<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE
YEAR ENDED JULY 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER
HORIZON FUND
"... the market bore out our convictions
and again proved the merits of diversification.
When the markets became more rational and broadened
out in April, we were well positioned. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
11
Statistics For Horizon 20+ Largest Holdings
13
Statistics For Horizon 10+ Largest Holdings
15
Statistics For Horizon 5 Largest Holdings
16
Portfolios Of Investments
36
Report Of Independent Auditors
37
Financial Statements
39
Notes To Financial Statements
45
Financial Highlights
AT A GLANCE
- --------------------------------------------------------------------------------
KEMPER HORIZON
FUND TOTAL RETURNS*
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED JULY 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
HORIZON 20+ 4.21% 3.55% 3.24%
- --------------------------------------------------------------------------------
HORIZON 10+ 5.37% 4.46% 4.29%
- --------------------------------------------------------------------------------
HORIZON 5 4.94% 4.24% 4.20%
- --------------------------------------------------------------------------------
</TABLE>
RETURNS 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 AND THE FINANCIAL
HIGHLIGHTS AT THE END OF THIS REPORT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
AS OF AS OF
7/31/99 7/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
HORIZON 20+ CLASS A $14.01 $13.48
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS B $13.72 $13.28
- --------------------------------------------------------------------------------
HORIZON 20+ CLASS C $13.70 $13.29
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS A $12.79 $12.49
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS B $12.78 $12.48
- --------------------------------------------------------------------------------
HORIZON 10+ CLASS C $12.73 $12.44
- --------------------------------------------------------------------------------
HORIZON 5 CLASS A $11.31 $11.26
- --------------------------------------------------------------------------------
HORIZON 5 CLASS B $11.31 $11.28
- --------------------------------------------------------------------------------
HORIZON 5 CLASS C $11.30 $11.27
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEMPER HORIZON FUND
RANKINGS AS OF 7/31/99*
- --------------------------------------------------------------------------------
COMPARED TO ALL OTHER FUNDS IN THE LIPPER CATEGORIES*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HORIZON 20+
1-YEAR #191 of 221 funds #201 of 221 funds #205 of 221 funds
- --------------------------------------------------------------------------------
3-YEAR #102 of 163 funds #112 of 163 funds #114 of 163 funds
- --------------------------------------------------------------------------------
HORIZON 10+
1-YEAR #354 of 424 funds #384 of 424 funds #392 of 424 funds
- --------------------------------------------------------------------------------
3-YEAR #241 of 313 funds #282 of 313 funds #285 of 313 funds
- --------------------------------------------------------------------------------
HORIZON 5
1-YEAR #51 of 95 funds #58 of 95 funds #59 of 95 funds
- --------------------------------------------------------------------------------
3-YEAR #31 of 49 funds #36 of 49 funds #37 of 49 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 GUARANTEE FUTURE PERFORMANCE. THE PORTFOLIOS ARE
COMPARED TO THEIR RESPECTIVE LIPPER CATEGORIES AS FOLLOWS: KEMPER HORIZON 20+
PORTFOLIO-FLEXIBLE PORTFOLIO, KEMPER HORIZON 10+ PORTFOLIO-BALANCED PORTFOLIO
AND KEMPER HORIZON 5 PORTFOLIO-INCOME PORTFOLIO.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
DURING THE PERIOD ENDED JULY 31, 1999,
THE FUND MADE THE FOLLOWING DISTRIBUTIONS 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+ $.2500 $.1369 $.1266 $.1100
- --------------------------------------------------------------------------------
HORIZON 5 $.3775 $.3131 $.3092 $.1200
- --------------------------------------------------------------------------------
</TABLE>
TERMS TO KNOW
CYCLICAL STOCKS Cyclical stocks carry a higher degree of economic sensitivity.
In accelerating economies, cyclical stocks tend to rise quickly. In decelerating
economies, cyclicals tend to decline quickly. Cyclical stocks include industrial
machinery, paper and forestry, automobiles and construction.
GROWTH STOCKS Growth stocks are shares in companies that are expected to
experience rapid growth resulting from strong sales, talented management and
dominant market position. Because these stocks are typically in demand, they
tend to carry relatively high price tags and can also be volatile, based on
changing perceptions of the companies' growth.
NARROW MARKET Describes a stock market environment where only a few stocks
perform strongly, while the majority struggle. In contrast, in a broad market,
overall market gains are driven by a larger group of stocks.
VALUE STOCK 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. Because their prices are already depressed, value stocks typically
carry less risk of price declines than do growth stocks.
<PAGE> 3
ECONOMIC OVERVIEW
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 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:
In a widely anticipated move, the Federal Reserve Board raised its key
interest rate -- the overnight bank lending rate -- by one quarter of a point
(0.25%) in August in an effort to slow the U.S. economy and keep inflation under
control. The rate hike frustrates many investors, who do not understand why the
Fed is tightening when there are no signs of inflation.
Talk of rising interest rates began last spring, and on June 30 the Fed
boosted the overnight bank lending rate one quarter of a point (0.25%). With
this move the Fed said it was not inclined to increase rates again anytime
soon -- although it noted that it was alert to the potential emergence of
inflationary pressures that could undermine economic growth. Talk of a second
rate hike began in July after Fed Chairman Alan Greenspan's commentary to the
House Banking Committee, which was part of the Fed's twice-yearly outlook report
required by the Humphrey-Hawkins Full Employment and Balanced Growth Act of
1978. While Greenspan didn't say that the Fed definitely would raise the
overnight bank loan rate at its next meeting, the tone of his report included
more warnings than expected about the need to follow the June rate increase with
another, and speculation about another hike became reality at the August 24 Fed
meeting.
Many investors are frustrated by a rate hike when there are no signs of
inflation, but Fed policymakers look at the rate hike another way: If the June
30 increase was not enough to bring inflation risks into balance, a "euphoric"
rise in stocks may fuel increased consumer spending, which could necessitate a
more disruptive adjustment later. In its August 24 rate hike, the Fed was acting
promptly to prevent such an adjustment. In other words, the Fed strongly
believes that "a stitch in time saves nine" -- it wants to be preemptive by
raising interest rates and slowing the economy before an inflation problem
arises.
What data may confirm the Fed's theory? To start, the Fed forecasts that the
consumer price index (CPI), the average value of an imaginary "basket" of goods
and services in the economy, could rise as much as 2.5 percent this year, up
from 1.6 percent in 1998. The CPI is the standard measure of inflation in the
United States, so a marked increase would suggest rising inflation.
Employment growth also suggests inflation. Job creation has exceeded the
growth of the working-age population by almost one-half a percentage point
(0.50%) in the past year. The Fed believes that if the pool of job seekers
shrinks sufficiently, upward pressures on wage costs are likely. Such cost
increases have invariably presaged rising inflation in that past, and presumably
would in the future.
The Fed also believes that gross domestic product (GDP), the value of all
goods and services produced in the United States, is growing faster than it
would grow without inflation. The Fed believes that GDP can grow 3.0 percent to
3.5 percent per year without generating inflation. Actual 1998 GDP growth was
4.3 percent, and 1999 GDP growth is projected to be 3.8 percent.
Productivity growth is another indicator of inflation pressure. After
languishing at about 1 percent in the 1970s and 1980s, productivity growth has
been above 2 percent in each of the past three years. Over the past four
quarters it has increased 2.8 percent, and could reach 3.5 percent if
second-quarter productivity growth comes in close to 4 percent. According to the
Fed, this has enabled output to grow beyond what normally would have been
expected -- and has held down inflationary pressures. But productivity must
continue to grow at an ever faster pace to keep inflation from accelerating. The
Fed is concerned that the gains in technology that have fostered the
productivity growth will slow, and any inflationary pressures in the labor
market could ultimately show in product prices.
The improving global economy could also contribute to inflation. Improving
economic conditions around the world mean that the U.S. economy will no longer
experience declines in basic commodity and import prices that curtailed
inflation in recent years. A rise in the price of imported crude oil -- which is
used to make everything from gasoline to plastic bags -- is already up 57
percent this year. To the Fed, which cut interest rates by 75 basis points last
year because of a slowdown in the global economy, raising interest rates in June
and again in August was only "taking back" some of what it gave last year.
Clearly, then, Fed raised interest rates to slow the economy. As a result,
consumer spending will likely decrease, leading to a decline in corporate
profits. That will have negative effects on capital spending. The end result
could be a decline in the value of equities in general.
Although many economic analysts have moved past the August 24 rate hike and
are now speculating about what the Fed will do at its October 5 meeting, the
August rate hike will likely be the end of the Fed's interest in interest rates
for the next six months. The Fed is unlikely to raise rates between November and
February because of the Y2K issue: It doesn't want to encourage Y2K fears or
appear responsible for Y2K-related volatility in the financial markets.
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION OR DEFLATION, CREDIT
EXPANSION OR CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR
TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA
REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOW (8/31/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate 1 5.94 5.00 5.34 6.30
Prime rate 2 8.06 7.75 8.50 8.50
Inflation rate 3* 2.00 1.60 1.68 2.16
The U.S. dollar 4 -6.36 -1.53 8.17 10.10
Capital goods orders 5* 11.84 5.11 3.05 10.30
Industrial production 5* 3.58 1.55 2.71 5.59
Employment growth 6* 2.17 2.37 2.67 2.39
</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 7/31/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
The long-term possibility of interest rate hikes is likely to be affected by
political considerations. Election primaries begin in February 2000. Will
candidates be talking about tax cuts? Medicare reform? Social Security reform?
These will be the issues to consider when we look at the economy in early- to
mid-2000.
Hopefully it will be as easy for investors to obtain information about Fed
policies at that time as it is today. The Humphrey-Hawkins hearings were created
to give Congress and the public some idea of economic growth and inflation. But
this round of Humphrey-Hawkins hearings could be the last, because the
Humphrey-Hawkins law expires this year. Although Greenspan has said he thinks it
is important for the Fed to report to Congress, and House Banking Committee
Chairman Jim Leach intends to press for a new law, there has been no move to
enact a new reporting requirement. Although the Fed could still provide
hearings, without a law forcing it to do so within a certain framework, we would
likely have no consistent basis for analyzing monetary policy.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
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 SCUDDER KEMPER INVESTMENTS ECONOMICS GROUP
AS OF AUGUST 27, 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.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
THE MARKETS REMAINED CHALLENGING THROUGHOUT THE ANNUAL REPORTING PERIOD. BELOW,
THE PORTFOLIO MANAGEMENT TEAM OF KEMPER HORIZON FUND DISCUSSES THE ECONOMIC
CLIMATE AND THEIR INVESTMENT STRATEGY. THEY ALSO PROVIDE AN OVERVIEW OF EACH
SEGMENT OF THE PORTFOLIO -- DOMESTIC STOCKS, INTERNATIONAL STOCKS AND DOMESTIC
BONDS.
[TYMOCZKO PHOTO]
LEAD PORTFOLIO MANAGER ROBERT TYMOCZKO IS A VICE PRESIDENT OF SCUDDER KEMPER
INVESTMENTS, INC. AND A MEMBER OF THE FIRM'S QUANTITATIVE GROUP. PORTFOLIO
MANAGERS JOSEPHINE CHU, ALMOND GODUTI AND SHAHRAM TAJBAKHSH ALSO CONTRIBUTE
THEIR INVESTMENT INDUSTRY EXPERIENCE. THE TEAM IS SUPPORTED BY SCUDDER KEMPER
INVESTMENTS' LARGE STAFF OF ANALYSTS, RESEARCHERS, TRADERS AND ECONOMISTS IN
OFFICES WORLDWIDE.
Q THROUGHOUT THE FUND'S FISCAL YEAR, THE MARKETS CONTINUED TO BE TURBULENT.
AGAINST THIS BACKDROP, HOW DID THE PORTFOLIOS OF KEMPER HORIZON FUND PERFORM?
A For the one-year period ending July 31, 1999, Kemper Horizon 5 Portfolio
gained 4.94 percent, Kemper Horizon 10+ Portfolio gained 5.37 percent and Kemper
Horizon 20+ Portfolio gained 4.21 percent. (Class A shares, unadjusted for any
sales charges.)
We recognize that some shareholders may be disappointed with these modest
gains. Particularly during the first half of the fiscal year, our disciplined
investment strategy faced challenges in an unusually emotional and narrow
market. (See Terms To Know on page 2). On a more positive note, we are pleased
to report that the fund picked up steam as the year progressed.
Also, for shareholders who may compare the portfolios' performance to
other funds, we encourage you to make apples-to-apples comparisons. The
portfolios of Kemper Horizon Fund are diversified across asset classes, and are
not pure domestic-stock vehicles.
Q DURING THE ANNUAL PERIOD, KEMPER HORIZON 10+ PORTFOLIO GAINED MORE THAN
THE OTHER TWO PORTFOLIOS. WHY DIDN'T KEMPER HORIZON 10+ PORTFOLIO LAND BETWEEN
KEMPER HORIZON 20+ PORTFOLIO AND KEMPER HORIZON 5 PORTFOLIO?
A That's a good question. Over longer time periods, we would typically
expect Kemper Horizon 20+ Portfolio to earn the largest returns and Kemper
Horizon 5 Portfolio to perform most conservatively. And, since the inception of
the funds, this has been the case. (See pages 10, 12 and 14 for complete
performance information.)
However, this pattern did not occur during the annual period. The
discrepancy can be traced to the extremely unusual market climate we saw in
August 1998, when the markets corrected sharply in response to the Russian debt
default. Because Kemper Horizon 20+ Portfolio holds the greatest quantity of
stocks, it slid more steeply than the other two portfolios. As the markets
recovered from August's decline, all of the portfolios made up ground, but
Kemper Horizon 20+ Portfolio wasn't able to recoup enough to surpass Kemper
Horizon 10+ Portfolio.
If we exclude August 1998, and calculate the returns for the following
eleven months, the portfolios performed as we would anticipate. Kemper Horizon 5
Portfolio gained 11.58 percent, Kemper Horizon 10+ gained 15.55 percent, and
Kemper Horizon 20+ Portfolio gained the most, 19.96 percent. (Class A shares,
unadjusted for sales charges.)
Q BEFORE YOU DISCUSS THE PORTFOLIOS IN GREATER DETAIL, PLEASE PROVIDE US
WITH AN OVERVIEW OF THE MARKET ENVIRONMENT.
A The fund began its fiscal year in August 1998, one of the worst months in
stock market history. Global uncertainty loomed.
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.
5
<PAGE> 6
PERFORMANCE UPDATE
Asian economic weakness had long been a source of concern, and the economic
balance of Brazil and Latin America remained precarious. In this already anxious
climate, Russia defaulted on its debt in late August 1998. This unexpected
development sent the global markets spiraling downward, with the U.S. market
losing more than 15 percent in a month.
Quick action led to a speedy rebound. To shore up the global economy, the
U.S. Federal Reserve Bank cut interest rates, and other countries followed suit.
These measures, combined with steady domestic economic growth, encouraged
investors to return to the market.
But although they returned, investors remained anxious. Often losing sight
of fundamentals, many were willing to pay exorbitantly high prices for stocks
that offered the perception of stability. This mindset led investors to a
handful of mega-cap, domestic growth companies. Meanwhile, most smaller-cap and
value-oriented stocks struggled, even though they offered strong fundamentals.
Technology stocks also charged ahead in the first half of the semiannual
period, particularly in December and January. Excitement about the Internet
fuelled this rally, and many untested ".com" stocks soared.
In April, the market changed direction. The narrow, large-cap growth market
began to "broaden out." Small- and mid-cap stocks as well as value-oriented
stocks began to take the lead. Many high-flying Internet stocks and richly
valued mega-cap growth stocks corrected to more realistic prices.
Several factors contributed to this healthier market climate. Investors
took a more rational approach, placing a greater emphasis on underlying company
fundamentals. Many individuals were less willing to pay the high price tags
sported by the mega-cap growth leaders. An improving global economy benefited
certain cyclical stocks. (See Terms To Know on page 2.) The Federal Reserve
Bank's decision to increase interest rates also made growth stocks a less
attractive choice for many investors. (An interest-rate increase is often used
as a way to slow an accelerating economy. In an accelerating economy, value
stocks have tended to enjoy greater favor.)
In June and July, the market once again took on a different character. No
single type of stock dominated for very long. Markets narrowed and broadened
over short periods. Growth-style and value-style stocks took and yielded the
lead from one another, as did large-caps and small-caps. At the close of the
fiscal year, uncertainty -- about Y2K, interest rates, inflation and global
economic strength -- continues to shape the market.
Q HOW DID THE INTERNATIONAL MARKETS PERFORM?
A International markets were hit hard during the first portion of the annual
period. Pockets of economic turbulence in Russia, Latin America and Brazil cast
a shadow. Also, the European Monetary Union (EMU) didn't start off as briskly as
many had anticipated, or hoped. The Balkans conflict added more negative
sentiment. Here again, in an uncertain climate, investors gravitated towards
blue-chip stocks, and shied away from value stocks.
During the course of the fiscal year, portions of the global picture
improved noticeably. Asia showed signs of renewed vigor and increased
productivity, with Japan gaining ground after nearly a decade of economic
recession. Australia also enjoyed robust market performance. The improved
climate didn't reach all corners of the globe in equal measure. Many of the
Western European markets, for instance, have not yet participated in similarly
strong upturns.
<TABLE>
<CAPTION>
FIRST HALF SECOND HALF
BENCHMARK THE KEY POINT (7/31/98-1/31/99) (1/31/99-7/31/99)
<S> <C> <C> <C>
RUSSELL 1000 INDEX LARGE-CAP DOMESTIC STOCKS PERFORMED WELL DURING THE FISCAL
LARGE-CAP U.S. YEAR, BUT THE MAJORITY OF GAINS WERE EARNED IN THE FIRST
STOCKS HALF OF THE YEAR 14.59% 4.41%
- ------------------------------------------------------------------------------------------------------------------------------
RUSSELL 2000 INDEX AFTER FALLING FAR BEHIND IN THE FIRST HALF OF THE FISCAL
SMALL-CAP U.S. YEAR, SMALL-CAPS SURPASSED LARGE-CAP STOCKS IN THE SECOND
HALF OF THE YEAR 2.40% 4.89%
- ------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH 1-3 PARTICULARLY IN THE FIRST HALF OF THE FISCAL YEAR,
YEAR TREASURY BOND SHORT-TERM BONDS PROVIDED SHELTER AGAINST THE TURMOIL OF THE
INDEX SHORT-TERM EQUITY MARKETS, BUT WERE RELATIVELY LESS PROFITABLE DURING
GOVERNMENT BONDS THE SECOND HALF OF THE YEAR 3.78% 1.09%
- ------------------------------------------------------------------------------------------------------------------------------
MSCI WORLD EX U.S. AFTER WEAK PERFORMANCE IN THE FIRST HALF OF THE FISCAL YEAR,
INDEX INTERNATIONAL STOCKS PICKED UP THE PACE, SURPASSING THE
INTERNATIONAL STOCKS DOMESTIC BENCHMARKS IN THE SECOND HALF OF THE YEAR 2.25% 7.65%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL PERIOD
BENCHMARK THE KEY POINT (7/31/98-7/31/99)
<S> <C> <C>
RUSSELL 1000 INDEX LARGE-CAP DOMESTIC STOCKS PERFORMED WELL DURING THE FISCAL
LARGE-CAP U.S. YEAR, BUT THE MAJORITY OF GAINS WERE EARNED IN THE FIRST
STOCKS HALF OF THE YEAR 19.64%
- ------------------------------------------------------------------------------------------------------------------------------
RUSSELL 2000 INDEX AFTER FALLING FAR BEHIND IN THE FIRST HALF OF THE FISCAL
SMALL-CAP U.S. YEAR, SMALL-CAPS SURPASSED LARGE-CAP STOCKS IN THE SECOND
HALF OF THE YEAR 7.41%
- ------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH 1-3 PARTICULARLY IN THE FIRST HALF OF THE FISCAL YEAR,
YEAR TREASURY BOND SHORT-TERM BONDS PROVIDED SHELTER AGAINST THE TURMOIL OF THE
INDEX SHORT-TERM EQUITY MARKETS, BUT WERE RELATIVELY LESS PROFITABLE DURING
GOVERNMENT BONDS THE SECOND HALF OF THE YEAR 4.92%
- ------------------------------------------------------------------------------------------------------------------------------
MSCI WORLD EX U.S. AFTER WEAK PERFORMANCE IN THE FIRST HALF OF THE FISCAL YEAR,
INDEX INTERNATIONAL STOCKS PICKED UP THE PACE, SURPASSING THE
INTERNATIONAL STOCKS DOMESTIC BENCHMARKS IN THE SECOND HALF OF THE YEAR 10.06%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: LIPPER ANALYTICAL SERVICES, INC. INDICES ARE UNMANAGED POOLS OF
SECURITIES THAT ARE NOT AVAILABLE FOR DIRECT INVESTMENT. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. RETURNS DO NOT REPRESENT THE PERFORMANCE OF ANY
KEMPER FUND.
6
<PAGE> 7
PERFORMANCE UPDATE
Q THE PORTFOLIOS OF KEMPER HORIZON FUND ARE DESIGNED TO ADDRESS VARYING
INVESTMENT OBJECTIVES. TELL US HOW THE INVESTMENTS IN THE PORTFOLIOS ARE
COMBINED TO PURSUE TIME-SPECIFIC GOALS.
A Simply put, the longer the time horizon of the portfolio, the greater the
stock exposure. Here's why: Over the long-term, stocks have historically
provided significantly higher returns than bonds or cash. In exchange for this
higher return potential, stocks are subject to greater fluctuations and risk.
Over longer historic time periods, however, the impact of this volatility has
decreased.
Kemper Horizon 5 Portfolio is designed for short-term investors with a
five-year time horizon. With a shorter time horizon, there's less time to ride
out the potential ups and downs of stocks. That's why Kemper Horizon 5 Portfolio
is the most conservative of the three options. Typically, about 60 percent of
assets are invested in bonds, with the remainder invested in stocks.
Kemper Horizon 10+ Portfolio is geared to investors with time horizons of
at least 10 years. Consistent with this longer horizon, the fund has a more
aggressive risk/return profile than Kemper Horizon 5 Portfolio. The fund invests
about 60 percent of assets in stocks and 40 percent in bonds.
Kemper Horizon 20+ Portfolio is designed for investors with even longer
time horizons -- 20 years or more. It's the most aggressive portfolio of the
group, investing about 80 percent of assets in stocks and 20 percent in bonds.
Q KEMPER HORIZON FUND PROVIDES EXPOSURE TO U.S. STOCKS, INTERNATIONAL STOCKS
AND DOMESTIC BONDS. TELL US ABOUT THE POTENTIAL ADVANTAGES OF THIS BROAD
DIVERSIFICATION.
A Diversification is a well-recognized strategy for managing portfolio risk.
Let's take a closer look: When you diversify your investments by asset class,
you can capture the performance of different market cycles. That's because
different types of investments tend to respond differently to changing market
climates. For example, if the domestic economy were stronger than the
international economy, U.S. stocks would likely perform more robustly than
international stocks. If stocks are out of favor, then investments in bonds
could provide stability and help offset losses.
It's important to remember that diversification works even when you might
not want it to. By that, we mean that in a diversified investment portfolio,
less-successful investments will slow the pace set by the most-successful
investments. Our diversification strategy isn't about turning a blind eye to
risk and trying to shoot the lights out. Instead, we place a higher premium on
trying to obtain consistent, long-term returns.
Q IN YOUR OVERVIEW, YOU SAID THAT DIFFERENT TYPES OF DOMESTIC STOCKS
DOMINATED THE MARKET THROUGHOUT THE ANNUAL PERIOD. DOES KEMPER HORIZON FUND
INCLUDE EXPOSURE TO GROWTH AND VALUE STOCKS, AND TO BOTH LARGE- AND SMALL-CAPS?
A Yes, the domestic stock portions of the portfolios include value and
growth stocks, as well as large-caps and small-caps. During the reporting
period, we invested about 70 percent in large-cap stocks, and 30 percent in
small-caps. We determine the value/growth allocation by evaluating a wide range
of economic and market factors. Currently, our analysis supports dividing assets
evenly between the two styles.
- --------------------------------------------------------------------------------
A WELL-DIVERSIFIED DOMESTIC STOCK PORTFOLIO
- --------------------------------------------------------------------------------
[PIE CHART]
35% LARGE-CAP GROWTH
35% LARGE-CAP VALUE
15% SMALL-CAP GROWTH
15% SMALL-CAP VALUE
AS OF JULY 31, 1999. PORTFOLIO COMPOSITION SUBJECT TO CHANGE.
7
<PAGE> 8
PERFORMANCE UPDATE
Q HOW DO YOU SELECT STOCKS?
A We use rigorous quantitative stock-selection models. These models leverage
years of testing, development and research, and organize data on thousands of
stocks. We consider a variety of factors, including price-to-earnings and
price-to-book ratios, as well as earnings-per-share-growth and earnings
predictability. We look not just at each individual stock in isolation, but also
analyze how each stock could impact the portfolio as a whole.
Q HOW DID THE DOMESTIC STOCK PORTION OF THE FUND PERFORM?
A Many of the factors that hindered performance during the first half of the
fiscal year helped us in the second. For instance, when mega-cap, high-priced
growth stocks dominated the market, our valuation discipline limited returns
during the first half of the fiscal year. Our analysis indicated that the prices
of many of the market's favorite stocks were simply too high -- and not
sustainable. To us, these high prices signaled an unwise level of potential
risk.
Also, our bias toward quality companies with established records limited
our participation in the Internet-stock rally, because many of the trendy ".com"
stocks lacked the demonstrated track records our models require.
Our small-cap exposure also impeded progress during the first portion of
the year. Here, too, investors responded emotionally -- and often misguidedly --
by punishing fundamentally sound small companies.
As time progressed, the market bore out our convictions and again proved
the merits of diversification. When the markets became more rational and
broadened out in April, we were well positioned. Many of our cyclically oriented
holdings came to life, including large-cap and small-cap companies involved in
the basic-industries and capital-goods sectors.
Q HOW DID YOU STRUCTURE THE INTERNATIONAL PORTIONS OF THE PORTFOLIOS? HOW
DID THIS IMPACT THE FUND?
A We use the country weightings of the MSCI World ex U.S. Index as a general
guide. This index tracks global stock markets, but does not include the United
States. The index is market-cap weighted, meaning that the largest countries
enjoy greater proportional representation. This cap-weighted structure results
in increased exposure to large, established markets, with lesser exposure to
less-tested emerging markets. Our country weightings don't exactly mirror the
index. Compared to the index, we're a bit overweighted in Asian stocks, and a
bit underweighted in European stocks.
As with our domestic-stock selection, we use a research-intensive and
risk-conscious process. We use country- and region-specific proprietary models
to choose and combine stocks. Our risk-conscious approach has led us to favor
value stocks, a decision that served the fund during the second portion of the
fiscal year.
Overall, we're pleased with the performance of the international portions
of the portfolios. Thanks to using the country allocations of the index as a
starting point, we participated in Asia's rebound. We reaped very good gains
from our exposure to stocks of this region. Several stocks from Japan and Hong
Kong contributed particularly strong returns, especially during the second half
of the semiannual period. Our holdings in Western Europe were generally less
successful.
Q WHAT'S YOUR OUTLOOK ON GLOBAL INVESTING?
A We believe that there are many compelling opportunities for global
investing. Asia has made good strides towards recovery. Notably, the Japanese
economy has been gaining positive momentum after almost a decade of economic
problems.
While we feel positive about Asia, we feel even more optimistic about the
long-term prospects of Europe. Although European markets have faced some rough
patches since the formation of the European Monetary Union (EMU), we believe
that Europe also offers very good investment opportunities. In our mind, the EMU
is a long-term proposition. In fact, to tap into Europe's potential, we're
looking for opportunities to channel some assets away from Asian markets and
into European ones.
Q PLEASE DESCRIBE HOW YOU'VE POSITIONED THE BOND SEGMENTS OF THE PORTFOLIOS.
A The bond allocations are conservatively positioned, with an eye to
providing stability. We are currently invested primarily in U.S. Treasury bonds,
which offer a guaranteed payment of interest and principal. We've kept the
average duration of the portfolio fairly short. Currently, the average duration
is about one-and-three-quarters years. The shorter the duration, the less impact
of interest rate movements on the fund's bond exposure.
As we noted in the semiannual report, this conservative duration held the
fund back a bit during the first portion of the fiscal year, when interest rates
were stable. Towards the end of the semiannual period,
8
<PAGE> 9
PERFORMANCE UPDATE
however, the Federal Reserve raised interest rates, and many investors believe
that further increases could occur. In this rate-anxious climate, a shorter
duration has benefited the portfolio.
Throughout the year, our bond exposure helped smooth over some of the ups
and downs of the equity market. As a trade-off, bonds muted performance
potential during the second half of the fiscal year.
Q IN THE PREVIOUS SEMIANNUAL REPORT, YOU EXPRESSED A CAUTIOUS MARKET
OUTLOOK. HAVE YOU BECOME MORE OPTIMISTIC, OR DO YOU BELIEVE THAT CAUTION IS
STILL WARRANTED?
A We believe that the current market climate continues to demand a cautious
approach. While the prices of many stocks have corrected to more reasonable
levels, we still believe that the market as a whole remains substantially
overvalued. Anxiety about rising interest rates and inflation could generate
considerable global economic and market volatility.
As the past year shows, when it comes to investing, volatility will be par
for the course. We believe that the challenges of today's market highlight the
potential strengths of Kemper Horizon Fund. The portfolios offer broad and
convenient diversification across asset classes. Discipline and rigorous
research is the basis of each stock-selection decision. Our investment outlook
is long-term and risk-conscious. As always, we remain committed to helping the
shareholders pursue their long-term investment objectives.
9
<PAGE> 10
PERFORMANCE UPDATE
KEMPER HORIZON 20+ PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED JULY 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HORIZON 20 + PORTFOLIO CLASS A -1.77% 12.79% 11.27% (since 12/29/1995)
- -------------------------------------------------------------------------------------------------------
KEMPER HORIZON 20 + PORTFOLIO CLASS B 0.55 13.64 11.77 (since 12/29/1995)
- -------------------------------------------------------------------------------------------------------
KEMPER HORIZON 20 + PORTFOLIO CLASS C 3.24 13.98 12.10 (since 12/25/1995)
- -------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS A(1) INDEX(1) INDEX(+) INDEX(++)
-------------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10848.00 11894.00 12296.00 10290.00
12/31/97 12899.00 15377.00 16398.00 11294.00
14316.00 19340.00 21083.00 12366.00
7/31/99 14672.00 20776.00 22957.00 12051.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS B(1) INDEX(1) INDEX(+) INDEX(++)
-------------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11398.00 11894.00 12296.00 10290.00
12/31/97 13425.00 15377.00 16398.00 11294.00
14799.00 19340.00 21083.00 12366.00
7/31/99 14911.00 20776.00 22957.00 12051.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 20+ PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS C(1) INDEX(1) INDEX(+) INDEX(++)
-------------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11406.00 11894.00 12296.00 10290.00
12/31/97 13443.00 15377.00 16398.00 11294.00
14783.00 19340.00 21083.00 12366.00
7/31/99 15069.00 20776.00 22957.00 12051.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS OVER THE PERIODS
SPECIFIED, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND, WHERE INDICATED,
ADJUSTMENT FOR THE MAXIMUM SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS
A SHARES IS 5.75%. FOR CLASS B SHARES THE MAXIMUM CONTINGENT DEFERRED SALES
CHARGE (CDSC) IS 4%. CLASS C SHARES HAVE NO SALES CHARGE ADJUSTMENT, BUT
REDEMPTIONS WITHIN ONE YEAR OF PURCHASE MAY BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1%. SHARE CLASSES INVEST IN THE SAME UNDERLYING
PORTFOLIO. AVERAGE ANNUAL TOTAL RETURN REFLECTS ANNUALIZED CHANGE WHILE
TOTAL RETURN REFLECTS AGGREGATE CHANGE. DURING THE PERIODS NOTED, SECURITIES
PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS AT THE END
OF THIS REPORT.
(1) PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES
CHARGE IN EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. EACH PORTFOLIO
IS COMPARED TO THE STANDARD & POOR'S 500 INDEX (S&P 500), LEHMAN BROTHERS
GOV'T/CORP. BOND INDEX, KEMPER HORIZON 20+ PORTFOLIO IS COMPARED WITH A
BLEND OF 80 PERCENT S&P 500 AND 20 PERCENT LEHMAN BROTHERS GOV'T/CORP.
KEMPER HORIZON 10+ PORTFOLIO IS COMPARED WITH A BLEND OF 60 PERCENT S&P 500
AND 40 PERCENT LEHMAN BROTHERS GOV'T/CORP. KEMPER HORIZON 5 PORTFOLIO IS
COMPARED WITH A BLEND OF 40 PERCENT S&P 500 AND 60 PERCENT LEHMAN BROTHER
GOV'T/CORP. IN COMPARING KEMPER HORIZON FUND TO THE BLENDED INDICES, YOU
SHOULD NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE,
WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE INDICES.
+ THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE U.S. STOCK MARKET. SOURCE IS CDA WIESENBERGER.
++ THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX IS AN UNMANAGED INDEX
COMPRISED OF INTERMEDIATE AND LONG-TERM GOVERNMENT AND INVESTMENT GRADE
CORPORATE DEBT SECURITIES. SOURCE IS CDA WIESENBERGER.
INVESTORS CANNOT ACTUALLY MAKE INVESTMENTS IN THE TWO INDICES.
10
<PAGE> 11
STATISTICS FOR 20+ PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO ON 7/31/99 ON 7/31/98
- -------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC/FOREIGN STOCKS** 78 78
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS 20 21
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 1
- -------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/99 ON 7/31/99
** FOR JULY 31, 1999 DOMESTIC STOCKS WERE 55% AND FOREIGN STOCKS 23%.
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 10.2 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
HOLDING PERCENT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INTEL Engaged in the design, development, manufacture 2.3%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- -----------------------------------------------------------------------------------------
VISX Engaged in the design, manufacturing and marketing 2.3%
of proprietary technologies and systems for laser
vision correction.
- -----------------------------------------------------------------------------------------
HOME DEPOT Operates retail stores carrying building supplies 2.1%
and home improvement products.
- -----------------------------------------------------------------------------------------
CITIGROUP Leading global financial-service provider. 1.8%
Operations include a wide variety of insurance
products and banking services, managed health-care
programs, asset management, investment services
and credit-card services.
- -----------------------------------------------------------------------------------------
FHLMC Often referred to as "Freddie Mac", this 1.7%
corporation provides for the transfer of capital
between mortgage lenders and mortgage security
investors, enabling mortgage lenders to provide a
continuous flow of funds to borrowers.
- -----------------------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
11
<PAGE> 12
PERFORMANCE UPDATE
KEMPER HORIZON 10+ PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED JULY 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS A -0.67% 11.56% 10.10% (since 12/29/1995)
- -------------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS B 1.46 12.29 10.59 (since 12/29/1995)
- -------------------------------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS C 4.29 12.66 10.90 (since 12/29/1995)
- -------------------------------------------------------------------------------------------------------
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares
from 12/31/95 to 7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS A(1) INDEX(1) INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10584.00 11493.00 12296.00 10290.00
12/31/97 12275.00 14357.00 16398.00 11294.00
13796.00 17596.00 21083.00 12366.00
7/31/99 14125.00 18594.00 22957.00 12051.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares
from 12/31/95 to 7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS B(1) INDEX(1) INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11152.00 11493.00 12296.00 10290.00
12/31/97 12827.00 14357.00 16398.00 11294.00
14284.00 17596.00 21083.00 12366.00
7/31/99 14394.00 18594.00 22957.00 12051.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER HORIZON 10+ PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares
from 12/31/95 to 7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS C INDEX(1) INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11146.00 11493.00 12296.00 10290.00
12/31/97 12796.00 14357.00 16398.00 11294.00
14252.00 17596.00 21083.00 12366.00
7/31/99 14494.00 18594.00 22957.00 12051.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS OVER THE PERIODS
SPECIFIED, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND, WHERE INDICATED,
ADJUSTMENT FOR THE MAXIMUM SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS
A SHARES IS 5.75%. FOR CLASS B SHARES THE MAXIMUM CONTINGENT DEFERRED SALES
CHARGE (CDSC) IS 4%. CLASS C SHARES HAVE NO SALES CHARGE ADJUSTMENT, BUT
REDEMPTIONS WITHIN ONE YEAR OF PURCHASE MAY BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1%. SHARE CLASSES INVEST IN THE SAME UNDERLYING
PORTFOLIO. AVERAGE ANNUAL TOTAL RETURN REFLECTS ANNUALIZED CHANGE WHILE
TOTAL RETURN REFLECTS AGGREGATE CHANGE. DURING THE PERIODS NOTED, SECURITIES
PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS AT THE END
OF THIS REPORT.
(1) PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES
CHARGE IN EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. EACH PORTFOLIO
IS COMPARED IN THE STANDARD & POOR'S 500 INDEX (S&P 500), LEHMAN BROTHERS
GOV'T/CORP. BOND INDEX AND A BLEND OF THE S&P 500 AND THE LEHMAN BROTHERS
GOV'T/CORP. BOND INDEX. KEMPER HORIZON 20+ PORTFOLIO IS COMPARED WITH A
BLEND OF 80 PERCENT S&P 500 AND 20 PERCENT LEHMAN BROTHERS GOV'T/CORP.
KEMPER HORIZON 10+ PORTFOLIO IS COMPARED WITH A BLEND OF 60 PERCENT S&P 500
AND 40 PERCENT LEHMAN BROTHERS GOV'T/CORP. KEMPER HORIZON 5 PORTFOLIO IS
COMPARED WITH A BLEND OF 40 PERCENT S&P 500 AND 60 PERCENT LEHMAN BROTHERS
GOV'T/CORP. IN COMPARING KEMPER HORIZON FUND TO THE BLENDED INDICES, YOU
SHOULD NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE,
WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE INDICES.
+ THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE U.S. STOCK MARKET. SOURCE IS CDA WIESENBERGER.
++ THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX IS AN UNMANAGED INDEX
COMPRISED OF INTERMEDIATE AND LONG-TERM GOVERNMENT AND INVESTMENT GRADE
CORPORATE DEBT SECURITIES. SOURCE IS CDA WIESENBERGER.
INVESTORS CANNOT ACTUALLY MAKE INVESTMENTS IN THE TWO INDICES.
12
<PAGE> 13
STATISTICS FOR 10+ PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO ON 7/31/99 ON 7/31/98
- -------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC/FOREIGN STOCKS** 60% 58%
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS 38 40
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS 2 2
- -------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/99 ON 7/31/98
** FOR JULY 31, 1999, DOMESTICS STOCKS WERE 42% AND FOREIGN STOCKS 18%.
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 9.9 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
HOLDING PERCENT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
VISX Engaged in the design, manufacturing and marketing 2.3%
of proprietary technologies and systems for laser
vision correction.
- -----------------------------------------------------------------------------------------
INTEL Engaged in the design, development, manufacture 2.2%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- -----------------------------------------------------------------------------------------
CITIGROUP Leading global financial-service provider. 1.9%
Operations include a wide variety of insurance
products and banking services, managed healthcare
programs, asset management, investment services
and credit-card services.
- -----------------------------------------------------------------------------------------
HOME DEPOT Operates retail stores carrying building supplies 1.8%
and home improvement products.
- -----------------------------------------------------------------------------------------
COMPAGNIE FINANCIERE Based in Switzerland and engaged in the production 1.7%
RICHEMONT and distribution of tobacco products and luxury
goods.
- -----------------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITIONS AND HOLDINGS ARE SUBJECT TO CHANGE.
13
<PAGE> 14
PERFORMANCE UPDATE
KEMPER HORIZON 5 PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED JULY 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KEMPER HORIZON 5 PORTFOLIO CLASS A -1.12% 8.27% 7.39% (since 12/29/1995)
- ---------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS B 1.24 9.18 8.05 (since 12/29/1995)
- ---------------------------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS C 4.20 9.66 8.44 (since 12/29/1995)
- ---------------------------------------------------------------------------------------------------
</TABLE>
LINE GRAPH
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS A1 INDEX1 INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10313.00 11092.00 12296.00 10290.00
12/31/97 11532.00 13336.00 16398.00 11294.00
12685.00 15853.00 21083.00 12366.00
7/31/99 12917.00 16414.00 22957.00 12051.00
</TABLE>
LINE GRAPH
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class B shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS B1 INDEX1 INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10870.00 11092.00 12296.00 10290.00
12/31/97 12081.00 13336.00 16398.00 11294.00
13214.00 15853.00 21083.00 12366.00
7/31/99 13206.00 16414.00 22957.00 12051.00
</TABLE>
LINE GRAPH
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class C shares from 12/31/95 to
7/31/99
<TABLE>
<CAPTION>
COMBINED S&P 500
STOCK INDEX AND
LEHMAN BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOV'T/CORP. BOND S&P 500 STOCK GOV'T/CORP. BOND
PORTFOLIO CLASS C1 INDEX1 INDEX+ INDEX++
------------------ ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10859.00 11092.00 12296.00 10290.00
12/31/97 12058.00 13336.00 16398.00 11294.00
13204.00 15853.00 21083.00 12366.00
7/31/99 13375.00 16414.00 22957.00 12051.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
* AVERAGE ANNUAL TOTAL RETURN AND TOTAL RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM PORTFOLIO INVESTMENTS OVER THE PERIODS
SPECIFIED, ASSUMING REINVESTMENT OF ALL DIVIDENDS AND, WHERE INDICATED,
ADJUSTMENT FOR THE MAXIMUM SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS
A SHARES IS 5.75%. FOR CLASS B SHARES THE MAXIMUM CONTINGENT DEFERRED SALES
CHARGE (CDSC) IS 4%. CLASS C SHARES HAVE NO SALES CHARGE ADJUSTMENT, BUT
REDEMPTIONS WITHIN ONE YEAR OF PURCHASE MAY BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1%. SHARE CLASSES INVEST IN THE SAME UNDERLYING
PORTFOLIO. AVERAGE ANNUAL TOTAL RETURN REFLECTS ANNUALIZED CHANGE WHILE
TOTAL RETURN REFLECTS AGGREGATE CHANGE. DURING THE PERIODS NOTED, SECURITIES
PRICES FLUCTUATED. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS AT THE END
OF THIS REPORT.
(1) PERFORMANCE INCLUDES REINVESTMENT OF DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A SHARES AND THE CONTINGENT DEFERRED SALES
CHARGE IN EFFECT AT THE END OF THE PERIOD FOR CLASS B SHARES. EACH
PORTFOLIO IS COMPARED TO THE STANDARD & POOR'S 500 INDEX (S&P 500), LEHMAN
BROTHERS GOV'T/CORP. BOND INDEX AND A BLEND OF THE S&P 500 AND THE LEHMAN
BROTHERS GOV'T/CORP. BOND INDEX. KEMPER HORIZON 20+ PORTFOLIO IS COMPARED
WITH A BLEND OF 80 PERCENT S&P 500 AND 20 PERCENT LEHMAN BROTHERS
GOV'T/CORP. KEMPER HORIZON 10+ PORTFOLIO IS COMPARED WITH A BLEND OF 60
PERCENT S&P 500 AND 40 PERCENT LEHMAN BROTHERS GOV'T/CORP. KEMPER HORIZON 5
PORTFOLIO IS COMPARED WITH A BLEND OF 40 PERCENT S&P 500 AND 60 PERCENT
LEHMAN BROTHERS GOV'T/CORP. IN COMPARING KEMPER HORIZON FUND TO THE BLENDED
INDICES, YOU SHOULD NOTE THAT THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM
SALES CHARGE, WHILE NO SUCH CHARGES ARE REFLECTED IN THE PERFORMANCE OF THE
INDICES.
+ THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX GENERALLY REPRESENTATIVE OF
THE U.S. STOCK MARKET. SOURCE IS CDA WIESENBERGER.
++ THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX IS AN UNMANAGED INDEX
COMPRISED OF INTERMEDIATE AND LONG-TERM GOVERNMENT AND INVESTMENT GRADE
CORPORATE DEBT SECURITIES. SOURCE IS CDA WIESENBERGER.
INVESTORS CANNOT ACTUALLY MAKE INVESTMENTS IN THE TWO INDICES.
14
<PAGE> 15
STATISTICS FOR 5 PORTFOLIO
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
HORIZON 5 ON 7/31/99 ON 7/31/98
- -------------------------------------------------------------------------------
<S> <C> <C>
DOMESTIC/FOREIGN STOCKS** 41% 38%
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS 59 60
- -------------------------------------------------------------------------------
CASH AND EQUIVALENTS -- 2
- -------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
ON 7/31/99 ON 7/31/98
** FOR JULY 31, 1999, DOMESTICS STOCKS WERE 29% AND FOREIGN STOCKS 12%.
LARGEST HOLDINGS
THE PORTFOLIO'S LARGEST EQUITY HOLDINGS*
REPRESENTING 9.6 PERCENT OF TOTAL NET ASSETS ON JULY 31, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
HOLDING PERCENT
- -----------------------------------------------------------------------------------------
<S> <C> <C>
VISX Engaged in the design, manufacturing and marketing 2.2%
of proprietary technologies and systems for laser
vision correction.
- -----------------------------------------------------------------------------------------
INTEL Engaged in the design, development, manufacture 2.2%
and sale of advanced microcomputer components,
such as integrated circuits and other related
products.
- -----------------------------------------------------------------------------------------
HOME DEPOT Operates retail stores carrying building supplies 1.8%
and home improvement products.
- -----------------------------------------------------------------------------------------
CITIGROUP Leading global financial-service provider. 1.8%
Operations include a wide variety of insurance
products and banking services, managed healthcare
programs, asset management, investment services
and credit-card services.
- -----------------------------------------------------------------------------------------
GKN A global industrial company with operations in 1.6%
more than 40 countries. Engaged in design,
development and manufacturing of defense and
aerospace products and automotive systems and
parts. The group also provides a variety of
industrial services.
- -----------------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO COMPOSITIONS AND HOLDINGS ARE SUBJECT TO CHANGE.
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON FUND
HORIZON 20+, 10+ AND 5
PORTFOLIO OF INVESTMENTS AT JULY 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
COUPON PRINCIPAL
U.S. GOVERNMENT OBLIGATIONS TYPE RATE MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY SECURITIES-- 17.4%,
35.4% AND 52.5%
Notes 8.000% 08/15/1999 $1,280 $ 1,281
7.750% 11/30/1999 -- --
7.750% 01/31/2000 -- --
8.500% 02/15/2000 1,645 1,674
6.750% 04/30/2000 -- --
8.875% 05/15/2000 -- --
8.750% 08/15/2000 -- --
8.500% 11/15/2000 2,800 2,902
5.500% 12/31/2000 1,300 1,299
5.375% 02/15/2001 500 499
6.250% 04/30/2001 125 126
8.000% 05/15/2001 2,900 3,015
6.500% 05/31/2001 4,320 4,385
6.625% 07/31/2001 6,165 6,277
6.125% 12/31/2001 -- --
6.250% 02/28/2002 1,000 1,012
7.875% 11/15/2004 936 1,015
-----------------------------------------------------------------------------
23,485
Bill 7.500 10/31/1999 540 543
- -------------------------------------------------------------------------------------------------------------------------
MORTGAGED BACKED SECURITIES--2.7%,
3.4% AND 6.5%
GNMA 6.50 03/16/2014 975 981
FHLMC 6.50 10/17/2014 625 628
FNMA 5.625 05/15/2004 2,250 2,174
-----------------------------------------------------------------------------
3,783
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS--20.1%, 38.8% AND 59.0%
(Cost: $28,339, $35,807, $34,007)
27,811
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS--3.5%, 2.3% AND
1.7%
TELEPHONE/COMMUNICATIONS
(a)ADC Telecommunications, Inc. 29,600 1,317
Alcatel Sel AG 1,222 190
Ameritech Corp. 6,200 454
BCE, Inc. 10,900 544
BellSouth Corp. 8,000 384
British Telecom plc 24,500 425
(a)MasTec, Inc. 1,000 36
(a)Oki Electric Industry Company 18,000 75
SBC Communications, Inc. 18,700 1,069
Telecom Italia SpA 38,030 377
--------------------------------------------------------------------------
4,871
- --------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--3.3%, 1.6% AND 1.2%
BUILDING MATERIALS--1.8%, .9% AND
.4%
Blue Circle Industries PLC -- --
Centex Construction Products, Inc. 10,200 407
Elcor Corp. 1,650 68
Fletcher Challenge Building Corp. 154,200 228
Grupo Dragados, S.A. 14,100 172
LaFarge Corp. 6,100 189
Sumitomo Osaka Cement Co., Ltd. 157,000 293
Taiheiyo Cement Corp. 228,000 631
Vulcan Materials Co. 11,700 515
--------------------------------------------------------------------------
2,503
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,050 $ 3,053 $ 1,760 $ 1,761
-- -- 300 303
100 101 -- --
2,620 2,665 1,500 1,526
-- -- 250 253
4,300 4,418 -- --
500 517 4,607 4,733
2,450 2,540 -- --
700 700 -- --
700 698 -- --
-- -- -- --
8,715 9,060 3,090 3,212
7,420 7,531 6,035 6,126
6,667 6,788 7,220 7,351
-- -- 2,425 2,447
6,670 6,751 -- --
3,518 3,816 2,785 3,021
- ------------------------------------------------------------------------------------------------------------------
48,638 30,733
-- -- 440 442
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
2,025 2,038 2,000 2,012
1,234 1,239 663 666
1,415 1,367 1,215 1,174
- ------------------------------------------------------------------------------------------------------------------
4,644 3,852
- ------------------------------------------------------------------------------------------------------------------
53,282 35,027
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
21,200 943 6,200 276
735 114 169 26
7,700 564 4,900 359
800 40 900 45
17,200 826 2,800 134
22,600 392 -- --
5,500 196 2,200 78
-- -- -- --
-- -- -- --
11,500 114 10,980 109
- ------------------------------------------------------------------------------------------------------------------
3,189 1,027
- ------------------------------------------------------------------------------------------------------------------
12,100 86 -- --
-- -- -- --
1,300 53 550 23
-- -- 19,300 29
18,000 219 2,100 26
11,400 353 2,000 62
53,000 99 -- --
124,000 343 42,000 116
-- -- -- --
- ------------------------------------------------------------------------------------------------------------------
1,153 256
</TABLE>
17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BUILDING PRODUCTS--1.2%, 0% AND
.1%
Blount International, Inc. 1,400 $ 40
(a)Genlyte Group, Inc. 60,000 1,395
Nortek, Inc. 6,800 265
--------------------------------------------------------------------------
1,700
HOMEBUILDING--.3%, .7% AND .7%
Del Webb Corp. 3,100 69
(a)NVR, Inc. -- --
Pulte Corp. -- --
Skanska AB "B" -- --
Standard Pacific Corp. 25,200 326
--------------------------------------------------------------------------
395
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--
8.8%, 7.1% AND 5.6%
APPAREL AND SHOES--.5%, .9% AND
.9%
Brown Shoe Company, Inc. 2,200 44
(a)Genesco, Inc. -- --
(a)Hartmarx Corp. 30,000 131
(a)Jones Apparel Group, Inc. 16,022 527
--------------------------------------------------------------------------
702
DEPARTMENT AND CHAIN STORES--5.6%,
4.1%
AND 3.2%
(a)Ames Department Stores, Inc. 38,200 1,566
Burlington Coat Factory Warehouse Corp. 57,900 1,049
Dillard's, Inc. 12,000 370
Home Depot, Inc. 35,500 2,265
Kingfisher PLC 61,900 693
Longs Drug Stores, Inc. 3,300 114
May Department Stores 6,000 232
(a)Neiman Marcus Group, Inc. 5,700 142
TJX Companies, Inc. (New) -- --
W.H. Smith Group PLC 15,300 155
Wal-Mart Stores, Inc. 29,200 1,234
--------------------------------------------------------------------------
7,820
HOME FURNISHINGS--.5%, .3% AND .3%
Bush Industries, Inc. "A" -- --
(a)Mohawk Industries, Inc. -- --
Newell Rubbermaid, Inc. 14,200 614
Pillowtex Corp. 6,000 94
--------------------------------------------------------------------------
708
RECREATIONAL PRODUCTS--.3%, .1%
AND .3%
Coachmen Industries, Inc. 18,800 362
Sankyo Co., Ltd. -- --
--------------------------------------------------------------------------
362
RESTAURANTS--.4%, .5%
AND .2%
Applebee's International, Inc. 1,200 38
(a)Brinker International, Inc. -- --
(a)Lone Star Steakhouse/Saloon -- --
(a)Ryan's Family Steak Houses, Inc. 42,700 456
--------------------------------------------------------------------------
494
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,200 $ 34 400 $ 11
-- -- 3,000 70
-- -- -- --
- ------------------------------------------------------------------------------------------------------------------
34 81
2,200 49 900 20
-- -- 1,800 101
16,000 363 -- --
4,900 180 -- --
27,900 361 20,100 260
- ------------------------------------------------------------------------------------------------------------------
953 381
- ------------------------------------------------------------------------------------------------------------------
1,700 34 600 12
23,600 285 30,400 367
30,000 131 -- --
22,318 734 5,705 187
- ------------------------------------------------------------------------------------------------------------------
1,184 566
8,100 332 8,800 361
5,600 101 14,400 261
9,000 277 4,000 123
23,400 1,493 6,800 434
46,300 518 15,600 175
15,100 520 400 14
6,000 232 1,350 52
6,400 160 1,900 47
32,200 1,065 -- --
-- -- 14,000 142
22,800 963 7,000 296
- ------------------------------------------------------------------------------------------------------------------
5,661 1,905
-- -- 300 4
-- -- 900 25
9,200 398 2,700 117
-- -- -- --
- ------------------------------------------------------------------------------------------------------------------
398 146
-- -- 7,700 148
1,800 104 -- --
- ------------------------------------------------------------------------------------------------------------------
104 148
900 28 500 16
-- -- 900 25
-- -- 500 4
68,400 731 7,200 77
- ------------------------------------------------------------------------------------------------------------------
759 122
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SPECIALTY RETAIL--1.5%, 1.2% AND
.7%
(a)AutoZone, Inc. 9,200 $ 227
(a)Avis Rent A Car, Inc. 20,500 580
(a)BJ's Wholesale Club, Inc. -- --
Canadian Tire Corporation -- --
(a)Cellstar Corp. -- --
(a)Central Garden & Pet Co. 10,500 95
Douglas Holding AG 1,100 46
Family Dollar Stores, Inc. 30,000 628
Friedman's, Inc.,"A" -- --
New England Business, Inc. 3,000 86
Regis Corp. -- --
(a)The Finish Line, Inc. "A" 15,400 162
(a)Wet Seal, Inc. "A" 13,100 314
--------------------------------------------------------------------------
2,138
- --------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.1%, 3.8% AND
2.7%
ALCOHOL AND TOBACCO--2.9%, 2.1%
AND 1.8%
Adolph Coors Company 4,800 256
Bass PLC 12,600 181
Imperial Tobacco Group PLC 99,000 1,012
Philip Morris Companies, Inc. 20,450 762
SEITA 8,700 502
Seagram Co., Ltd. -- --
UST, Inc. 24,000 744
Universal Corp. 19,000 571
--------------------------------------------------------------------------
4,028
CONSUMER SPECIALTIES--.3%, .2% AND
.1%
American Greeting Corp., "A" 13,700 402
(a)Sola International, Inc. 4,600 77
--------------------------------------------------------------------------
479
FOOD AND BEVERAGE--1.2%, .9% AND
.7%
Etablissements Economiques du Casino
Guichard-Perrachon SA -- --
Farmer Brothers Co. 500 99
Michael Foods, Inc. 39,700 921
(a)Performance Food Group Co. 1,800 48
SUPERVALU, Inc. 9,400 214
Seaboard Corp. 1,500 405
--------------------------------------------------------------------------
1,687
PACKAGED GOODS/COSMETICS--
.1%, .1% AND .1%
(a)Chattem, Inc. 3400 99
--------------------------------------------------------------------------
TEXTILES--.6%, .5% AND .0%
Springs Industries, Inc. "A" 800 32
VF Corporation 19,000 751
--------------------------------------------------------------------------
783
- --------------------------------------------------------------------------------------------------------------------
DURABLES--4.6%, 3.9%
AND 1.9%
AEROSPACE--1.6%, 1.5%
AND .4%
AAR Corp. -- --
(a)Alliant Techsystems, Inc. 4,500 372
AlliedSignal, Inc. 5,400 349
(a)Ducommun, Inc. -- --
(a)Fairchild Corp. "A" 19,300 205
Primex Technologies, Inc. 28,000 595
United Technologies Corp. 10,400 694
--------------------------------------------------------------------------
2,215
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7,000 $ 173 -- $ --
2,200 62 2,500 71
-- -- 600 18
4,700 122 -- --
-- -- 1,700 11
16,900 153 4,200 38
8,600 359 300 12
-- -- 5,000 105
1,600 14 -- --
-- -- 400 11
12,400 260 -- --
24,100 253 4,600 48
13,500 324 3,900 94
- ---------------------------------------------------------------------------------------------------------
1,720 408
- ---------------------------------------------------------------------------------------------------------
500 27 1,300 69
-- -- -- --
84,600 865 26,400 270
15,750 587 4,950 184
6,300 363 3,700 213
5,200 267 -- --
13,500 418 6,100 189
12,000 361 4,000 120
- ---------------------------------------------------------------------------------------------------------
2,888 1,045
8,600 253 2,700 79
-- -- -- --
- ---------------------------------------------------------------------------------------------------------
253 79
3,600 310 -- --
-- -- 1,000 197
26,200 608 7,900 183
2,600 70 600 16
-- -- -- --
900 243 -- --
- ---------------------------------------------------------------------------------------------------------
1,231 396
6,000 175 1,400 41
- ---------------------------------------------------------------------------------------------------------
600 24 200 8
16,000 632 400 16
- ---------------------------------------------------------------------------------------------------------
656 24
- ---------------------------------------------------------------------------------------------------------
6,500 137 -- --
700 58 600 50
19,100 1,236 -- --
-- -- 400 5
17,900 190 3,600 38
-- -- 2,600 55
5,800 387 1,600 107
- ---------------------------------------------------------------------------------------------------------
2,008 255
</TABLE>
21
<PAGE> 22
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUTOMOBILES--2.6%, 1.7% AND 1.4%
Borg-Warner Automotive, Inc. 3,900 $ 198
DaimlerChrysler, A.G. 374 27
(a)Dura Automotive Systems, Inc. 2,059 61
Fiat SpA 29,900 105
Ford Motor Co. 15,100 734
GKN PLC 103,600 1,773
Honda Motor Co., Ltd. 7,000 304
Magna International, Inc. "A" -- --
Renault SA 7,100 382
(a)Tower Automotive, Inc. -- --
--------------------------------------------------------------------------
3,584
TELECOMMUNICATIONS EQUIPMENT--.4%,
.7% AND .1%
LM Ericsson Telephone Co. "B" 5,500 179
Scientific-Atlanta, Inc. 8,300 303
--------------------------------------------------------------------------
482
- ------------------------------------------------------------------------------------------------------------------
ENERGY--2.0%, 2.6%
AND .9%
OIL AND GAS PRODUCTION--
.5%, .9% AND .2%
Coastal Corp. -- --
(a)Marine Drilling Companies, Inc. -- --
Repsol SA 24,000 492
Tosco Corporation 9,400 248
(a)UTI Energy Corp. -- --
--------------------------------------------------------------------------
740
OIL COMPANIES--.6%, .8% AND .4%
Ashland, Inc. -- --
ENI SpA 131,400 800
--------------------------------------------------------------------------
800
OIL/GAS TRANSMISSION--.2%, .4% AND
.0%
Questar Corp. 15,400 290
--------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT--
.7%, .5% AND .3%
Aker Maritime ASA 12,100 140
(a)Seitel, Inc. 2,000 26
(a)Tuboscope, Inc. -- --
(a)Veritas DGC, Inc. 41,600 744
--------------------------------------------------------------------------
910
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL--17.1%, 13.8%
AND 8.9%
BANKS--5.0%, 4.8%
AND 2.4%
ABN AMRO Holding NV 34,000 764
Astoria Financial Corp. 1,840 70
Australia & New Zealand Banking Group Ltd. 35,600 250
Bank of America Corp. -- --
BANK ONE CORP. 2,749 150
Bank of Nova Scotia 19,300 402
Banque Nationale de Paris 8,400 692
Chase Manhattan Corp. 8,300 638
Christiania Bank og Kreditkasse 25,600 100
Cullen\Frost Bankers, Inc. 2,000 51
Dah Sing Financial Group 51,400 211
Dime Bancorp, Inc. -- --
Dresdner Bank AG 5,400 232
Fleet Financial Group, Inc. 16,100 652
Fuji Bank, Ltd. 7,000 54
Hang Seng Bank, Ltd. -- --
Istituto Bancario San Paolo di Torino 12,100 154
KeyCorp 2,600 82
National Australia Bank, Ltd. 16,100 246
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
600 $ 30 200 $ 10
1,247 90 -- --
-- -- -- --
-- -- -- --
12,100 588 2,800 136
56,300 963 23,000 394
11,000 477 2,000 87
900 49 -- --
1,700 91 3,100 167
5,400 129 1,600 38
- ----------------------------------------------------------------------------------------------------------
2,417 832
800 26 -- --
26,600 971 1,300 47
- ----------------------------------------------------------------------------------------------------------
997 47
- ----------------------------------------------------------------------------------------------------------
5,800 229 -- --
13,200 197 -- --
28,340 582 5,790 119
-- -- -- --
14,300 238 -- --
- ----------------------------------------------------------------------------------------------------------
1,246 119
4,800 182 1,200 46
146,000 889 28,400 173
- ----------------------------------------------------------------------------------------------------------
1,071 219
27,200 512 1,400 26
- ----------------------------------------------------------------------------------------------------------
-- -- -- --
1,600 21 600 8
14,700 221 -- --
25,500 456 9,900 177
- ----------------------------------------------------------------------------------------------------------
698 185
- ----------------------------------------------------------------------------------------------------------
23,100 519 3,400 76
-- -- -- --
37,200 261 -- --
12,300 816 -- --
-- -- 750 41
2,400 50 6,100 127
6,600 544 800 66
8,900 684 800 61
-- -- 3,900 15
1,600 41 600 15
16,000 66 25,600 105
-- -- 1,800 36
8,800 378 5,200 223
12,400 502 800 32
-- -- 4,000 31
21,600 238 4,300 47
-- -- -- --
3,400 107 800 25
7,100 108 -- --
</TABLE>
23
<PAGE> 24
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
National Bank of Canada 16,400 $ 202
PNC Bank Corp. 3,000 159
Pacific Century Financial Corporation -- --
Provident Financial Group 5,500 240
Sakura Bank, Ltd. 215,000 896
Societe Generale 600 113
The Mitsui Trust & Banking Co., Ltd. 291,000 539
Wing Hang Bank, Ltd. -- --
--------------------------------------------------------------------------
6,897
INSURANCE--4.1%, 3.3%
AND 3.3%
AFLAC, Inc. -- --
AMBAC Financial Group, Inc. 11,100 617
AXA SA 5,100 598
Aetna, Inc. 13,700 1,123
Allamerica Financial Corp. -- --
American General Corp. 2,400 186
Everest Reinsurance Holdings, Inc. -- --
Fidelity National Financial, Inc. 5,500 96
Fremont General Corp. 8,400 143
Hartford Financial Services Group, Inc. 10,000 540
ING Groep N.V. 11,035 565
Jefferson Pilot Corp. 6,150 449
LandAmerica Financial Group, Inc. 1,100 27
MGIC Investment Corp. -- --
Old Republic International Corp. -- --
Progressive Corp. -- --
Protective Life Corp. 8,500 303
QBE Insurance Group, Ltd. 3,300 12
Skandia Forsakrings AB 20,700 387
Stewart Information Services Corp. 5,200 115
White Mountain Insurance Group, Inc. 1,600 212
XL Capital Ltd. "A" 4,941 259
--------------------------------------------------------------------------
5,632
BUSINESS FINANCE--.2%, .6% AND .1%
Heller Financial, Inc. 11,100 283
--------------------------------------------------------------------------
CONSUMER FINANCE--1.9%, 1.5% AND
1.0%
Associates First Capital Corp. -- --
Citigroup, Inc. 43,800 1,952
SLM Holding Corp. 14,300 651
(a)Southern Pacific Funding Corp. -- --
--------------------------------------------------------------------------
2,603
OTHER FINANCIAL COMPANIES--
5.5%, 3.3% AND 2.0%
Bear Stearns Companies, Inc. 13,650 578
Compagnie Financiere Richemont AG 800 1,551
Custos, A.B. -- --
Edwards (A.G.), Inc. 15,400 425
Federal Home Loan Mortgage Corp. 31,900 1,830
Federal National Mortgage Association 19,500 1,346
GreenPoint Financial Corp. 8,000 259
HSBC Holdings plc 18,000 212
Legg Mason, Inc. 16,700 585
Man (ED&F) Group PLC 29,700 175
Morgan Stanley, Dean Witter & Co. 8,000 721
Resource Bancshares Mortgage Group, Inc. 2,520 18
--------------------------------------------------------------------------
7,700
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 25
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
14,500 $ 179 2,000 $ 25
2,100 111 900 48
8,800 174 -- --
-- -- -- --
136,000 566 38,000 158
1,300 244 -- --
411,000 761 112,000 207
48,000 183 20,000 76
- --------------------------------------------------------------------------------------------------------
6,532 1,414
-- -- 2,200 102
-- -- 2,000 111
3,800 445 1,720 202
5,700 467 1,400 115
-- -- 3,400 201
4,500 348 -- --
6,600 206 -- --
14,240 248 -- --
12,500 213 400 7
-- -- 2,000 108
10,819 554 4,056 208
6,000 438 1,800 131
800 20 300 7
-- -- 2,000 99
-- -- 13,000 219
2,500 319 -- --
5,200 186 3,000 107
58,300 219 -- --
9,400 176 7,800 146
6,400 142 4,400 98
-- -- -- --
9,882 519 1,830 96
- --------------------------------------------------------------------------------------------------------
4,500 1,957
34,000 867 2,000 51
- --------------------------------------------------------------------------------------------------------
-- -- 1,466 56
34,200 1,524 9,600 428
12,400 564 2,900 132
1,800 -- -- --
- --------------------------------------------------------------------------------------------------------
2,088 616
10,920 462 2,205 93
700 1,357 100 194
1,500 33 -- --
11,600 320 1,500 41
19,500 1,119 4,000 229
12,300 849 3,700 255
-- -- 1,500 49
3,600 42 -- --
-- -- 5,500 192
-- -- 4,800 28
4,200 379 1,300 117
-- -- 735 5
- --------------------------------------------------------------------------------------------------------
4,561 1,203
</TABLE>
25
<PAGE> 26
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REAL ESTATE--.4%, .3%
AND .1%
China Resources Enterprises, Ltd. 364,000 $ 567
DBS Land, Ltd. -- --
(a)IMC Mortgage Company 112,700 10
-----------------------------------------------------------------------
577
- ------------------------------------------------------------------------------------------------------------------
HEALTH--9.0%, 6.3%
AND 4.8%
BIOTECHNOLOGY--1.9%, 1.3% AND .8%
(a)Amgen, Inc. 22,900 1,760
(a)Bio-Rad Laboratories, Inc. "A" 11,000 300
Biogen, Inc. 7,400 509
-----------------------------------------------------------------------
2,569
HEALTH INDUSTRY SERVICES--
1.8%, 1.3% AND .8%
Cardinal Health, Inc. 16,812 1,147
(a)HEALTHSOUTH Corp. 13,200 162
(a)Hanger Orthopedic Group, Inc. 21,200 249
McKesson HBOC, Inc. -- --
Shared Medical Systems Corp. 6,200 371
(a)US Oncology, Inc. 13,400 159
(a)Wellpoint Health Networks, Inc. 5,800 476
-----------------------------------------------------------------------
2,564
HOSPITAL MANAGEMENT--
.9%, .3% AND .4%
(a)Trigon Healthcare, Inc. 11,800 412
(a)Universal Health Services, Inc. 19,900 847
-----------------------------------------------------------------------
1,259
MEDICAL SUPPLY & SPECIALTY--
2.9%, 2.1% AND 1.4%
C.R. Bard, Inc. 26,600 1,293
(a)Maxxim Medical, Inc. 10,300 241
(a)NBTY, Inc. 9,500 59
(a)VISX, Inc. 24,200 2,450
-----------------------------------------------------------------------
4,043
PHARMACEUTICALS--1.5%, 1.3% AND
1.4%
Abbott Laboratories -- --
Johnson & Johnson 3,900 359
Merck & Co., Inc. 18,300 1,239
Suzuken Co., LTD 15,000 419
-----------------------------------------------------------------------
2,017
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURING--8.9%, 6.3% AND 4%
CHEMICALS--2.8%, 1.8%
AND 1.3%
Akzo Nobel NV 6,000 257
BASF AG 30,800 1,395
BOC Group plc 66,000 1,365
Bayer AG -- --
Compania Espanola de Petroleos, S.A. -- --
Dow Chemical Co. 4,100 508
Kyowa Hakko Kogyp -- --
Praxair, Inc. 6,500 300
Rohm & Haas Co. -- --
Valhi, Inc. 5,700 68
-----------------------------------------------------------------------
3,893
CONTAINERS AND PAPER--.9%, .5% AND
.4%
(a)Rexam, PLC -- --
FPB Holding AG 3,869 671
UPM-Kymmene OYJ 15,100 509
-----------------------------------------------------------------------
1,180
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
102,000 $ 159 32,000 $ 50
100,000 208 -- --
-- -- -- --
- --------------------------------------------------------------------------------------------------------
367 50
- --------------------------------------------------------------------------------------------------------
17,500 1,345 4,100 315
18,800 513 1,000 27
-- -- 1,600 110
- --------------------------------------------------------------------------------------------------------
1,858 452
10,375 708 700 48
-- -- 1,600 20
20,600 242 7,800 92
-- -- 900 28
5,700 341 1,000 60
16,700 198 9,400 112
2,900 238 1,100 90
- --------------------------------------------------------------------------------------------------------
1,727 450
6,200 216 3,800 133
5,600 238 3,300 140
- --------------------------------------------------------------------------------------------------------
454 273
18,500 900 6,100 297
-- -- -- --
10,000 63 4,700 29
18,500 1,873 5,300 537
- --------------------------------------------------------------------------------------------------------
2,836 863
-- -- 1,800 77
-- -- 2,200 203
19,700 1,333 4,300 291
14,900 416 8,600 240
- --------------------------------------------------------------------------------------------------------
1,749 811
- --------------------------------------------------------------------------------------------------------
3,000 128 1,700 73
15,800 715 5,900 267
26,000 538 8,600 178
1,200 51 -- --
-- -- 5,400 65
2,800 347 800 99
14,000 88 -- --
-- -- 1,000 46
9,100 388 -- --
11,600 139 4,800 58
- --------------------------------------------------------------------------------------------------------
2,394 786
122,341 187 -- --
1,277 221 652 113
8,800 297 3,500 118
- --------------------------------------------------------------------------------------------------------
705 231
</TABLE>
27
<PAGE> 28
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED MANUFACTURING--
2.2%, .8% AND .6%
Ball Corporation -- $ --
Briggs & Stratton Corp. 700 42
Cooper Industries, Inc. 5,000 274
General Electric Co., plc -- --
Hillenbrand Industries, Inc. 7,000 315
Kawasaki Heavy Industries, Ltd. -- --
Man AG 11,500 379
Matthews International Corp. 10,300 314
Myers Industries, Inc. 2,510 60
Pentair, Inc. -- --
Robbins & Myers, Inc. -- --
Scotsman Industries, Inc. 30,400 1,017
Sulzer Brothers Ltd. (Registered) 1,000 590
Williams, PLC -- --
-----------------------------------------------------------------------
2,991
ELECTRICAL PRODUCTS--.4%, .5% AND
.3%
(a)American Power Conversion Corp. -- --
(a)SLI, Inc. 20,700 520
Scana Corp. -- --
Taiyo Yuden Co., Ltd. 6,000 107
-----------------------------------------------------------------------
627
INDUSTRIAL SPECIALTY--.6%, .6% AND
.1%
(a)Albany International Corp. "A" -- --
Carlisle Companies, Inc. 5,200 238
Chart Industries, Inc. 44,900 295
Fleetwood Enterprises 1,100 25
(a)RTI International Metals, Inc. -- --
Sherwin-Williams Co. 10,400 281
Teleflex Incorporated -- --
-----------------------------------------------------------------------
839
MACHINERY/COMPONENTS/
CONTROLS--2.0%, 2.1% AND 1.3%
Columbus McKinnon Corp. -- --
Gleason Corp. -- --
(a)Howmet International, Inc. -- --
Ingersoll-Rand Co. 14,900 958
Intermet Corp. 3,900 44
Lincoln Electric Holdings, Inc. -- --
(a)MotivePower Industries, Inc. 16,950 300
(a)Mueller Industries, Inc. -- --
Okuma Corp. 112,000 519
Pitney Bowes, Inc. -- --
Premark International, Inc. 16,700 633
Reliance Steel & Aluminum Co. 10,400 354
Rolls-Royce PLC -- --
(a)Shaw Group, Inc. -- --
Valmet-Rauma Oyj -- --
(a)Wyman-Gordon Co. 1,900 36
-----------------------------------------------------------------------
2,844
- ------------------------------------------------------------------------------------------------------------------
MEDIA--.1%, .1% AND .0%
CABLE TELEVISION--.1%, .1% AND 0%
Granada Group plc 9,800 98
-----------------------------------------------------------------------
PRINT MEDIA--0%, 0%
AND 0%
(a)Valassis Communications, Inc. 1,050 39
-----------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-- $ -- 700 $ 34
500 30 200 12
-- -- -- --
14,200 143 -- --
-- -- -- --
25,000 66 -- --
4,900 162 1,000 33
-- -- -- --
1,950 46 880 21
4,500 195 1,100 48
-- -- 300 7
-- -- -- --
600 354 300 177
9,200 52 -- --
- --------------------------------------------------------------------------------------------------------
1,048 332
9,400 195 -- --
18,900 475 5,000 126
-- -- 3,400 83
-- -- -- --
- --------------------------------------------------------------------------------------------------------
670 209
-- -- 206 4
-- -- -- --
29,500 194 3,900 26
2,300 53 300 7
12,700 164 -- --
6,600 178 -- --
4,200 212 -- --
- --------------------------------------------------------------------------------------------------------
801 37
-- -- 2,400 55
15,200 245 -- --
-- -- 2,500 47
7,100 457 2,300 148
2,900 33 1,300 15
38,800 735 -- --
-- -- 3,000 53
1,500 51 200 7
87,000 403 35,000 162
-- -- 500 32
8,700 330 3,700 140
12,400 422 200 7
37,900 158 21,100 88
-- -- 400 8
7,600 102 -- --
1,400 27 600 11
- --------------------------------------------------------------------------------------------------------
2,963 773
- --------------------------------------------------------------------------------------------------------
14,000 139 -- --
- --------------------------------------------------------------------------------------------------------
900 34 450 17
- --------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
METALS AND MINERALS--.7%, Barrick Gold Corp. -- $ --
.2% AND .3% ----------------------------------------------------------------------------
PRECIOUS METALS--.0%, .0%
AND .1%
STEEL AND METALS--.7%, .2% AND .2%
AK Steel Holding Corp. -- --
AMCOL International Corp. 3,300 49
Alcan Aluminium, Ltd. -- --
Allegheny Teledyne, Inc. -- --
Arbed SA 3,600 320
(a)Bethlehem Steel Corp. 24,300 190
Comalco, Ltd. -- --
Nucor Corp. 6,200 301
Ryerson Tul, Inc. 6,466 138
--------------------------------------------------------------------------
998
- ------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.4%, 1.4% AND
1.7%
EDP SERVICES--.9%, .1%
AND .5%
(a)Affiliated Computer Services 21,500 1,000
(a)Cotelligent, Inc. -- --
(a)Pomeroy Computer Resources, Inc. 13,300 192
--------------------------------------------------------------------------
1,192
INVESTMENT--1.0%, .5%
AND .4%
PaineWebber Group, Inc. 5,800 232
Raymond James Financial, Inc. 50,700 1,087
--------------------------------------------------------------------------
1,319
MISCELLANEOUS COMMERCIAL
SERVICES--1.2%, .4% AND .4%
Cap Gemini Sogeti SA 3,100 528
(a)Convergys Corp. 16,500 322
Hanson PLC 28,200 252
(a)Personnel Group of America, Inc. 21,400 202
(a)US Foodservice Inc. 8,200 348
--------------------------------------------------------------------------
1,652
MISCELLANEOUS CONSUMER
SERVICES--.2%, .2% AND .2%
United Utilities PLC 25,000 325
--------------------------------------------------------------------------
PRINTING/PUBLISHING--.1%, .2% AND
.2%
Deluxe Corp. -- --
(a)Mail-Well, Inc. 13,200 191
--------------------------------------------------------------------------
191
- ------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--5.5%, 4.8% AND 2.8%
COMPUTER SOFTWARE--1.2%, 1.2% AND
.6%
(a)BMC Software Inc. -- --
Computer Associates International, Inc. -- --
(a)MTI Technology Corp. -- --
Reynolds and Reynolds Company 33,400 785
SAP AG (pfd.) 300 114
(a)Synopsys, Inc. 12,300 740
--------------------------------------------------------------------------
1,639
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 31
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-- $ -- 3,100 $ 58
- -------------------------------------------------------------------------------------------------------
-- -- 300 7
2,550 38 900 13
3,800 115 -- --
-- -- 2,100 45
-- -- -- --
9,900 77 -- --
8,300 41 -- --
-- -- 1,200 58
-- -- -- --
- -------------------------------------------------------------------------------------------------------
271 123
- -------------------------------------------------------------------------------------------------------
-- -- 5,200 242
-- -- 3,200 19
8,000 116 3,500 51
- -------------------------------------------------------------------------------------------------------
116 312
-- -- 2,500 100
31,700 680 5,700 122
- -------------------------------------------------------------------------------------------------------
680 222
1,700 289 900 153
-- -- -- --
13,800 123 -- --
18,300 173 -- --
-- -- 2,200 93
- -------------------------------------------------------------------------------------------------------
585 246
18,700 243 9,200 120
- -------------------------------------------------------------------------------------------------------
8,500 319 1,500 56
-- -- 4,300 62
- -------------------------------------------------------------------------------------------------------
319 118
- -------------------------------------------------------------------------------------------------------
6,200 334 -- --
-- -- 300 14
10,100 183 -- --
14,100 331 5,600 132
900 341 -- --
8,200 494 3,200 193
- -------------------------------------------------------------------------------------------------------
1,683 339
</TABLE>
31
<PAGE> 32
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRONIC COMPONENTS/
DISTRIBUTORS--1.2%, 1.1% AND .6%
(a)Benchmark Electronics, Inc. 1,400 $ 54
(a)CHS Electronics, Inc. 27,000 103
(a)Gateway, Inc. -- --
Koninklijke (Royal) Philips Electronics N.V. 7,808 798
(a)SCI Systems, Inc. 6,700 353
STMicroelectronics -- --
(a)Tech Data Corp. -- --
Technitrol, Inc. 9,100 318
--------------------------------------------------------------------------
1,626
MILITARY ELECTRONICS--.6%, .7% AND
.2%
(a)Computer Sciences Corp. 12,800 824
--------------------------------------------------------------------------
SEMICONDUCTORS--2.5%, 1.8% AND
1.4%
Intel Corp. 35,800 2,470
Linear Technology Corp. 16,200 994
--------------------------------------------------------------------------
3,464
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.4%, 1.6% AND
1.0%
AIR FREIGHT--.0%, .0%
AND .1%
(a)FDX Corp. -- --
--------------------------------------------------------------------------
AIRLINES--.6%, .5% AND .5%
Air New Zealand, Ltd. "B" -- --
Comair 19,600 479
Qantas Airways, Ltd. 119,500 396
-----------------------------------------------------------------------------
875
MARINE TRANSPORTATION--.1%, .0%
AND .0%
(a)Avondale Industries, Inc. -- --
Newport News Shipbuilding, Inc. 6,200 200
--------------------------------------------------------------------------
200
RAILROADS--.5%, .6% AND .3%
Railtrack Group PLC -- --
Tranz Rail Holdings, ADR -- --
Trinity Industries, Inc. 20,100 668
--------------------------------------------------------------------------
668
TRUCKING--.2%, .5% AND .1%
Roadway Express, Inc. 6,000 131
(a)U.S. Xpress Enterprises, Inc."A" 11,400 111
--------------------------------------------------------------------------
242
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES--4.6%, 3.7% AND 3.5%
ELECTRIC UTILITIES/NATURAL GAS
DISTRIBUTOR--4.3%, 2.6% AND 3%
(a)AES Corp. 6,400 384
Ameren Corp. -- --
BG, PLC -- --
Black Hills Corp. 8,700 219
CLP Holdings, Ltd. 70,000 318
(a)Calpine Corporation 5,900 444
Chugoku Electric Power Co., Inc. 64,400 1,035
Eastern Utilities Association 7,200 215
Electrabel NPV 500 160
Empire District Electric Company 19,300 503
Endesa S.A. 7,900 156
FPL Group, Inc. -- --
Hokuriku Electric Power Co. -- --
</TABLE>
32
<PAGE> 33
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,200 $ 46 400 $ 15
46,900 179 5,000 19
4,000 305 600 46
5,500 562 860 88
-- -- 2,500 132
1,800 129 -- --
9,400 341 -- --
-- -- 2,000 70
- -------------------------------------------------------------------------------------------------------
1,562 370
13,900 895 1,900 122
- -------------------------------------------------------------------------------------------------------
25,800 1,780 7,700 531
11,800 724 4,400 270
- -------------------------------------------------------------------------------------------------------
2,504 801
- -------------------------------------------------------------------------------------------------------
-- -- 1,200 54
- -------------------------------------------------------------------------------------------------------
105,000 211 5,300 11
20,400 499 3,350 82
-- -- 66,100 219
- -------------------------------------------------------------------------------------------------------
710 312
-- -- 200 8
-- -- -- --
- -------------------------------------------------------------------------------------------------------
-- -- 8
11,400 210 -- --
46,000 83 -- --
16,200 539 4,900 163
- -------------------------------------------------------------------------------------------------------
832 163
19,300 421 1,200 26
19,200 187 -- --
- -------------------------------------------------------------------------------------------------------
608 26
- -------------------------------------------------------------------------------------------------------
-- -- 2,300 138
-- -- 5,300 207
-- -- 6,700 41
14,600 367 400 10
-- -- -- --
-- -- 1,700 128
51,600 829 15,700 252
-- -- -- --
1,200 385 400 128
5,200 136 2,100 55
-- -- -- --
-- -- 1,700 92
4,000 63 -- --
</TABLE>
33
<PAGE> 34
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kyushu Electric Power Co. 62,200 $ 975
Northwestern Corp. -- --
Scottish Power plc 54,000 456
Scottish & South Energy -- --
Shikoku Electric Power Co., Inc. 66,100 1,033
TNP Enterprises, Inc. 700 27
Texas Utilities Co., Inc. -- --
Tohoku Electric Power Co., Inc. -- --
WPS Resources Corp. -- --
--------------------------------------------------------------------------
5,925
NATURAL GAS DISTRIBUTION--0%, .4%
AND 0%
Eastern Enterprises 1,100 43
--------------------------------------------------------------------------
WATER SUPPLY--.3%, .7% AND .5%
Aquarion Co. 11,550 404
Suez Lyonnaise des Eaux -- --
Thames Water PLC -- --
Yorkshire Water Ord 7,200 52
--------------------------------------------------------------------------
456
--------------------------------------------------------------------------
TOTAL COMMON STOCKS--78.0%, 59.5% AND 49.0%
(Cost: $97,621, $75,311 and $21,653) 108,084
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKETS
INSTRUMENTS
(b)Repurchase agreement
State Street Bank and Trust Company dated
7/30/99, 5.04%, due 8/2/99 199 199
Commercial paper
Yield--4.88% to 5.01%
Due--August 1999 2,400 2,392
-----------------------------------------------------------------------------
TOTAL MONEY MARKET INSTRUMENTS--1.9%, 1.7% AND 0%
(Cost: $2,591, $2,298 and $0) 2,591
-----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $128,551, $132,050 and $57,460) $138,486
-----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Repurchase agreement is fully collateralized by U.S. Treasury or Government
securities. The collateral is monitored daily by the fund so that its market
value is at least equal to the minimum carrying value of the repurchase
agreement.
Based on the cost of investments for federal income tax purposes at July 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 $128,551 132,050 57,463
- ------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 14,792 10,965 3,751
- ------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 4,857 5,757 1,896
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 9,935 5,208 1,855
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
34
<PAGE> 35
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12,800 $ 201 -- $ --
14,200 355 11,600 290
34,600 292 -- --
-- -- 12,700 122
6,500 102 16,100 252
600 23 200 8
7,400 314 800 34
31,000 509 -- --
-- -- 1,000 29
- ------------------------------------------------------------------------------------------------------
3,576 1,786
12,700 495 -- --
- ------------------------------------------------------------------------------------------------------
17,100 599 7,950 278
1,100 194 -- --
4,000 62 -- --
20,000 144 -- --
- ------------------------------------------------------------------------------------------------------
999 278
- ------------------------------------------------------------------------------------------------------
81,678 24,291
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
300 300 -- --
--
--
2,000 1,998
- ------------------------------------------------------------------------------------------------------
--
2,298 --
- ------------------------------------------------------------------------------------------------------
$137,258 $59,318
- ------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER HORIZON FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Kemper Horizon 20+ Portfolio, Kemper
Horizon 10+ Portfolio and Kemper Horizon 5 Portfolio, comprising Kemper Horizon
Fund (the Fund), as of July 31, 1999, the related statements of operations for
the year then ended and the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
fiscal periods since 1996. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of July
31, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios comprising Kemper Horizon Fund at July 31, 1999, the results
of their operations, the changes in their net assets and the financial
highlights for the periods referred to above in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 20, 1999
36
<PAGE> 37
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
---------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $128,551, $132,050 and $57,460) $138,486 137,258 59,318
- -------------------------------------------------------------------------------------------------------------
Cash 15 36 --
- -------------------------------------------------------------------------------------------------------------
Foreign taxes recoverable 38 33 11
- -------------------------------------------------------------------------------------------------------------
Receivable for:
Investments sold 3,586 1,696 1,026
- -------------------------------------------------------------------------------------------------------------
Fund shares sold 114 409 192
- -------------------------------------------------------------------------------------------------------------
Dividends and interest 685 1,183 701
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 142,924 140,615 61,248
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to custodian -- -- 31
- -------------------------------------------------------------------------------------------------------------
Payable for:
Investments purchased 4,750 1,822 991
- -------------------------------------------------------------------------------------------------------------
Fund shares redeemed 940 447 160
- -------------------------------------------------------------------------------------------------------------
Management fee 67 65 29
- -------------------------------------------------------------------------------------------------------------
Distribution services fee 41 35 18
- -------------------------------------------------------------------------------------------------------------
Administrative services fee 23 21 10
- -------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 120 98 50
- -------------------------------------------------------------------------------------------------------------
Trustees' fees and other 12 17 6
- -------------------------------------------------------------------------------------------------------------
Total liabilities 5,953 2,505 1,295
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $136,971 138,110 59,953
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) $ 591 651 223
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 9,935 5,208 1,858
- -------------------------------------------------------------------------------------------------------------
Foreign currency related transactions 4 7 1
- -------------------------------------------------------------------------------------------------------------
Undistributed net realized gain on investments 9,933 11,234 2,517
- -------------------------------------------------------------------------------------------------------------
Paid-in capital 116,508 121,010 55,354
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $136,971 138,110 59,953
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net assets applicable to shares outstanding $ 63,294 72,534 29,714
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 4,518 5,672 2,627
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/ shares outstanding) $ 14.01 12.79 11.31
- -------------------------------------------------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $ 14.86 13.57 12.00
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net assets applicable to shares outstanding $ 59,209 51,365 24,454
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 4,314 4,020 2,162
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/shares outstanding) $ 13.72 12.78 11.31
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net assets applicable to shares outstanding $ 13,156 14,034 5,620
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 961 1,102 497
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/shares outstanding) $ 13.70 12.73 11.30
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net assets applicable to shares outstanding $ 1,312 177 165
- -------------------------------------------------------------------------------------------------------------
Shares outstanding 93 14 15
- -------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share (net assets
/shares outstanding) $ 14.16 12.76 11.31
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
37
<PAGE> 38
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended July 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
----------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
NET INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $23, $13 and
$1) $ 1,631 1,316 416
- ------------------------------------------------------------------------------------------------------------
Interest income 1,910 3,714 2,414
- ------------------------------------------------------------------------------------------------------------
Total investment income 3,541 5,030 2,830
- ------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 713 732 333
- ------------------------------------------------------------------------------------------------------------
Distribution services fee 495 454 221
- ------------------------------------------------------------------------------------------------------------
Administrative services fee 290 299 137
- ------------------------------------------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 1,202 788 331
- ------------------------------------------------------------------------------------------------------------
Trustees' fees 18 14 5
- ------------------------------------------------------------------------------------------------------------
Reports to shareholders 75 78 50
- ------------------------------------------------------------------------------------------------------------
Audit 29 34 12
- ------------------------------------------------------------------------------------------------------------
Legal 3 3 1
- ------------------------------------------------------------------------------------------------------------
Registration fee 13 19 2
- ------------------------------------------------------------------------------------------------------------
Other 18 12 7
- ------------------------------------------------------------------------------------------------------------
Total expenses 2,856 2,433 1,099
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 685 2,597 1,731
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain (loss) from:
Investments 10,623 11,703 2,897
- ------------------------------------------------------------------------------------------------------------
Futures (153) (102) (16)
- ------------------------------------------------------------------------------------------------------------
Foreign currency transactions (23) (30) (6)
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 10,447 11,571 2,875
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (5,326) (7,387) (1,916)
- ------------------------------------------------------------------------------------------------------------
Foreign currency related transactions 4 7 1
- ------------------------------------------------------------------------------------------------------------
(5,322) (7,380) (1,915)
- ------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 5,125 4,191 960
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,810 6,788 2,691
- ------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended July 31, 1999 and 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 $ 685 48 2,597 1,553 1,731 1,245
- --------------------------------------------------------------------------------------------------------
Net realized gain (loss) 10,447 679 11,571 1,335 2,875 528
- --------------------------------------------------------------------------------------------------------
Net change in net unrealized appreciation
(depreciation) (5,322) 6,055 (7,380) 5,063 (1,915) 1,289
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 5,810 6,782 6,788 7,951 2,691 3,062
- --------------------------------------------------------------------------------------------------------
Distribution from net investment income (74) (124) (2,051) (1,217) (1,741) (1,124)
- --------------------------------------------------------------------------------------------------------
Distribution from net realized gain (184) (2,944) (1,127) (2,477) (582) (920)
- --------------------------------------------------------------------------------------------------------
Total dividends to shareholders (258) (3,068) (3,178) (3,694) (2,323) (2,044)
- --------------------------------------------------------------------------------------------------------
Net increase from capital share transactions 21,343 43,689 22,813 44,030 4,250 23,617
- --------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 26,895 47,403 26,423 48,287 4,618 24,635
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
NET ASSETS
BEGINNING OF YEAR 110,076 62,673 111,687 63,400 55,335 30,700
- --------------------------------------------------------------------------------------------------------
END OF YEAR $136,971 110,076 138,110 111,687 59,953 55,335
- --------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) AT
END OF YEAR $ 591 1 651 132 223 237
- --------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1
DESCRIPTION OF THE
FUND Kemper Horizon Fund (the "fund") is registered
under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end,
diversified management investment company organized
as a Massachusetts business trust. 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 offers
multiple classes of shares. Class A shares are
offered to investors subject to an initial sales
charge. Class B shares are offered 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 offered 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
generally have lower ongoing expenses than other
classes.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the Portfolios
have equal rights with respect to voting subject to
class specific arrangements.
Each Portfolio's financial statements are prepared
in accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by each Portfolio in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
2
SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. 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, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used.
Portfolio debt securities purchased with an
original maturity greater than sixty days are
valued by pricing agents approved by the officers
of the Fund, whose quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the
39
<PAGE> 40
NOTES TO FINANCIAL
STATEMENTS
most recent bid quotation supplied by a bona fide
market maker shall be 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 value
as determined in good faith by the Valuation
Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The books and records
of each Portfolio 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 at period end. 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.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. Each Portfolio may enter
into repurchase agreements with certain banks and
broker/dealers whereby each Portfolio, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
FUTURES CONTRACTS. A futures contract is an
agreement between a buyer or seller and an
established futures exchange or its clearinghouse
in which the buyer or seller agrees to take or make
a delivery of a specific amount of a financial
instrument at a specified price on a specific date
(settlement date). During the period, each
Portfolio purchased securities index futures to
lock in the purchase price of a security or
currency which it expects to purchase in the near
future.
Upon entering into a futures contract, each
Portfolio is required to deposit with a financial
intermediary an amount ("initial margin") equal to
a certain percentage of the face value indicated in
the futures contract. Subsequent payments
("variation margin") are made or received by the
Portfolio dependent upon the daily fluctuations in
the value of the underlying security and are
recorded for financial reporting purposes as
unrealized gains or losses by the Portfolio. When
entering into a closing transaction, the Portfolio
will realize a gain or loss equal to the difference
between the value of the futures contract to sell
and the futures contract to buy. Futures contracts
are valued at the most recent settlement price.
Certain risks may arise upon entering into futures
contracts, including the risk that an illiquid
secondary market will limit the Portfolio's ability
to close out a futures contract prior to the
settlement date and that a change in the value of a
futures contract may not correlate exactly with the
changes in the value of the securities or
currencies hedged. When utilizing futures contracts
to hedge, the
40
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS
Portfolio gives up the opportunity to profit from
favorable price movements in the hedged positions
during the term of the contract.
All discounts are accreted for both tax and
financial reporting purposes.
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, the Portfolios paid no federal income
taxes and no federal income tax provision was
required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made as follows:
annually for the Kemper Horizon 20+ semiannually
for the Kemper Horizon 10+ and quarterly for the
Kemper Horizon 5. Net realized gains from
investment transactions, in excess of available
capital loss carryforwards, would be taxable to
each Portfolio if not distributed, and, therefore,
will be distributed to shareholders at least
annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. As a result, net investment income
(loss) and net realized gain (loss) on investment
transactions for a reporting period may differ
significantly from distributions during such
period. Accordingly, each Portfolio may
periodically make reclassifications among certain
of its capital accounts without impacting the net
asset value of each Portfolio.
INVESTMENT TRANSACTIONS AND INVESTMENT
INCOME. Investment transactions are accounted for
on the trade date. Interest income is recorded on
the accrual basis. Dividend income is recorded on
the ex-dividend date and realized gains and losses
from investment transactions are recorded on an
identified cost basis. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as soon as each Portfolio is
informed of such dividends.
- --------------------------------------------------------------------------------
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. Management
fees for the year ended July 31, 1999 are as
follows:
<TABLE>
<CAPTION>
MANAGEMENT
FEES
----------
<S> <C>
Kemper Horizon 20+ Portfolio $713
Kemper Horizon 10+ Portfolio 732
Kemper Horizon 5 Portfolio 333
</TABLE>
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. Each Portfolio has an underwriting and
distribution services agreement with Kemper
Distributors, Inc. (KDI). Underwriting commissions
retained by KDI in connection with
41
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS
the distribution of each portfolio's Class A shares
for the year ended July 31, 1999 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
RETAINED BY KDI
---------------
<S> <C>
Kemper Horizon 20+ Portfolio $18,000
Kemper Horizon 10+ Portfolio 20,000
Kemper Horizon 5 Portfolio 12,000
</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
year ended July 31, 1999 are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
AND CDSC
RECEIVED BY KDI
-----------------
<S> <C>
Kemper Horizon 20+ Portfolio $637,000
Kemper Horizon 10+ Portfolio 546,000
Kemper Horizon 5 Portfolio 271,000
</TABLE>
ADMINISTRATIVE SERVICES AGREEMENT. Each Portfolio
has an administrative services agreement with KDI.
For providing information and administrative
services to Class A, Class B and Class C
shareholders, each portfolio pays KDI a fee at an
annual rate of up to .25% of average daily net
assets of each class. KDI in turn has various
agreements with financial services firms that
provide these services and pays these firms based
on assets of portfolio accounts the firms service.
Administrative services fees (ASF) paid for the
year ended July 31, 1999 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE PORTFOLIOS TO KDI
----------------------
<S> <C>
Kemper Horizon 20+ Portfoli o $290,000
Kemper Horizon 10+ Portfoli o 299,000
Kemper Horizon 5 Portfolio 137,000
</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
$1,728,000 for the year ended July 31, 1999.
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Portfolios are also officers or directors of
Scudder Kemper. During the year ended July 31,
1999, the fund made no payments to its officers and
incurred trustees' fees of $37,000 to independent
trustees.
- --------------------------------------------------------------------------------
4
INVESTMENT
TRANSACTIONS For the year ended July 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 $107,847 95,506 35,172
Proceeds from sales 85,465 76,865 31,048
</TABLE>
42
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5
CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of the portfolios (in thousands):
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,111 $ 27,982 2,092 $27,974
------------------------------------------------------------------------------
Class B 1,684 21,882 1,757 22,828
------------------------------------------------------------------------------
Class C 623 8,128 460 6,048
------------------------------------------------------------------------------
Class I 49 666 111 568
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 11 144 120 1,458
------------------------------------------------------------------------------
Class B 6 83 110 1,326
------------------------------------------------------------------------------
Class C 1 17 14 171
------------------------------------------------------------------------------
Class I 1 14 3 41
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (1,302) (17,386) (630) (8,322)
------------------------------------------------------------------------------
Class B (1,118) (14,745) (518) (7,024)
------------------------------------------------------------------------------
Class C (363) (4,814) (82) (1,086)
------------------------------------------------------------------------------
Class I (48) (628) (90) (293)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 42 549 80 1,050
------------------------------------------------------------------------------
Class B (42) (549) (80) (1,050)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE
TRANSACTIONS $ 21,343 $43,689
------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
KEMPER HORIZON 10+ PORTFOLIO
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
--------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,362 $ 29,026 2,805 $33,563
------------------------------------------------------------------------------
Class B 1,809 22,330 1,763 21,466
------------------------------------------------------------------------------
Class C 517 6,352 505 6,176
------------------------------------------------------------------------------
Class I 3 29 33 141
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 152 1,906 157 1,820
------------------------------------------------------------------------------
Class B 77 967 124 1,294
------------------------------------------------------------------------------
Class C 19 235 29 334
------------------------------------------------------------------------------
Class I -- 5 2 23
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (1,651) (20,380) (717) (8,630)
------------------------------------------------------------------------------
Class B (1,118) (13,815) (825) (9,857)
------------------------------------------------------------------------------
Class C (294) (3,623) (168) (2,084)
------------------------------------------------------------------------------
Class I (18) (219) (39) (216)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 156 1,919 120 1,523
------------------------------------------------------------------------------
Class B (156) (1,919) (120) (1,523)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 22,813 $44,030
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
KEMPER HORIZON 5 PORTFOLIO
YEAR ENDED YEAR ENDED
JULY 31, 1999 JULY 31, 1998
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,796 $ 20,110 1,976 $21,743
------------------------------------------------------------------------------
Class B 1,166 12,909 1,414 15,661
------------------------------------------------------------------------------
Class C 248 2,751 242 2,675
------------------------------------------------------------------------------
Class I 2 20 7 83
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 88 982 78 850
------------------------------------------------------------------------------
Class B 79 871 84 908
------------------------------------------------------------------------------
Class C 19 216 18 198
------------------------------------------------------------------------------
Class I 1 8 1 9
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (1,671) (18,686) (858) (9,364)
------------------------------------------------------------------------------
Class B (1,117) (12,455) (729) (8,043)
------------------------------------------------------------------------------
Class C (214) (2,403) (97) (1,089)
------------------------------------------------------------------------------
Class I (7) (73) (1) (14)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 65 716 83 919
------------------------------------------------------------------------------
Class B (65) (716) (83) (919)
------------------------------------------------------------------------------
NET INCREASE FROM
CAPITAL SHARE TRANSACTIONS $ 4,250 $23,617
------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION> ---------------------------------------
CLASS A
---------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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 .13 .04 .12 .18
- ------------------------------------------------------------------------------------
Net realized and unrealized gain .44 1.07 3.15 .04
- ------------------------------------------------------------------------------------
Total from investment operations .57 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 $14.01 13.48 12.89 9.72
- ------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.21% 9.04 33.90 2.32
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------
Expenses 1.90% 2.00 1.69 1.48
- ------------------------------------------------------------------------------------
Net investment income .95% .49 1.08 1.51
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CLASS B
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
---------------------- 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) .03 (.03) .03 .11
- ------------------------------------------------------------------------------------
Net realized and unrealized gain .43 1.00 3.15 .04
- ------------------------------------------------------------------------------------
Total from investment operations .46 .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 $13.72 13.28 12.79 9.65
- ------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.55% 7.98 33.01 1.58
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------
Expenses 2.61% 2.79 2.47 2.26
- ------------------------------------------------------------------------------------
Net investment income (loss) .24% (.30) .30 .73
- ------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 46
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS C
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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) (.01) (.05) .04 .13
- -------------------------------------------------------------------------------------
Net realized and unrealized gain .44 1.02 3.13 .04
- -------------------------------------------------------------------------------------
Total from investment operations .43 .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 $13.70 13.29 12.80 9.67
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 3.24% 7.97 32.80 1.79
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses 2.88% 3.03 2.48 2.23
- -------------------------------------------------------------------------------------
Net investment income (loss) (.03)% (.54) .29 .76
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CLASS I
--------------------------------------
YEAR ENDED JULY 31, APRIL 8
---------------------- 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 .27 .17 .19 .07
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .46 1.09 3.17 (.37)
- -------------------------------------------------------------------------------------
Total from investment operations .73 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 $14.16 13.62 12.96 9.73
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.43% 10.29 34.84 (2.99)
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses .84% .85 1.04 .73
- -------------------------------------------------------------------------------------
Net investment income 2.01% 1.64 1.73 2.32
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ----------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
--------------------------- TO JULY 31,
1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $136,971 110,076 62,673 18,251
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 72% 44 130 122
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
46
<PAGE> 47
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS A
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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 .31 .24 .25 .20
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .35 .87 2.36 (.04)
- -------------------------------------------------------------------------------------
Total from investment operations .66 1.11 2.61 .16
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .25 .22 .20 .06
- -------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- -------------------------------------------------------------------------------------
Total dividends .36 .63 .20 .06
- -------------------------------------------------------------------------------------
Net asset value, end of period $12.79 12.49 12.01 9.60
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.37% 9.75 27.43 1.70
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses 1.46% 1.48 1.51 1.48
- -------------------------------------------------------------------------------------
Net investment income 2.47% 2.26 2.36 2.40
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CLASS B
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
---------------------- 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 .20 .15 .16 .17
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .35 .86 2.35 (.04)
- -------------------------------------------------------------------------------------
Total from investment operations .55 1.01 2.51 .13
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .14 .12 .11 .03
- -------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- -------------------------------------------------------------------------------------
Total dividends .25 .53 .11 .03
- -------------------------------------------------------------------------------------
Net asset value, end of period $12.78 12.48 12.00 9.60
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.46% 8.85 26.25 1.38
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses 2.34% 2.36 2.36 2.26
- -------------------------------------------------------------------------------------
Net investment income 1.59% 1.38 1.51 1.62
- -------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 48
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------------------------
CLASS C
------------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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 .18 .14 .14 .17
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .35 .87 2.34 (.04)
- ------------------------------------------------------------------------------------------
Total from investment operations .53 1.01 2.48 .13
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .13 .14 .10 .03
- ------------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- ------------------------------------------------------------------------------------------
Total dividends .24 .55 .10 .03
- ------------------------------------------------------------------------------------------
Net asset value, end of period $12.73 12.44 11.98 9.60
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.29% 8.83 25.97 1.39
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ------------------------------------------------------------------------------------------
Expenses 2.50% 2.39 2.61 2.23
- ------------------------------------------------------------------------------------------
Net investment income 1.43% 1.35 1.26 1.65
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
CLASS I
-------------------------------------------
YEAR ENDED JULY 31, APRIL 8
---------------------- 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 .36 .35 .26 .09
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .36 .84 2.40 (.26)
- ------------------------------------------------------------------------------------------
Total from investment operations .72 1.19 2.66 (.17)
- ------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .31 .29 .26 .09
- ------------------------------------------------------------------------------------------
Distribution from net realized gain .11 .41 -- --
- ------------------------------------------------------------------------------------------
Total dividends .42 .70 .26 .09
- ------------------------------------------------------------------------------------------
Net asset value, end of period $12.76 12.46 11.97 9.57
- ------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.86% 10.47 28.09 (1.74)
- ------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.07% .99 1.06 .73
- ------------------------------------------------------------------------------------------
Net investment income 3.10% 2.75 2.81 3.21
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- ------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
--------------------------- TO JULY 31,
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of period (in thousands) $138,110 111,687 63,400 18,912
- ------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 64% 37 126 87
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Highlights.
48
<PAGE> 49
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------------------------
CLASS A
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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 .38 .35 .34 .25
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .17 .47 1.45 (.07)
- -------------------------------------------------------------------------------------
Total from investment operations .55 .82 1.79 .18
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .38 .35 .30 .11
- -------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------
Total dividends .50 .62 .30 .11
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.31 11.26 11.06 9.57
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.94% 7.74 19.02 1.84
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 1.54% 1.64 1.51 1.48
- -------------------------------------------------------------------------------------
Net investment income 3.34% 3.28 3.30 3.20
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CLASS B
--------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
---------------------- 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 .30 .30 .27 .21
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .16 .47 1.44 (.07)
- -------------------------------------------------------------------------------------
Total from investment operations .46 .77 1.71 .14
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .31 .28 .22 .07
- -------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------
Total dividends .43 .55 .22 .07
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.31 11.28 11.06 9.57
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.24% 7.27 18.15 1.44
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses 2.20% 2.17 2.15 2.26
- -------------------------------------------------------------------------------------
Net investment income 2.68% 2.75 2.66 2.42
- -------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 50
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
---------------------------------------
CLASS C
---------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
KEMPER HORIZON ---------------------- 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 .28 .28 .28 .21
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .18 .47 1.43 (.07)
- -------------------------------------------------------------------------------------
Total from investment operations .46 .75 1.71 .14
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .31 .28 .21 .07
- -------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------
Total dividends .43 .55 .21 .07
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.30 11.27 11.07 9.57
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 4.20% 7.10 18.13 1.45
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses 2.39% 2.18 2.16 2.23
- -------------------------------------------------------------------------------------
Net investment income 2.49% 2.74 2.65 2.45
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
CLASS I
--------------------------------------
YEAR ENDED JULY 31, APRIL 8
---------------------- 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 .41 .41 .32 .08
- -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .18 .47 1.49 (.11)
- -------------------------------------------------------------------------------------
Total from investment operations .59 .88 1.81 (.03)
- -------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .44 .39 .33 .08
- -------------------------------------------------------------------------------------
Distribution from net realized gain .12 .27 -- --
- -------------------------------------------------------------------------------------
Total dividends .56 .66 .33 .08
- -------------------------------------------------------------------------------------
Net asset value, end of period $11.31 11.28 11.06 9.58
- -------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 5.47% 8.29 19.27 (.31)
- -------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- -------------------------------------------------------------------------------------
Expenses 1.13% 1.03 1.20 .73
- -------------------------------------------------------------------------------------
Net investment income 3.75% 3.89 3.61 4.11
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALLOCATION
- -------------------------------------------------------------------------------------
YEAR ENDED JULY 31, DEC. 29, 1995
------------------------ TO JULY 31,
1999 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at end of period (in thousands) $59,953 55,335 30,700 10,831
- -------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 58% 43 150 57
- -------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 51
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 periods ended July 31, 1996 and July 31, 1999 were
determined based on average shares outstanding.
For the period ended July 31, 1996, the investment manager agreed to reduce its
management fee and absorb certain operating expenses of the portfolios. If these
expense waivers had not been in effect, the expense ratio of each share class
would have increased by .06% of average net assets for Horizon 20+, .04% for
Horizon 10+ and .05% for Horizon 5. There would have been a corresponding
decrease in the net investment income ratio for the period. The waivers were
discontinued on August 1, 1996.
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5 Portfolio paid distributions
of $0.02, $0.11, and $0.12 per share, respectively, from net long-term capital
gains during the year ended July 31, 1999, of which 100%, 100% and 100%
represent 20% rate gains, respectively.
Pursuant to Section 852 of the Internal Revenue Code, Kemper Horizon 20+
Portfolio, 10+ Portfolio and 5 Portfolio designate $9,630,000, $7,610,000, and
$2,375,000, respectively, as capital gain dividends for the year ended July 31,
1999, of which 100%, 100%, and 100% represent 20% rate gains, respectively.
For corporate shareholders Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5
Portfolio, 100%, 44%, 16%, respectively, of the income dividends paid during the
Fund's fiscal year ended July 31, 1999 qualified for the dividends received
deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
51
<PAGE> 52
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY
Trustee President
JAMES R. EDGAR PHILIP J. COLLORA
Vice President Vice President and
Secretary
ARTHUR R. GOTTSCHALK
Trustee JOHN R. HEBBLE
Treasurer
FREDERICK T. KELSEY
Trustee PHILIP S. FORTUNA
Vice President
THOMAS W. LITTAUER
Trustee and ANN M. MCCREARY
Vice President Vice President
FRED B. RENWICK KATHRYN L. QUIRK
Trustee Vice President
JOHN G. WEITHERS CORNELIA SMALL
Trustee Vice President
LINDA J. WONDRACK
Vice President
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
BRENDA LYONS
Assistant Treasurer
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
TRANSFER AGENT INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
- ------------------------------------------------------------------------------
CUSTODIAN STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
- ------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com
[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 - 2 (9/27/99) 1086170
