200 99
900 376 -- --
-- -- 4,300 245
600 25 200 8
13,500 425 6,100 192
12,000 364 4,000 121
7,000 167 2,400 57
- ------------------------------------------------------------------------------
6,465 1,958
- ------------------------------------------------------------------------------
7,300 347 1,200 57
4,500 258 1,400 80
1,200 36 400 12
120,200 746 6,700 42
3,000 224 1,000 75
2,656 288 -- --
118,600 704 23,700 141
4,000 282 -- --
-- -- -- --
12,700 144 -- --
5,000 83 1,400 23
3,780 205 1,230 67
1,600 20 600 8
2,400 26 1,100 12
1,200 57 400 19
-- -- -- --
61,200 425 16,700 116
- ------------------------------------------------------------------------------
3,845 652
</TABLE>
19
<PAGE> 20
PORTFOLIOS OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
HORIZON 20+ PORTFOLIO
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCE -- 15.1%, A.G. Edwards, Inc. 10,500 $ 356
10.5% AND 8.0% AXA-UAX, S.A. 5,100 741
Aetna, Inc. 13,700 1,235
Allmerica Financial Corp. -- --
Ambac Financial Group, Inc. 8,000 479
American General Corp. 2,400 171
Assicurazioni Generali, SpA -- --
Associates First Capital Corp. 3,930 159
Astoria Financial Corp. 1,840 84
BB&T Corp. 16,000 612
Bank of New York Co. 3,400 121
Bank of Nova Scotia 9,400 203
Bank One Corp. 2,749 144
Banque Nationale de Paris 8,400 764
Bear Stearns Cos. 6,000 283
(a) Berkshire Hathaway, Inc. 5 341
Chartwell Re Corp. -- --
Chase Manhattan Corp. 3,800 292
China Resources Enterprises, Ltd. 364,000 442
Cincinnati Financial Corp. 1,000 33
Citigroup, Inc. 7,000 392
Commercial Federal Corp. 9,700 222
Compass Bancshares, Inc. -- --
Cullen Frost Bankers, Inc. 1,000 52
(a) Custos, A.B. -- --
Dah Sing Financial 112,400 211
Del Webb Corp. 3,100 81
Deluxe Corp. -- --
Dresdner Bank, A.G. 2,500 102
Everest Reinsurance Holdings, Inc. -- --
Federal National Mortgage Association 15,100 1,100
Fidelity National Financial, Inc. 5,500 146
(a) Financial Federal Corp. 11,500 269
First Union Corp. 5,520 290
Fleet Financial Group, Inc. 3,800 168
Fremont General Corp. 1,600 36
Fund America Enterprises Holdings, Inc. 1,600 233
HSBC Holdings, PLC 9,778 244
Hang Seng Bank, Ltd. 21,000 175
Hartford Financial Services 10,000 519
Heller Financial, Inc. -- --
Hibernia Corp. -- --
(a) IMC Mortgage Co. 112,700 49
ING Groep, N.V. 11,035 644
Jefferson-Pilot Corp. 4,350 330
KeyCorp 2,600 83
LandAmerica Financial Group, Inc. 1,100 55
(a) LaSalle Partners, Inc. 3,400 107
Legg Mason, Inc. 9,100 271
MGIC Investment Corp. 7,800 286
Man (ED&F) Group, PLC 29,700 154
Merrill Lynch & Co., Inc. 5,600 426
Mitsui Trust & Banking Co., Ltd. 291,000 301
Morgan Stanley, Dean Witter & Co. 8,000 695
NAC Re Corp. 5,400 264
(a) NVR, Inc. -- --
Old Republic International Corp. -- --
PNC Bank Corp. 3,000 154
Progressive Corp. -- --
Protective Life Insurance Co. 8,500 294
Provident Financial Group 5,500 199
</TABLE>
20
<PAGE> 21
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
11,600 $ 393 1,500 $ 51
3,800 552 1,720 250
-- -- 1,400 126
-- -- 3,400 183
-- -- 2,000 120
2,600 185 -- --
1,800 77 -- --
4,192 170 1,466 59
1,380 63 575 26
7,000 268 4,200 161
2,400 85 -- --
-- -- -- --
1,831 96 750 39
2,500 227 800 73
7,400 349 2,100 99
-- -- -- --
-- -- 200 5
3,000 231 800 62
102,000 124 38,000 46
-- -- 1,600 53
8,500 477 1,500 84
6,725 154 3,800 87
650 23 -- --
800 42 300 16
1,500 31 -- --
108,800 204 31,600 59
2,200 57 900 23
8,500 303 1,500 53
8,800 360 5,200 213
3,100 104 -- --
12,300 896 3,700 270
8,140 217 -- --
11,900 278 3,550 83
4,600 242 -- --
2,400 106 800 35
1,400 32 400 9
-- -- -- --
11,131 278 2,642 66
27,700 231 13,400 112
-- -- 2,000 104
10,400 285 -- --
11,500 193 -- --
-- -- -- --
6,419 375 3,156 184
6,000 454 1,800 136
3,400 108 800 26
800 40 300 15
2,800 88 1,400 44
-- -- -- --
6,000 220 2,000 73
-- -- 4,800 25
3,100 236 800 61
411,000 425 112,000 116
4,200 365 1,300 113
10,800 528 2,000 98
-- -- 1,800 80
-- -- 13,000 254
2,100 107 900 46
1,500 187 -- --
5,200 180 3,000 104
-- -- -- --
</TABLE>
21
<PAGE> 22
PORTFOLIOS OF INVESTMENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
HORIZON 20+ PORTFOLIO
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pulte Corp. -- $ --
Raymond James Financial 50,700 966
Reliance Group Holdings, Inc. 2,200 24
Resource Bancshares Mortgage Group, Inc. 2,520 37
Rouse Co. 39,100 924
SLM Holding Corp. 5,400 238
Safeco Corp. 7,100 276
Sakura Bank, Ltd. 215,000 526
Stewart Information Services 2,600 139
SunTrust Banks, Inc. -- --
Texas Regional Bancshares, Inc. 4,300 108
20th Century Industries 43,300 917
United Companies Financial Corp. -- --
W.R. Berkley Corp. -- --
Webster Financial Corp. -- --
Wing Hang Bank, Ltd. -- --
-------------------------------------------------------------------------
19,167
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 6.1%, Abbott Laboratories 13,490 626
4.8% AND 3.3% American Home Products Corp. 11,000 646
(a) American Oncology Resources 13,400 183
(a) Amgen, Inc. 1,900 243
(a) Bio-Rad Laboratories, Inc. "A" 11,000 227
C.R. Bard, Inc. 5,000 253
Cardinal Health, Inc. 6,412 474
(a) Centennial HealthCare Corp. 1,500 23
(a) CONMED Corp. -- --
(a) Genesis Health Ventures, Inc. -- --
(a) Hanger Orthopedic Group, Inc. 21,200 530
Hologic, Inc. -- --
Johnson & Johnson 4,000 340
McKesson Corp. -- --
Medtronic, Inc. 10,818 862
Merck & Co., Inc. 4,900 719
(a) NBTY, Inc. 9,500 56
Omnicare, Inc. 4,400 135
Pfizer, Inc. -- --
(a) Renal Care Group, Inc. 2,550 79
(a) Safeskin Corp. 9,400 220
Schering-Plough, PLC 7,000 382
Suzuken Co., Ltd. 15,000 334
(a) Trigon Healthcare, Inc. 11,800 377
(a) Universal Health Services, Inc. 7,400 331
(a) Wellpoint Health Networks, Inc. 5,800 434
(a) Xomed Surgical 9,000 323
-------------------------------------------------------------------------
7,797
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 14.5%, (a) ADC Telecommunications, Inc. 38,400 1,526
9.4% AND 7.1% AMP, Inc. 8,112 427
AT&T Corp. -- --
(a) Affiliated Computer Services, Inc. 21,500 1,037
(a) AirTouch Communications, Inc. -- --
Alcatel Sel, A.G. 1,222 210
Alltel Corp. 5,000 323
Ameritech Corp. 6,200 404
BCE, Inc. 10,900 490
Belden, Inc. -- --
BellSouth Corp. 8,000 357
(a) Benchmark Electronics, Inc. 1,400 54
</TABLE>
22
<PAGE> 23
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
16,000 $ 483 -- $ --
31,700 604 3,700 71
2,200 24 700 8
1,890 28 735 11
30,200 713 9,700 229
-- -- 600 26
2,000 78 -- --
102,000 250 -- --
3,200 171 2,200 118
960 68 -- --
3,900 97 800 20
-- -- 4,200 89
-- -- 500 1
-- -- 100 3
1,200 36 400 12
277,500 564 95,000 193
- ------------------------------------------------------------------------------
13,762 4,723
- ------------------------------------------------------------------------------
9,600 446 3,800 176
4,200 246 3,000 176
16,700 229 9,400 129
8,100 1,035 500 64
18,800 388 1,000 21
8,000 405 2,700 137
4,275 316 -- --
-- -- -- --
1,700 56 -- --
-- -- 300 2
20,600 515 7,800 195
1,500 19 600 8
2,350 200 -- --
4,500 338 1,500 113
3,299 263 537 43
3,000 440 1,500 220
10,000 59 4,700 28
5,800 178 1,000 31
5,000 643 -- --
-- -- 1,050 33
6,200 145 2,000 47
-- -- -- --
900 20 16,600 370
-- -- -- --
-- -- -- --
700 52 1,100 82
7,500 269 1,500 54
- ------------------------------------------------------------------------------
6,262 1,929
- ------------------------------------------------------------------------------
-- -- 4,700 370
6,716 353 2,094 110
-- -- 900 82
-- -- 5,200 251
6,000 579 -- --
735 126 169 29
-- -- -- --
7,700 501 4,900 319
-- -- -- --
900 18 400 8
17,200 768 2,800 125
1,200 46 400 15
</TABLE>
23
<PAGE> 24
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
-------------------------------
HORIZON 20+ PORTFOLIO
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Burr-Brown Corp. -- $ --
(a) CHS Electronics, Inc. 27,000 403
Cap Gemini Sogeti, S.A. 3,100 613
(a) CIBER, Inc. -- --
(a) Cisco Systems 6,925 774
Comdisco, Inc. 43,600 583
Computer Associates International 10,000 506
Computer Sciences Corp. 12,800 878
(a) Compuware Corp. 2,000 133
(a) Comverse Technologies, Inc. -- --
Deutsche Telekom 4,100 187
(a) Fuji Photo Film Co., Ltd. 7,000 259
GTE Corp. 5,500 371
(a) HMT Technology Corp. 2,200 24
Hewlett-Packard Co. 4,300 337
(a) InaCom Corp. 8,700 114
Intel Corp. 10,200 1,438
(a) Keane, Inc. 4,800 155
(a) Koninklijke KPN, N.V. 5,700 316
(a) Learning Company, Inc. 1,700 41
Linear Technology Corp. 8,100 824
MasTec, Inc. 1,000 30
Murata Manufacturing -- --
(a) Orbital Sciences Corp. 8,600 345
Pittway Corp. 14,200 398
(a) Pomeroy Computer Resources 14,500 308
Primex Technologies, Inc. 14,000 615
(a) Quantum Corp. 25,400 606
Reynolds & Reynolds Co. 24,500 490
SAP, A.G. 300 118
Scientific-Atlanta, Inc. 4,600 143
(a) Sun Microsystems 5,700 638
(a) Synopsys, Inc. 8,200 476
(a) Tech Data Corp. -- --
Technitrol, Inc. 9,100 223
Telecom Italia, SpA 76,430 716
(a) Veritas DGC, Inc. 41,600 517
-------------------------------------------------------------------------
18,407
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.2%, (a) AMR Corp. -- --
1.7% AND 1.6% Air New Zealand, Ltd., "B" -- --
Airborne Freight Corp. 800 28
(a) America West Holdings Corp., "B" 2,200 47
Comair Holdings, Inc. 18,000 660
(a) FDX Corp. 2,400 196
Jurong Shipyard, Ltd. 10,400 42
Qantas Airways, Ltd. 119,500 260
Roadway Express, Inc. 6,000 99
Tranz Rail Holdings -- --
Trinity Industries 1,000 36
(a) U.S. Xpress Enterprises, "A" 11,400 194
(a) Wisconsin Central Transportation Corp. -- --
-------------------------------------------------------------------------
1,562
- --------------------------------------------------------------------------------------------------------------------
UTILITIES -- 6.4%, Ameren Corp. -- --
5.7% AND 3.9% (a) Anglian Water, PLC -- --
Aquarion Co. 7,700 297
Black Hills Corp. 8,700 216
CLP Holdings Ltd. 70,000 317
(a) Calpine Corp. 1,100 41
</TABLE>
24
<PAGE> 25
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ------------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1,200 $ 29 -- $ --
46,900 701 5,000 75
200 40 900 178
-- -- 3,000 83
5,862 655 -- --
6,500 87 9,900 132
7,500 380 2,500 127
6,600 453 500 34
2,400 159 1,700 113
-- -- 800 67
4,600 209 1,800 82
3,400 126 2,000 74
5,000 337 2,000 135
1,700 18 800 9
3,600 282 1,400 110
-- -- 4,000 52
8,100 1,142 2,500 352
1,600 52 -- --
-- -- -- --
1,300 32 500 12
5,900 600 2,200 224
800 24 300 9
100 5 -- --
2,900 116 2,600 104
8,000 224 3,800 107
11,100 236 1,900 40
-- -- 1,300 57
17,200 411 5,400 129
-- -- -- --
1,600 631 100 39
26,600 828 1,300 40
10,000 1,119 1,200 134
8,200 476 1,400 81
9,400 295 1,500 47
-- -- 2,000 49
23,100 216 10,980 103
4,400 55 9,900 123
- ------------------------------------------------------------------------------
12,329 4,230
- ------------------------------------------------------------------------------
5,400 317 2,000 118
105,000 175 5,300 9
600 21 200 7
1,700 37 600 13
20,600 756 3,300 121
2,000 163 600 49
-- -- -- --
-- -- 193,800 422
19,300 320 1,200 20
46,000 111 -- --
800 29 4,900 175
19,200 326 -- --
-- -- 400 6
- ------------------------------------------------------------------------------
2,255 940
- ------------------------------------------------------------------------------
-- -- 5,300 208
-- -- 4,800 60
11,400 440 5,300 204
14,600 362 400 10
32,500 147 11,000 50
-- -- 300 11
</TABLE>
25
<PAGE> 26
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
-------------------------------
HORIZON 20+ PORTFOLIO
-------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Casella Waste Systems, Inc. -- $ --
Chugoku Electric Power 64,400 1,088
CINergy Corp. -- --
Eastern Enterprises 1,100 44
Eastern Utilities Associates 7,200 213
Empire District Electric 19,300 480
FPL Group 11,700 642
FirstEnergy Corp. 2,500 78
Hokuriku Electric Power Co. -- --
(a) Hong Kong & China Gas Co., Ltd. 133,000 154
(a) Hong Kong Electric Holdings, Ltd. -- --
(a) Hong Kong Telecommunications, Ltd. 58,600 95
Kyushu Electric Power Co. 62,200 1,027
LG&E Energy Corp. -- --
Northwestern Corp. -- --
Scottish Power PLC 54,000 573
Scottish & South Energy 110,200 1,054
Shikoku Electric Power 66,100 1,111
TNP Enterprises 700 25
Texas Utilities Co., Inc. -- --
Tohoku Electric Power Co. -- --
(a) United Utilities, PLC 25,000 323
WPS Resources Corp. -- --
Waste Management, Inc. 6,010 300
-----------------------------------------------------------------------------
8,078
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--77.4%, 59.1% AND 39.8%
98,341
(Cost: $85,598, $67,197 and $20,805)
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENTS
(b) Repurchase agreements
State Street Bank and Trust Company
dated 1/29/99, 4.00%, due 2/1/99 $ 956 956
Other money market instruments
Yield--4.76% to 4.91%
Due--February 1999 2,000 1,999
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--2.3%, 1.5% AND 2.1%
(Cost: $2,955, $1,998 and $1,229) 2,955
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIOS--100%
(Cost: $114,188, $120,789 and $56,457) $127,055
-----------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) Non-income producing security.
(b) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. The collateral is monitored daily by the fund
so that its market value exceeds the carrying value of the repurchase
agreement.
Based on the cost of investments for federal income tax purposes at January 31,
1999, 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 $114,188 $120,789 $56,457
- ------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 17,869 14,907 4,418
- ------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 5,002 4,506 1,529
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 12,867 10,401 2,889
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
26
<PAGE> 27
PORTFOLIOS OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------- --------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ----------------------------------- --------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
4,900 $ 127 -- $ --
51,600 872 15,700 265
-- -- 2,900 91
12,700 511 -- --
-- -- -- --
5,200 129 2,100 52
6,100 335 1,700 93
9,900 308 3,100 96
4,000 65 -- --
52,700 61 12,200 14
114,200 335 -- --
68,000 110 -- --
12,800 211 -- --
31,700 836 5,500 145
14,200 378 11,600 309
2,000 21 -- --
87,400 836 26,900 257
6,500 109 16,100 271
600 21 200 7
7,400 325 800 35
31,000 512 -- --
18,700 242 6,300 81
-- -- 1,000 33
4,977 249 -- --
- ------------------------------------------------------------------------------
7,542 2,292
- ------------------------------------------------------------------------------
77,463 23,619
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$ -- -- $ 230 230
2,000 1,998 1,000 999
- -------------------------------------------------------------------------------
1,998 1,229
- -------------------------------------------------------------------------------
$131,190 $59,346
- -------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $114,188, $120,789, and $56,457) $127,055 131,190 59,346
- -------------------------------------------------------------------------------------------------------------
Cash 21 10 243
- -------------------------------------------------------------------------------------------------------------
Receivable for:
Fund shares sold 4 44 248
- -------------------------------------------------------------------------------------------------------------
Dividends and interest 625 1,094 469
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 127,705 132,338 60,306
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
Payable for:
Fund shares redeemed 18 25 38
- -------------------------------------------------------------------------------------------------------------
Management fee 64 64 29
- -------------------------------------------------------------------------------------------------------------
Distribution services fee 42 39 19
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 24 24 12
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 200 101 44
- -------------------------------------------------------------------------------------------------------------
Trustees' fees and other 3 5 13
- -------------------------------------------------------------------------------------------------------------
Total liabilities 351 258 155
- -------------------------------------------------------------------------------------------------------------
NET ASSETS $127,354 132,080 60,151
- -------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
Paid-in capital $110,891 117,166 55,796
- -------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 3,685 4,295 1,291
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 12,867 10,401 2,889
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (89) 218 175
- -------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $127,354 132,080 60,151
- -------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net assets applicable to shares outstanding $ 57,729 67,638 29,980
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 4,249 5,373 2,660
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/ shares outstanding) $ 13.59 12.59 11.27
- -------------------------------------------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $ 14.42 13.36 11.96
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $ 56,738 51,216 24,292
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 4,248 4,072 2,154
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price (subject to
contingent deferred sales charge) per share (net assets /
shares outstanding) $ 13.36 12.58 11.28
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 11,766 13,064 5,721
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 881 1,042 507
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price (subject to
contingent deferred sales charge) per share (net assets /
shares outstanding) $ 13.34 12.54 11.28
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net assets applicable to shares outstanding $ 1,121 162 158
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 82 13 14
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/ shares outstanding) $ 13.66 12.57 11.29
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
28
<PAGE> 29
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Six months ended January 31, 1999 (unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
----------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
NET INVESTMENT INCOME
Dividends $ 477 387 131
- ------------------------------------------------------------------------------------------------------------
Interest 941 1,823 1,144
- ------------------------------------------------------------------------------------------------------------
Total investment income 1,418 2,210 1,275
- ------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 332 346 158
- ------------------------------------------------------------------------------------------------------------
Distribution services fee 232 215 108
- ------------------------------------------------------------------------------------------------------------
Administrative services fee 133 140 65
- ------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 665 392 150
- ------------------------------------------------------------------------------------------------------------
Professional fees 20 25 12
- ------------------------------------------------------------------------------------------------------------
Reports to shareholders 25 26 17
- ------------------------------------------------------------------------------------------------------------
Trustees' fees and other 27 26 12
- ------------------------------------------------------------------------------------------------------------
Total expenses 1,434 1,170 522
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (16) 1,040 753
- ------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on sales of investments 4,423 4,765 1,661
- ------------------------------------------------------------------------------------------------------------
Net realized loss from futures transactions (153) (102) (16)
- ------------------------------------------------------------------------------------------------------------
Net realized gain 4,270 4,663 1,645
- ------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation on investments (2,394) (2,194) (885)
- ------------------------------------------------------------------------------------------------------------
Net gain on investments 1,876 2,469 760
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,860 3,509 1,513
- ------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 1999 (unaudited) and for the year
ended July 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
--------------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
------------------ ----------------- ---------------
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
Net investment income (loss) $ (16) 48 1,040 1,553 753 1,245
- --------------------------------------------------------------------------------------------------------
Net realized gain 4,270 679 4,663 1,335 1,645 528
- --------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (2,394) 6,055 (2,194) 5,063 (885) 1,289
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,860 6,782 3,509 7,951 1,513 3,062
- --------------------------------------------------------------------------------------------------------
Distribution from net investment income (74) (124) (954) (1,217) (815) (1,124)
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain (184) (2,944) (1,127) (2,477) (582) (920)
- --------------------------------------------------------------------------------------------------------
Total dividends to shareholders (258) (3,068) (2,081) (3,694) (1,397) (2,044)
- --------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 15,676 43,689 18,965 44,030 4,700 23,617
- --------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 17,278 47,403 20,393 48,287 4,816 24,635
- --------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 110,076 62,673 111,687 63,400 55,335 30,700
- --------------------------------------------------------------------------------------------------------
END OF PERIOD $127,354 110,076 132,080 111,687 60,151 55,335
- --------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT
END OF PERIOD $ (89) 1 218 132 175 237
- --------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF THE
FUND Kemper Horizon Fund (the "fund") is an open-end
diversified management investment company organized
as a business trust under the laws of
Massachusetts. The fund consists of three
investment portfolios ("portfolios") designed for
investors with different investment objectives. The
three portfolios are Kemper Horizon 20+, Kemper
Horizon 10+ and Kemper Horizon 5. Each portfolio
currently offers four classes of shares. Class A
shares are sold to investors subject to an initial
sales charge. Class B shares are sold without an
initial sales charge but are subject to higher
ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are sold without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class. Class I shares are offered to a
limited group of investors, are not subject to
initial or contingent deferred sales charges and
have lower ongoing expenses than other classes.
Differences in class expenses will result in the
payment of different per share income dividends by
class. All shares of each portfolio have equal
rights with respect to voting, dividends and
assets, subject to class specific preferences.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Securities quoted on the Nasdaq Stock Market
(Nasdaq) for which there have been sales, are
valued at the most recent sale price reported. If
there are no such sales, the value is the most
recent bid quotation. Securities which are not
quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price on such market. If no sale
occurred, the security is then valued at the
calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Money market instruments purchased with an
original maturity of sixty days or less are valued
at amortized cost. All other securities are valued
at their fair market value as determined in good
faith by the Valuation Committee of the Board of
Trustees.
FOREIGN CURRENCY TRANSLATION. The books and records
of the portfolios are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
rates of exchange. Purchases and sales of
investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions. The portfolios include that portion
of the results of operations resulting from changes
in foreign exchange rates with net realized and
unrealized gain (loss) on investments, as
appropriate.
30
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Dividend income is recorded on
the ex-dividend date, and interest income is
recorded on the accrual basis and includes discount
amortization on fixed income securities. Realized
gains and losses from investment transactions are
reported on an identified cost basis.
EXPENSES. Expenses arising in connection with a
specific portfolio are allocated to that portfolio.
Other fund expenses are allocated among the
portfolios in proportion to their relative net
assets.
FUND SHARE VALUATION. Fund shares are sold and
redeemed on a continuous basis at net asset value
(plus an initial sales charge on most sales of
Class A shares). Proceeds payable on redemption of
Class B and Class C shares will be reduced by the
amount of any applicable contingent deferred sales
charge. On each day the New York Stock Exchange is
open for trading, the net asset value per share is
determined as of the close of the Exchange. The net
asset value per share is determined separately for
each class by dividing the portfolio's net assets
attributable to that class by the number of shares
of the class outstanding.
FEDERAL INCOME TAXES. Each portfolio's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, each portfolio paid no federal income
taxes and no federal income tax provision was
required.
DIVIDENDS TO SHAREHOLDERS. Each portfolio intends
to pay dividends of net investment income as
follows: annually for the Kemper Horizon 20+
semiannually for the Kemper Horizon 10+ and
quarterly for the Kemper Horizon 5. Each portfolio
will pay any net realized capital gains at least
annually. Dividends are recorded on the ex-dividend
date. Dividends are determined in accordance with
income tax principles which may treat certain
transactions differently from generally accepted
accounting principles.
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. Each portfolio has a
management agreement with Scudder Kemper
Investments, Inc. (Scudder Kemper). Under the
management agreement each portfolio pays a monthly
investment management fee of 1/12 of the annual
rate of .58% of the first $250 million of average
daily net assets declining to .42% of average daily
net assets in excess of $12.5 billion. The fund
incurred management fees of $836,000 for the six
months ended January 31, 1999.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T industries p.l.c. (B.A.T.) pursuant to which
the financial services businesses at B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreements with Scudder
Kemper was deemed to have been assigned and,
therefore, terminated. The Board of Trustees of the
fund has approved a new investment management
agreement for each portfolio with Scudder Kemper,
which is substantially identical to the former
investment management agreement, except for the
dates of execution and termination. Shareholders
approved the new investment management agreements
through a proxy solicitation that concluded in
mid-December.
31
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. The fund has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with the distribution
of each portfolio's Class A shares for the six
months ended January 31, 1999 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
RETAINED BY KDI
---------------
<S> <C>
Kemper Horizon 20+ Portfolio $10,000
Kemper Horizon 10+ Portfolio 11,000
Kemper Horizon 5 Portfolio 7,000
</TABLE>
For services under the distribution services
agreement, each portfolio pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the 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 and
CDSC related to Class B and Class C shares for the
six months ended January 31, 1999 are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
AND CDSC
RECEIVED BY KDI
-----------------
<S> <C>
Kemper Horizon 20+ Portfolio $280,000
Kemper Horizon 10+ Portfolio 255,000
Kemper Horizon 5 Portfolio 129,000
</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,
1999 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE PORTFOLIOS TO KDI
----------------------
<S> <C>
Kemper Horizon 20+ Portfolio $133,000
Kemper Horizon 10+ Portfolio 140,000
Kemper Horizon 5 Portfolio 65,000
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
services agreement with the fund's transfer agent,
Kemper Service Company (KSvC) is the shareholder
service agent of the fund. Under the agreement,
KSvC received shareholder services fees of
$1,018,000 for the six months ended January 31,
1999.
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, 1999, the fund made no payments to its officers
and incurred trustees' fees of $19,000 to
independent trustees.
32
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 INVESTMENT
TRANSACTIONS For the six months ended January 31, 1999,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
<TABLE>
<CAPTION>
KEMPER KEMPER KEMPER
HORIZON 20+ HORIZON 10+ HORIZON 5
----------- ----------- ---------
<S> <C> <C> <C>
Purchases $63,036 55,229 20,918
Proceeds from sales 49,178 37,804 17,792
</TABLE>
- --------------------------------------------------------------------------------
5
CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of the portfolios (in thousands):
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,016 $13,175 2,092 $27,974
------------------------------------------------------------------------------
Class B 819 10,384 1,757 22,828
------------------------------------------------------------------------------
Class C 265 3,376 460 6,048
------------------------------------------------------------------------------
Class I 14 193 111 568
------------------------------------------------------------------------------
SHARES ISSUED IN
REINVESTMENT OF DIVIDENDS
Class A 11 144 120 1,458
------------------------------------------------------------------------------
Class B 6 82 110 1,326
------------------------------------------------------------------------------
Class C 1 16 14 171
------------------------------------------------------------------------------
Class I 1 14 3 41
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (454) (5,794) (630) (8,322)
------------------------------------------------------------------------------
Class B (341) (4,540) (518) (7,024)
------------------------------------------------------------------------------
Class C (85) (1,074) 82 (1,086)
------------------------------------------------------------------------------
Class I (24) (300) (90) (293)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 20 248 80 1,050
------------------------------------------------------------------------------
Class B (20) (248) (80) (1,050)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $15,676 $43,689
------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,285 $ 16,096 2,805 $33,563
------------------------------------------------------------------------------
Class B 1,134 13,862 1,763 21,466
------------------------------------------------------------------------------
Class C 279 3,386 505 6,176
------------------------------------------------------------------------------
Class I 1 13 33 141
------------------------------------------------------------------------------
SHARES ISSUED IN
REINVESTMENT OF DIVIDENDS
Class A 96 1,192 157 1,820
------------------------------------------------------------------------------
Class B 54 674 124 1,294
------------------------------------------------------------------------------
Class C 14 167 29 334
------------------------------------------------------------------------------
Class I 1 3 2 23
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (736) (8,834) (717) (8,630)
------------------------------------------------------------------------------
Class B (449) (6,040) (825) (9,857)
------------------------------------------------------------------------------
Class C (111) (1,342) (168) (2,084)
------------------------------------------------------------------------------
Class I (18) (212) (39) (216)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 75 904 120 1,523
------------------------------------------------------------------------------
Class B (75) (904) (120) (1,523)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 18,965 $44,030
------------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 909 $ 10,476 1,976 $21,743
------------------------------------------------------------------------------
Class B 776 8,538 1,414 15,661
------------------------------------------------------------------------------
Class C 149 1,642 242 2,675
------------------------------------------------------------------------------
Class I 1 9 7 83
------------------------------------------------------------------------------
SHARES ISSUED IN
REINVESTMENT OF DIVIDENDS
Class A 61 670 78 850
------------------------------------------------------------------------------
Class B 49 542 84 908
------------------------------------------------------------------------------
Class C 12 137 18 198
------------------------------------------------------------------------------
Class I 1 5 1 9
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (688) (7,641) (858) (9,364)
------------------------------------------------------------------------------
Class B (741) (8,512) (729) (8,043)
------------------------------------------------------------------------------
Class C (98) (1,100) (97) (1,089)
------------------------------------------------------------------------------
Class I (7) (66) (1) (14)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 29 316 83 919
------------------------------------------------------------------------------
Class B (29) (316) 83 (919)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 4,700 $23,617
------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 35
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS A
-----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JANUARY JULY 31, DEC. 29, 1995
KEMPER HORIZON 31, ------------- TO JULY 31,
20+ PORTFOLIO 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.48 12.89 9.72 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .02 .04 .12 .18
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain .13 1.07 3.15 .04
- -------------------------------------------------------------------------------------------
Total from investment operations .15 1.11 3.27 .22
- -------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .02 .04 .10 --
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .02 .48 -- --
- -------------------------------------------------------------------------------------------
Total dividends .04 .52 .10 --
- -------------------------------------------------------------------------------------------
Net asset value, end of period $13.59 13.48 12.89 9.72
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.08% 9.04 33.90 2.32
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.07% 2.00 1.69 1.48
- -------------------------------------------------------------------------------------------
Net investment income .39% .49 1.08 1.51
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS B
-----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JANUARY JULY 31, DEC. 29, 1995
31, ------------- TO JULY 31,
1999 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.28 12.79 9.65 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.02) (.03) .03 .11
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain .12 1.00 3.15 .04
- -------------------------------------------------------------------------------------------
Total from investment operations .10 .97 3.18 .15
- -------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income -- -- .04 --
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .02 .48 -- --
- -------------------------------------------------------------------------------------------
Total dividends .02 .48 .04 --
- -------------------------------------------------------------------------------------------
Net asset value, end of period $13.36 13.28 12.79 9.65
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .76% 7.98 33.01 1.58
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.80% 2.79 2.47 2.26
- -------------------------------------------------------------------------------------------
Net investment income (loss) (.34)% (.30) .30 .73
- -------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS C
--------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON JANUARY 31, -------------- TO JULY 31,
20+ PORTFOLIO 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.29 12.80 9.67 9.50
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.03) (.05) .04 .13
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain .10 1.02 3.13 .04
- -----------------------------------------------------------------------------------------------
Total from investment operations .07 .97 3.17 .17
- -----------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income -- -- .04 --
- -----------------------------------------------------------------------------------------------
Distribution from net realized gain .02 .48 -- --
- -----------------------------------------------------------------------------------------------
Total dividends .02 .48 .04 --
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $13.34 13.29 12.80 9.67
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) .53% 7.97 32.80 1.79
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 3.18% 3.03 2.48 2.23
- -----------------------------------------------------------------------------------------------
Net investment income (loss) (.72)% (.54) .29 .76
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------
CLASS I
--------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, APRIL 8
JANUARY 31, -------------- TO JULY 31,
1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.62 12.96 9.73 10.03
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .17 .19 .07
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .10 1.09 3.17 (.37)
- -----------------------------------------------------------------------------------------------
Total from investment operations .23 1.26 3.36 (.30)
- -----------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .17 .12 .13 --
- -----------------------------------------------------------------------------------------------
Distribution from net realized gain .02 .48 -- --
- -----------------------------------------------------------------------------------------------
Total dividends .19 .60 .13 --
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $13.66 13.62 12.96 9.73
- -----------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.71% 10.29 34.84 (2.99)
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .87% .85 1.04 .73
- -----------------------------------------------------------------------------------------------
Net investment income 1.59% 1.64 1.73 2.32
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, DEC. 29, 1995
JANUARY 31, ------------------- TO JULY 31,
1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $127,354 110,076 62,673 18,251
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 83% 44 130 122
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
36
<PAGE> 37
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS A
----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON JANUARY 31, ------------- TO JULY 31,
10+ PORTFOLIO 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.49 12.01 9.60 9.50
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .12 .24 .25 .20
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .21 .87 2.36 (.04)
- -----------------------------------------------------------------------------------------
Total from investment operations .33 1.11 2.61 .16
- -----------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .12 .22 .20 .06
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- -----------------------------------------------------------------------------------------
Total dividends .23 .63 .20 .06
- -----------------------------------------------------------------------------------------
Net asset value, end of period $12.59 12.49 12.01 9.60
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.68% 9.75 27.43 1.70
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.52% 1.48 1.51 1.48
- -----------------------------------------------------------------------------------------
Net investment income 2.15% 2.26 2.36 2.40
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
CLASS B
----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, DEC. 29, 1995
JANUARY 31, ------------- TO JULY 31,
1999 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.48 12.00 9.60 9.50
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06 .15 .16 .17
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .21 .86 2.35 (.04)
- -----------------------------------------------------------------------------------------
Total from investment operations .27 1.01 2.51 .13
- -----------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .06 .12 .11 .03
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- -----------------------------------------------------------------------------------------
Total dividends .17 .53 .11 .03
- -----------------------------------------------------------------------------------------
Net asset value, end of period $12.58 12.48 12.00 9.60
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.22% 8.85 26.25 1.38
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.37% 2.36 2.36 2.26
- -----------------------------------------------------------------------------------------
Net investment income 1.30% 1.38 1.51 1.62
- -----------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------------
CLASS C
---------------------------------------------
SIX MONTHS YEAR ENDED JULY
ENDED 31, DEC. 29, 1995
KEMPER HORIZON JANUARY 31, --------------- TO JULY 31,
10+ PORTFOLIO 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.44 11.98 9.60 9.50
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06 .14 .14 .17
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .21 .87 2.34 (.04)
- ----------------------------------------------------------------------------------------
Total from investment operations .27 1.01 2.48 .13
- ----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .06 .14 .10 .03
- ----------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- ----------------------------------------------------------------------------------------
Total dividends .17 .55 .10 .03
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 12.54 12.44 11.98 9.60
- ----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.21% 8.83 25.97 1.39
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.51% 2.39 2.61 2.23
- ----------------------------------------------------------------------------------------
Net investment income 1.16% 1.35 1.26 1.65
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------
CLASS I
---------------------------------------------
SIX MONTHS YEAR ENDED JULY
ENDED 31, APRIL 8
JANUARY 31, --------------- TO JULY 31,
1999 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.46 11.97 9.57 9.83
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .28 .35 .26 .09
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .09 .84 2.40 (.26)
- ----------------------------------------------------------------------------------------
Total from investment operations .37 1.19 2.66 (.17)
- ----------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .15 .29 .26 .09
- ----------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- ----------------------------------------------------------------------------------------
Total dividends .26 .70 .26 .09
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 12.57 12.46 11.97 9.57
- ----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.01% 10.47 28.09 (1.74)
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.05% .99 1.06 .73
- ----------------------------------------------------------------------------------------
Net investment income 2.62% 2.75 2.81 3.21
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, DEC. 29, 1995
JANUARY 31, -------------------- TO JULY 31,
1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $132,080 111,687 63,400 18,912
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 61% 37 126 87
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
38
<PAGE> 39
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS A
-----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON JANUARY 31, ------------- TO JULY 31,
5 PORTFOLIO 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.26 11.06 9.57 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .17 .35 .34 .25
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .15 .47 1.45 (.07)
- -------------------------------------------------------------------------------------------
Total from investment operations .32 .82 1.79 .18
- -------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .19 .35 .30 .11
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------------
Total dividends .31 .62 .30 .11
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.27 11.26 11.06 9.57
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.87% 7.74 19.02 1.84
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.63% 1.64 1.51 1.48
- -------------------------------------------------------------------------------------------
Net investment income 3.07% 3.28 3.30 3.20
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------
CLASS B
-----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, DEC. 29, 1995
JANUARY 31, ------------- TO JULY 31,
1999 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.28 11.06 9.57 9.50
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .30 .27 .21
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .14 .47 1.44 (.07)
- -------------------------------------------------------------------------------------------
Total from investment operations .28 .77 1.71 .14
- -------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .16 .28 .22 .07
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------------
Total dividends .28 .55 .22 .07
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.28 11.28 11.06 9.57
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.51% 7.27 18.15 1.44
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.20% 2.17 2.15 2.26
- -------------------------------------------------------------------------------------------
Net investment income 2.50% 2.75 2.66 2.42
- -------------------------------------------------------------------------------------------
</TABLE>
39
FINANCIAL Highlights
<PAGE> 40
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------
CLASS C
----------------------------------------------
SIX MONTHS YEAR ENDED JULY
ENDED 31, DEC. 29, 1995
KEMPER HORIZON JANUARY 31, ---------------- TO JULY 31,
5 PORTFOLIO 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.27 11.07 9.57 9.50
- -----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .13 .28 .28 .21
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .16 .47 1.43 (.07)
- -----------------------------------------------------------------------------------------
Total from investment operations .29 .75 1.71 .14
- -----------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .16 .28 .21 .07
- -----------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -----------------------------------------------------------------------------------------
Total dividends .28 .55 .21 .07
- -----------------------------------------------------------------------------------------
Net asset value, end of period $11.28 11.27 11.07 9.57
- -----------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.60% 7.10 18.13 1.45
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.18% 2.18 2.16 2.23
- -----------------------------------------------------------------------------------------
Net investment income 2.52% 2.74 2.65 2.45
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
CLASS I
------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED JULY 31, APRIL 8
JANUARY 31, -------------- TO JULY 31,
1999 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $11.28 11.06 9.58 9.69
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .26 .41 .32 .08
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .09 .47 1.49 (.11)
- -------------------------------------------------------------------------------------------
Total from investment operations .35 .88 1.81 (.03)
- -------------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .22 .39 .33 .08
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------------
Total dividends .34 .66 .33 .08
- -------------------------------------------------------------------------------------------
Net asset value, end of period $11.29 11.28 11.06 9.58
- -------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.19% 8.29 19.27 (.31)
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.04% 1.03 1.20 .73
- -------------------------------------------------------------------------------------------
Net investment income 3.66% 3.89 3.61 4.11
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALLOCATION
- -------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, DEC. 29, 1995
JANUARY 31, -------------------- TO JULY 31,
1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $60,151 55,335 30,700 10,831
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 60% 43 150 57
- -------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 41
FINANCIAL HIGHLIGHTS
NOTES TO FINANCIAL HIGHLIGHTS FOR ALL PORTFOLIOS:
Total returns do not reflect the effect of any sales charges.
Per share data for the period ended July 31, 1996 was determined based on
average shares outstanding.
Data for the period ended January 31, 1999 is unaudited.
For the period ended July 31, 1996, the investment manager agreed to reduce its
management fee and absorb certain operating expenses of the portfolios. If these
expense waivers had not been in effect, the expense ratio of each share class
would have increased by .06% of average net assets for Horizon 20+, .04% for
Horizon 10+ and .05% for Horizon 5. There would have been a corresponding
decrease in the net investment income ratio for the period. The waivers were
discontinued on August 1, 1996.
41
<PAGE> 42
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
On December 17, 1998, a special shareholders' meeting was held. Kemper Horizon
Portfolio shareholders were asked to vote on two separate issues: approval of
the new Investment Management Agreement between the fund and Scudder Kemper
Investments, Inc., and to modify or eliminate certain policies and to eliminate
the shareholder approval requirements as to certain other matters. The following
are the results.
KEMPER HORIZON 20+
- --------------------------------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
4,444,138 109,481 196,080
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,445,253 336,585 318,303 649,557
</TABLE>
Diversification
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,444,047 337,791 318,303 649,557
</TABLE>
Borrowing
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,440,500 341,337 318,303 649,557
</TABLE>
Senior securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,446,732 335,106 318,303 649,557
</TABLE>
Concentration
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,446,732 335,106 318,303 649,557
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,445,234 336,604 318,303 649,557
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,446,732 335,106 318,303 649,557
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,446,387 335,451 318,303 649,557
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,443,714 338,124 318,303 649,557
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,445,545 336,293 318,303 649,557
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,440,703 341,134 318,303 649,557
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,446,732 335,106 318,303 649,557
</TABLE>
42
<PAGE> 43
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
KEMPER HORIZON 10+
- ---------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
5,145,765 57,328 200,872
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,984,444 196,926 290,435 932,161
</TABLE>
Diversification
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,984,496 196,874 290,435 932,161
</TABLE>
Borrowing
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,978,128 203,242 290,435 932,161
</TABLE>
Senior securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,983,727 197,643 290,435 932,161
</TABLE>
Concentration
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,984,496 196,874 290,435 932,161
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,978,392 202,978 290,435 932,161
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,983,727 197,643 290,435 932,161
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,984,496 196,874 290,435 932,161
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,979,759 201,611 290,435 932,161
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,972,810 208,560 290,435 932,161
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,983,700 197,670 290,435 932,161
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
3,978,508 202,862 290,435 932,161
</TABLE>
43
<PAGE> 44
SHAREHOLDERS' MEETING
SPECIAL SHAREHOLDERS' MEETING
KEMPER HORIZON 5
- --------------------------------------------------------------------------------
1) Approval of the new Investment Management Agreement between the fund and
Scudder Kemper Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
2,691,668 26,680 118,365
</TABLE>
2) To modify or eliminate certain policies and to eliminate the shareholder
approval requirements as to certain other matters. These items were approved.
Investment objectives
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,027,919 104,755 183,918 520,122
</TABLE>
Diversification
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,019,125 113,548 183,918 520,122
</TABLE>
Borrowing
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,878 106,796 183,918 520,122
</TABLE>
Senior securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,878 106,796 183,918 520,122
</TABLE>
Concentration
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,026,051 106,623 183,918 520,122
</TABLE>
Underwriting of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,026,051 106,623 183,918 520,122
</TABLE>
Investment in real estate
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,026,051 106,623 183,918 520,122
</TABLE>
Purchase of commodities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,919 106,755 183,918 520,122
</TABLE>
Lending
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,788 106,885 183,918 520,122
</TABLE>
Margin purchases and short sales
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,878 106,796 183,918 520,122
</TABLE>
Pledging of assets
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,025,921 106,754 183,918 520,122
</TABLE>
Purchases of securities
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
2,026,051 106,623 183,918 520,122
</TABLE>
44
<PAGE> 45
NOTES
45
<PAGE> 46
NOTES
46
<PAGE> 47
NOTES
47
<PAGE> 48
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
DANIEL PIERCE MARK S. CASADY LINDA J. WONDRACK
Chairman and Trustee President Vice President
JAMES E. AKINS PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
ARTHUR R. GOTTSCHALK CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
FREDERICK T. KELSEY ELIZABETH C. WERTH
Trustee PHILIP S. FORTUNA Assistant Secretary
Vice President
THOMAS W. LITTAUER BRENDA LYONS
Trustee and Vice President ANN M. MCCREARY Assistant Treasurer
Vice President
FRED B. RENWICK
Trustee KATHRYN L. QUIRK
Vice President
JOHN G. WEITHERS
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 Avenue
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 (3/24/99) 1068890
