<PAGE> 1
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED JULY 31, 2000
Kemper Horizon 20+ Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 5 Portfolio
KEMPER HORIZON FUND
"... In a challenging market, the fund's diversification and disciplined
investment process helped reduce volatility to a level that was much less than a
portfolio of domestic stocks. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
TERMS TO KNOW
11
STATISTICS FOR 20+ PORTFOLIO
LARGEST HOLDINGS
13
STATISTICS FOR 10+ PORTFOLIO
LARGEST HOLDINGS
15
STATISTICS FOR 5 PORTFOLIO
LARGEST HOLDINGS
16
PORTFOLIO OF
INVESTMENTS
41
FINANCIAL STATEMENTS
44
FINANCIAL HIGHLIGHTS
50
NOTES TO
FINANCIAL STATEMENTS
56
REPORT OF
INDEPENDENT AUDITORS
57
TAX INFORMATION
KEMPER HORIZON FUND TOTAL RETURNS*
FOR THE YEAR ENDED JULY 31, 2000 (UNADJUSTED FOR ANY SALES CHARGE)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
............................................................
<S> <C> <C> <C> <C> <C>
KEMPER HORIZON 20+ -3.85% -4.68% -5.07%
............................................................
KEMPER HORIZON 10+ -0.94% -1.83% -1.90%
............................................................
KEMPER HORIZON 5 0.37% -0.49% -0.63%
............................................................
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS
AND PRINCIPAL VALUE 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, STATEMENT OF ADDITIONAL INFORMATION AND THE FINANCIAL HIGHLIGHTS
TABLE AT THE END OF THIS REPORT.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
7/31/00 7/31/99
.........................................................
<S> <C> <C> <C> <C>
KEMPER HORIZON 20+ CLASS A $12.25 $14.01
.........................................................
KEMPER HORIZON 20+ CLASS B $11.97 $13.72
.........................................................
KEMPER HORIZON 20+ CLASS C $11.92 $13.70
.........................................................
KEMPER HORIZON 10+ CLASS A $11.22 $12.79
.........................................................
KEMPER HORIZON 10+ CLASS B $11.21 $12.78
.........................................................
KEMPER HORIZON 10+ CLASS C $11.17 $12.73
.........................................................
KEMPER HORIZON 5 CLASS A $10.60 $11.31
.........................................................
KEMPER HORIZON 5 CLASS B $10.59 $11.31
.........................................................
KEMPER HORIZON 5 CLASS C $10.58 $11.30
.........................................................
</TABLE>
KEMPER HORIZON FUND
RANKINGS AS OF 7/31/00*
COMPARED WITH ALL OTHER FUNDS IN THE LIPPER CATEGORIES*
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
............................................................
<S> <C> <C> <C> <C> <C>
KEMPER HORIZON 20+
1-YEAR
#222 of #223 of #224 of
233 funds 233 funds 233 funds
............................................................
3-YEAR
#163 of #167 of #168 of
172 funds 172 funds 172 funds
............................................................
KEMPER HORIZON 10+
1-YEAR
#371 of #387 of #388 of
464 funds 464 funds 464 funds
............................................................
3-YEAR
#279 of #310 of #311 of
350 funds 350 funds 350 funds
............................................................
KEMPER HORIZON 5
1-YEAR
#66 of 92 #71 of 92 #72 of 92
funds funds funds
............................................................
3-YEAR
#57 of 70 #62 of 70 #64 of 70
funds funds funds
............................................................
</TABLE>
*LIPPER, 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+ -- FLEXIBLE PORTFOLIO, KEMPER
HORIZON 10+ -- BALANCED PORTFOLIO AND KEMPER HORIZON 5 -- INCOME PORTFOLIO.
DIVIDEND REVIEW
DURING THE PERIOD ENDED JULY 31, 2000, THE FUND MADE THE FOLLOWING
DISTRIBUTIONS PER SHARE:
<TABLE>
<CAPTION>
LONG- SHORT-
TERM TERM
INCOME DIVIDEND CAPITAL CAPITAL
CLASS A CLASS B CLASS C GAIN GAIN
.....................................................................
<S> <C> <C> <C> <C> <C> <C> <C>
KEMPER HORIZON
20+ $0.13 $0.03 n/a $0.13 $1.01
.....................................................................
KEMPER HORIZON
10+ $0.34 $0.23 $0.21 $0.46 $0.67
.....................................................................
KEMPER HORIZON 5 $0.34 $0.27 $0.25 $0.10 $0.30
.....................................................................
</TABLE>
57
TAX INFORMATION
AT A GLANCE
<PAGE> 3
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.
ECONOMIC OVERVIEW
DEAR KEMPER FUNDS SHAREHOLDER,
When an irresistible force such as the ebullient U.S. economy meets an immovable
object, such as a determined Federal Reserve Board, the old song is right:
Something's gotta give. One possibility -- the economy could slow down as the
Fed has ordered. Or, if market volatility becomes truly distressful, the Fed
could back off, as it has in the past. A third possibility is that neither the
Fed nor the economy will give way until it's too late, which could lead to a
recession. Recent evidence suggests, however, that the economy probably will
slow down as ordered. The Fed decided to leave rates unchanged at both its June
and August meetings, and in his testimony before Congress in late July, Fed
Chairman Alan Greenspan said he believes a slowdown has indeed arrived.
Before explaining why we agree with the Fed that a slowdown is a good bet,
let's review how monetary policy works. Central bankers often sound like witch
doctors reading animal entrails, so it's understandable that many people are
confused about monetary policy. But monetary policy still works in the same way
it always has. First, it changes the price and availability of money. More
subtly, it alters people's perceptions about and confidence in the future,
thereby adjusting their willingness to take risks.
The Fed only started raising interest rates a little over year ago, and it
takes at least that long for higher rates to impact borrowers. There are two
reasons. First, interest rates on many existing loans are fixed. And, a family
who has just selected a dream house isn't going walk away if mortgage rates rise
a notch. Similarly, a company that has just approved an expansion program won't
stop cold because the prime rate is higher. So it's foolish to think that
America's economy has become less interest-sensitive because the economy roared
through the first several months of this year. Americans are more in hock than
ever, so higher interest rates will hurt more than ever. The sharp drop in
housing starts and auto sales from their February peak is probably the first
sign that higher rates are biting. They will bite harder in coming months. We
look for both housing starts and vehicle sales to continue to drop and to be
lower in 2001 than in 2000.
Confidence is harder to measure, but there are some early flutters of
weakness. It's true that consumers remain cheerily upbeat. But corporate bond
markets, the most sensitive barometer of business confidence and a vital source
of corporate funds, have been nervous. Investors are demanding a big premium
before they'll buy lower quality bonds, which means there's less new money for
companies to spend.
So far, companies have been able to get around the bond market stinginess by
turning to their bankers. Banks lent businesses 9 percent more from January
through July of this year than they did during the first seven months of 1999.
But some banks are beginning to worry, too. Bank examiners have been questioning
the quality of loans and the level of reserves. In response, more bankers are
tightening lending standards and raising rates. This is a textbook case of how
tighter monetary policy eventually slows an economy.
Aren't bond market and banker concerns overdone? As long as the economy keeps
growing at 3 percent or so, won't that guarantee such good profits that paying
the bills will be a cinch? Not necessarily. Profits are far more cyclical than
economic growth. Earnings actually fell during 1998, even though the economy
continued to roll. That was a global crisis, when foreign earnings fell sharply.
But take a look at the last "soft landing" during 1995. Revenue growth dipped
and pricing power fell, squeezing profits. The same thing is likely to happen
again in the coming slowdown -- and this time, tight labor markets could make it
even tougher for companies to control costs quickly. Assuming growth is between
2.5 percent and 3 percent by the end of 2001, we believe year-over-year profit
comparisons will have turned slightly negative.
A profit slowdown when new lines of credit are hard to come by will take its
toll on capital spending. We expect growth in business outlays for buildings and
equipment to slip from over 12 percent this year to around 8 percent in 2001.
That's still quite robust, and the "high-tech imperative" is the reason why.
Executives believe that they have no option but to keep up with the
technological revolution that is transforming the world. The fact that high-tech
gear keeps getting cheaper year after year and also helps save on expensive
labor makes the decision to buy it easy. Indeed, unit sales of computers and
peripherals to businesses have sustained growth rates in excess of 40 percent
since 1995. And the rush is on to lay down the infrastructure for the next
generation of wireless communications. We estimate that the telecommunications
sector will see unit growth of more than 30 percent this year, double the
average growth of the past six years. It's hard even for
3
<PAGE> 4
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 (8/31/00) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.8 6.5 5.9 5.3
Prime rate (2) 9.5 8.75 8.25 8.5
Inflation rate (3)* 3.6 2.7 2.1 1.7
The U.S. dollar (4) 5.1 2.3 -5.7 8
Capital goods orders (5)* 13.2 11.4 8.4 6.4
Industrial production (5)* 5.8 5.2 4.6 3.2
Employment growth (6) 1.9 2 2.2 2.7
</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 7/31/00.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
ECONOMIC OVERVIEW
superstars to sustain these stratospheric compound growth rates forever, and we
do expect some moderation next year. However, high-tech orders continue to
ratchet upwards, and the shortage in semiconductors and other components has
persisted long enough to cause major players to announce huge capacity
additions.
Another battle the Fed must win before it succeeds in slowing the economy is
bringing consumers to heel. Most families still feel better off than they were
last year and much richer than they were five years ago. That's a powerful
incentive to spend and enjoy. Indeed, total real consumption has been galloping
at a 5 percent rate or better since early 1998. But consumers are so important
to the economy that if they don't start spending less freely, there won't be a
slowdown. However, there is some evidence of moderation. Retailers have been
reporting sluggish summer sales, and the back-to-school season is getting off to
a slow start. This is music to the Fed's ears, because the policymakers would
like nothing better than to sit on the sidelines until well after the
Presidential election.
So what will the slowdown look like? It will be concentrated in retail sales,
housing starts and job creation slowed (at least that's where it has surfaced so
far). However, strength in high tech orders and capital equipment production
probably will help keep the slowdown from becoming too abrupt. We expect about
3.5 percent growth in the second half. That would still produce a hearty 5
percent growth for full year 2000. During 2001, the full impact of the Fed's
earlier tightening will probably rein growth in to just 3 percent.
Sincerely,
Kemper Distributors, Inc.
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF SEPTEMBER 5, 2000, 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
[TYMOCZKO PHOTO]
LEAD PORTFOLIO MANAGER ROBERT TYMOCZKO IS A SENIOR VICE PRESIDENT OF SCUDDER
KEMPER INVESTMENTS, INC. AND A MEMBER OF THE FIRM'S QUANTITATIVE GROUP.
PORTFOLIO MANAGERS RICHARD SCARGILL AND SHAHRAM TAJBAKHSH MANAGE THE
FIXED-INCOME AND INTERNATIONAL EQUITY COMPONENTS OF THE FUND, RESPECTIVELY.
SCUDDER KEMPER INVESTMENTS' LARGE STAFF OF ANALYSTS, RESEARCHERS, TRADERS AND
ECONOMISTS IN OFFICES WORLDWIDE SUPPORTS THE TEAM.
DURING FISCAL YEAR 2000, A NARROW MARKET LIMITED
PERFORMANCE IN SEVERAL ASSET CLASSES, WHILE
VOLATILITY IN DOMESTIC EQUITY PRICES INCREASED.
KEMPER HORIZON FUND'S PORTFOLIO MANAGEMENT TEAM
REVIEWS EACH OF THE PORTFOLIOS' RESULTS FOR THE 12
MONTHS ENDED JULY 31 IN THE CONTEXT OF THE FUND'S
LONG-TERM INVESTMENT STRATEGY.
Q HOW DID THE KEMPER HORIZON FUND PORTFOLIOS PERFORM BETWEEN JULY 31, 1999,
AND JULY 31, 2000?
A Each portfolio's absolute returns were weak but generally in line with the
performance of each portfolio's unmanaged composite benchmark. For the 12 months
ended July 31, 2000, Kemper Horizon 5 returned 0.37 percent; Kemper Horizon 10+
declined 0.94 percent and Kemper Horizon 20+ fell 3.85 percent. (All returns are
for Class A shares, unadjusted for sales charges.)
Q TO WHAT DO YOU ATTRIBUTE THE PORTFOLIOS' RESULTS?
A One of the largest factors impacting performance was the narrow market in
which we found ourselves for much of the year. Growth stocks, especially those
of larger companies, dominated the equity market by a large margin, a situation
that history has shown cannot continue indefinitely. As part of the fund's
long-term investment philosophy, we remained diversified across multiple asset
classes rather than bet on the market's short-term direction. In a challenging
market, the fund's diversification and disciplined investment process helped
reduce volatility to a level that was much less than a portfolio of domestic
stocks.
The fund's valuation discipline also worked against us in the past year. When
picking stocks, we conduct quantitative analysis to evaluate several factors,
including a company's price-to-earnings and price-to-book ratios,
earnings-per-share growth rates and earnings predictability. Historically, these
parameters have been effective indicators of a stock's capital appreciation
potential. However, in the past year, amid emotional euphoria affecting certain
domestic growth stocks and initial public offerings, a systematic investment
strategy did not bear as much short-term fruit as we would have liked.
During the fiscal period, we bought shares of companies that had significantly
higher earnings growth rates than those in our composite benchmark. These stocks
were also priced at a large discount relative to those in the benchmark. Neither
of these factors was rewarded in the marketplace. As such, the portfolios' low
price-to-earnings, price-to-book and price-to-revenue ratios relative to the
benchmark hurt performance.
Q TECHNOLOGY STOCKS HAVE BEEN IN THE LIMELIGHT FOR THE PAST FEW YEARS. HOW
DID THIS SECTOR'S PERFORMANCE AND VOLATILITY PLAY OUT DURING FISCAL YEAR 2000?
A From August 1999 until early March 2000, technology stocks rallied as
investors focused on non-cyclical growth companies that they believed would not
be hurt by the Federal Reserve Board's efforts to raise U.S. interest rates.
Biotechnology and Internet stocks were especially strong during this period.
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 AND SHOULD NOT BE CONSIDERED AS A RECOMMENDATION OF ANY SPECIFIC
SECURITY.
PERFORMANCE UPDATE
5
<PAGE> 6
PERFORMANCE UPDATE
Concentrated market leadership also translated into weak returns from other
sectors, especially cyclical and value stocks.
However, as the Nasdaq Composite index crossed the 5000 mark for the first
time, it gradually became clear to many investors that prices of some technology
stocks had become excessive in relation to their earnings potential. Signs also
began emerging that the Federal Reserve Board's efforts to cool the U.S.
economy's torrid growth rate would affect demand for certain technology
products.
The ides of March proved a critical turning point in market sentiment as
investors dethroned Internet stocks with questionable business plans in favor of
companies with sustainable earnings growth and selected "old economy" stocks.
Equity market leadership broadened out substantially beginning in April.
Q
CAN YOU EXPLAIN THE DIFFERENCE IN PERFORMANCE AMONG KEMPER HORIZON 5,
KEMPER HORIZON 10+ AND KEMPER HORIZON 20+ FOR FISCAL 2000?
A
By maintaining a 60 percent weighting in shorter-term fixed-income
securities in fiscal year 2000, Kemper Horizon 5 was in a good position to
preserve principal amid a rising interest-rate environment and a volatile
domestic equity market. During the period, the Federal Reserve Board increased
the federal funds rate -- the rate banks charge each other for overnight loans
-- to 6.50 percent, the highest rate in nine years.
Kemper Horizon 10+ maintained a 40 percent weighting in a basket of
shorter-term fixed-income securities, while Kemper Horizon 20+ had a 20 percent
fixed-income weighting. Because it had the highest exposure to a broad mix of
domestic and international equities of the three portfolios, the results of
Kemper Horizon 20+ were the lowest for the fiscal period.
Q
GIVEN THESE DYNAMIC MARKET CONDITIONS, WHAT STRATEGY DID YOU EMPLOY TO
KEEP THE FUND'S PORTFOLIO COMPOSITION IN LINE WITH ITS UNMANAGED BENCHMARK?
A
By not attempting to guess that one asset class would outperform another,
we avoided much of the volatility associated with this past March's technology
sector setback. We attempted to derive the fund's returns from a relatively
steady asset-allocation mix. At the same time, we adjusted the mix slightly so
that each portfolio's composition remained in line with its respective composite
benchmark. This attempt to reduce so-called tracking errors is a portfolio
management technique that is often employed by institutional investors.
Q
HOW DID SOME OF THE SECTORS IN WHICH YOU INVESTED HELP OR HURT
PERFORMANCE?
A
Our positioning in financial services stocks hurt performance. This sector
was weighed down by concerns over rising interest rates and the outlook for
corporate earnings, which appeared to rely too heavily on investment gains.
Our limited exposure to technology stocks also hurt performance. As we
mentioned earlier, this sector accounted for most of the stock market's gains
during the fiscal period.
On a positive note, greater exposure to the health care sector helped us. We
saw a big turnaround in health care stocks in the first half of 2000, which we
attribute to investors' desire to own more defensive stocks.
Q
WHAT WERE CONDITIONS LIKE IN THE INTERNATIONAL STOCK MARKET DURING THE 12
MONTHS ENDED JULY 31, 2000?
A
International growth stocks delivered better performance than
international value stocks over the entire 12-month period. However, between
January and July, international value stocks outperformed growth stocks by
roughly 5 percent. Europe was one of the best-performing regions in the latter
half of our fiscal period. Japan, which had been charging ahead earlier in the
year, fell behind Europe during the annual period.
<TABLE>
<CAPTION>
PORTFOLIO EQUITY CHARACTERISTICS FOR THE
BASED ON MONTHLY AVERAGES FOR KEMPER HORIZON FUND: BENCHMARK:
<S> <C> <C> <C> <C>
PRICE-TO-EARNINGS RATIO 20.1 27.5
...............................................................................................................................
PRICE-TO-BOOK RATIO 3.1 3.5
...............................................................................................................................
PRICE-TO-REVENUE RATIO 1.1 1.6
...............................................................................................................................
EARNINGS-PER-SHARE GROWTH RATE 18.6% 17.2%
...............................................................................................................................
</TABLE>
6
<PAGE> 7
PERFORMANCE UPDATE
Q
HOW DID THE INTERNATIONAL STOCK COMPONENT OF THE PORTFOLIOS PERFORM?
A
The international stock portion of the portfolios delivered returns that
were fairly consistent with the benchmark MSCI EAFE index. This had a positive
impact on our performance.
As we repositioned the portfolios in March to more closely track the fund's
unmanaged composite benchmark, we steered clear of making any large country
bets. The international component is very well diversified in more than 20
established countries, including Hong Kong, Japan, France, Germany, the United
Kingdom, the Netherlands and Italy. In fact, the same countries represented in
the MSCI EAFE index are represented in the three Horizon Fund portfolios.
Q
EACH OF THE KEMPER HORIZON FUND PORTFOLIOS ALSO INVESTS IN FIXED-INCOME
SECURITIES WITH AN AVERAGE MATURITY OF LESS THAN THREE YEARS. HOW DID THIS PART
OF THE FUND FARE?
A
The fixed-income component of the portfolios always consists of the
highest quality securities available. This includes U.S. Treasuries and federal
agency issues. The objective is to provide income and relative stability. We
strive to keep the average duration on the shorter side -- between one year and
three years. The shorter the duration, the less impact changes in interest rates
will have on the fund's bond component. Currently, the average duration is about
two and one-quarter years. We're comfortable with that duration given recent
signs that the Fed may be close to finishing raising interest rates in the near
term.
Q
WHAT DO YOU THINK IS THE BIGGEST ADVANTAGE OF DIVERSIFYING THE KEMPER
HORIZON FUND PORTFOLIOS ACROSS ASSET CLASSES?
A
Without a doubt, diversification gives us the ability to better manage
risk. We can gauge portfolio risk using a statistical measure called "standard
deviation." The higher the numeric value, the greater the risk. For year ended
July 31, 2000, Kemper Horizon 20+ had a standard deviation of 10.47, compared
with 15.00 for the unmanaged Standard & Poor's 500 index. That means that the
most aggressive Horizon Fund portfolio had a risk profile that was 30 percent
lower than that of a portfolio of large-cap domestic equities. Horizon 10+'s
standard deviation for the same period was 7.29, while Horizon 5 had a standard
deviation of 5.09.
Q
WHAT IS YOUR OUTLOOK FOR THE MARKETS FOR THE MONTHS AHEAD?
A
While we believe that international stocks will be the dominant-performing
asset category over the next 12 months, we aren't putting all of our eggs in
that basket. We are mindful of the fact that many Horizon Fund investors use the
fund as a vehicle for their retirement nest egg, and we will continue to
structure the portfolios in ways that we believe can provide the potential for
attractive results over the long term.
<TABLE>
<CAPTION>
TOTAL RETURN%
INDEX BENCHMARK FOR: (7/31/99-8/1/00)
<S> <C> <C> <C> <C>
RUSSELL 1000(R) GROWTH LARGE-CAP GROWTH STOCKS 24.38%
..............................................................................................................................
RUSSELL 1000(R) VALUE LARGE-CAP VALUE STOCKS -5.00
..............................................................................................................................
RUSSELL 2000(R) GROWTH SMALL-CAP GROWTH STOCKS 21.13
..............................................................................................................................
RUSSELL 2000(R) VALUE SMALL-CAP VALUE STOCKS 4.85
..............................................................................................................................
MSCI EAFE INDEX INTERNATIONAL STOCKS IN DEVELOPED MARKETS 9.27
..............................................................................................................................
MERRILL LYNCH 1-3 YEAR TREASURY SHORT-TERM BONDS 5.24
..............................................................................................................................
</TABLE>
LARGE-CAP GROWTH STOCKS, AS REPRESENTED BY THE RUSSELL 1000(R) GROWTH INDEX,
OUTPERFORMED ALL OTHER ASSET CLASSES FOR THE YEAR ENDED JULY 31, 2000. WITHIN
THE SMALL-CAP MARKET, THERE WAS SIGNIFICANT DISPARITY BETWEEN THE RETURNS OF
SMALL-CAP GROWTH (RUSSELL 2000(R) GROWTH) AND SMALL-CAP VALUE (RUSSELL 2000(R)
VALUE) STOCKS.
SOURCE: LIPPER, INC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
INDICES ARE UNMANAGED POOLS OF ASSETS THAT ARE NOT AVAILABLE FOR DIRECT
INVESTMENT, AND DO NOT REPRESENT THE PERFORMANCE OF ANY KEMPER FUND.
7
<PAGE> 8
TERMS TO KNOW
CAPITALIZATION/MARKET CAPITALIZATION A measure of the current market value of a
company's publicly traded stock, as determined by multiplying the current share
price by the number of shares outstanding.
CYCLICAL COMPANY A business whose operations have a high degree of economic
sensitivity. At the start of an economic expansion, cyclical stocks may rise
quickly; as an economy slows, stocks of cyclical companies may fall quickly.
Cyclical stocks include industrial machinery, basic materials, automobiles,
construction and certain retailers.
DURATION A measure of the interest-rate sensitivity of a portfolio,
incorporating time to maturity and coupon size. The longer a portfolio's
duration, the greater its sensitivity to interest-rate changes.
FEDERAL FUNDS RATE The interest rate banks charge each other for overnight loans
that are needed to meet reserve requirements. The Federal funds rate is often
considered the most sensitive indicator of the direction of interest rates.
GROWTH COMPANY A company enjoying a strong, long-term expansion of sales or
market share. Stocks of growth companies generally trade at prices based on a
multiple of the company's future growth in sales, cash flow or earnings rather
than its historical record of earnings or measures of value such as dividend
yield.
INVERTED YIELD CURVE A market phenomenon in which intermediate-term bonds
(securities with one-to 10-year maturities) have higher income potential and
current yields than long-term bonds (securities with 10-to 30-year maturities).
Historically, an inverted yield curve has occurred during a period of rising
short-term interest rates and been viewed as an indicator of a future economic
slowdown.
TRACKING ERROR A measure of the degree to which a portfolio's asset allocation
strategy and performance deviate from the composition and performance of an
unmanaged benchmark index or composite of unmanaged indices.
8
<PAGE> 9
[THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
PERFORMANCE UPDATE
KEMPER HORIZON 20+ PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIOD ENDED JULY 31, 2000 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KEMPER HORIZON 20+ PORTFOLIO CLASS A -9.35% 0.97% 7.78% (since 12/29/95)
...................................................................................................
KEMPER HORIZON 20+ PORTFOLIO CLASS B -7.29 1.55 7.94 (since 12/29/95)
...................................................................................................
KEMPER HORIZON 20+ PORTFOLIO CLASS C -5.07 1.90 8.11 (since 12/29/95)
...................................................................................................
</TABLE>
KEMPER HORIZON 20+ FUND CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 12/31/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS A(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 9425.00 10000.00 10000.00 10000.00
10848.00 11679.00 12026.00 10290.00
12/31/97 12899.00 14863.00 15756.00 11294.00
14316.00 18439.00 19957.00 12366.00
12/31/99 15212.00 21503.00 23854.00 12099.00
7/31/00 14106.00 21132.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 20+ FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 12/31/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS B(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11398.00 11679.00 12026.00 10290.00
12/31/97 13425.00 14863.00 15756.00 11294.00
14799.00 18439.00 19957.00 12366.00
12/31/99 15604.00 21503.00 23854.00 12099.00
7/31/00 14205.00 21132.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 20+ FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 12/31/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 20+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS C(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11406.00 11679.00 12026.00 10290.00
12/31/97 13443.00 14863.00 15756.00 11294.00
14783.00 18439.00 19957.00 12366.00
12/31/99 15553.00 21503.00 23854.00 12099.00
7/31/00 14305.00 21132.00 23230.00 12736.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE 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, STATEMENT OF ADDITIONAL
INFORMATION AND THE FINANCIAL
HIGHLIGHTS TABLE 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 WITH THE
STANDARD & POOR'S 500 INDEX (S&P
500) AND THE LEHMAN BROTHERS
GOVERNMENT/ CORPORATE BOND INDEX.
KEMPER HORIZON 20+ PORTFOLIO IS
COMPARED WITH A BLEND OF 80% S&P 500
AND 20% LEHMAN BROTHERS GOVERNMENT/
CORPORATE KEMPER HORIZON 10+
PORTFOLIO IS COMPARED WITH A BLEND
OF 60% S&P 500 AND 40% LEHMAN
BROTHERS GOVERNMENT/CORPORATE.
KEMPER HORIZON 5 PORTFOLIO IS
COMPARED WITH A BLEND OF 40% S&P 500
AND 60 PERCENT LEHMAN BROTHERS
GOVERNMENT/CORPORATE. IN COMPARING
KEMPER HORIZON FUND WITH THE BLENDED
INDICES, YOU SHOULD NOTE THAT THE
FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH
CHARGES ARE REFLECTED IN THE
PERFORMANCE OF THE INDICES.
+THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE IS WIESENBERGER(R).
++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 WIESENBERGER(R).
INVESTORS CANNOT ACTUALLY MAKE
INVESTMENTS IN THE TWO INDICES.
10
<PAGE> 11
STATISTICS FOR 20+ PORTFOLIO LARGEST HOLDINGS
PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
KEMPER HORIZON 20+ ON 7/31/00 ON 7/31/99
<S> <C> <C> <C> <C>
DOMESTIC STOCKS 55.3% 55.0%
..............................................................................
FOREIGN STOCKS 23.6 23.0
..............................................................................
U.S. TREASURY BONDS 20.1 20.0
..............................................................................
CASH AND EQUIVALENTS 1.0 2.0
------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 7.0 PERCENT OF TOTAL NET ASSETS ON JULY 31, 2000
<TABLE>
<CAPTION>
HOLDING PERCENT
<S> <C>
GENERAL ELECTRIC
1.6%
----------------------------------------------------
CISCO SYSTEMS
1.6%
----------------------------------------------------
INTEL
1.6%
----------------------------------------------------
CITIGROUP
1.2%
----------------------------------------------------
MICROSOFT
1.0%
----------------------------------------------------
</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, 2000 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KEMPER HORIZON 10+ PORTFOLIO CLASS A -6.64% 2.59% 7.59% (since 12/29/95)
....................................................................................................
KEMPER HORIZON 10+ PORTFOLIO CLASS B -4.46 3.15 7.74 (since 12/29/95)
....................................................................................................
KEMPER HORIZON 10+ PORTFOLIO CLASS C -1.90 3.64 7.97 (since 12/29/95)
....................................................................................................
</TABLE>
KEMPER HORIZON 10+ PORTFOLIO CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 12/29/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS A(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 9425.00 10000.00 10000.00 10000.00
10584.00 11332.00 12026.00 10290.00
12/31/97 12275.00 13971.00 15756.00 11294.00
13796.00 16921.00 19957.00 12366.00
12/31/99 14572.00 19152.00 23854.00 12099.00
7/31/00 13991.00 19033.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 10+ PORTFOLIO CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 12/29/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS B(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11152.00 11332.00 12026.00 10290.00
12/31/97 12827.00 13971.00 15756.00 11294.00
14284.00 16921.00 19957.00 12366.00
12/31/99 14956.00 19152.00 23854.00 12099.00
7/31/00 14088.00 19033.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 10+ PORTFOLIO CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 12/29/95 to 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 10+ GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS C(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
------------------ -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
11146.00 11332.00 12026.00 10290.00
12/31/97 12796.00 13971.00 15756.00 11294.00
14252.00 16921.00 19957.00 12366.00
12/31/99 14900.00 19152.00 23854.00 12099.00
7/31/00 14219.00 19033.00 23230.00 12736.00
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE 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, STATEMENT OF ADDITIONAL
INFORMATION AND THE FINANCIAL
HIGHLIGHTS TABLE 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 WITH THE
STANDARD & POOR'S 500 INDEX (S&P
500) AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
KEMPER HORIZON 20+ PORTFOLIO IS
COMPARED WITH A BLEND OF 80% S&P 500
AND 20% LEHMAN BROTHERS
GOVERNMENT/CORPORATE. KEMPER HORIZON
10+ PORTFOLIO IS COMPARED WITH A
BLEND OF 60% S&P 500 AND 40% LEHMAN
BROTHERS GOVERNMENT/CORPORATE.
KEMPER HORIZON 5 PORTFOLIO IS
COMPARED WITH A BLEND OF 40% S&P 500
AND 60 PERCENT LEHMAN BROTHERS
GOVERNMENT/CORPORATE. IN COMPARING
KEMPER HORIZON FUND WITH THE BLENDED
INDICES, YOU SHOULD NOTE THAT THE
FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH
CHARGES ARE REFLECTED IN THE
PERFORMANCE OF THE INDICES.
+THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE IS WIESENBERGER(R).
++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 WIESENBERGER(R).
INVESTORS CANNOT ACTUALLY MAKE
INVESTMENTS IN THE TWO INDICES.
12
<PAGE> 13
STATISTICS FOR 10+ PORTFOLIO LARGEST HOLDINGS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
KEMPER HORIZON 10+ PORTFOLIO ON 7/31/00 ON 7/31/99
<S> <C> <C> <C> <C>
DOMESTIC STOCKS 41.3% 42.0%
..............................................................................
FOREIGN STOCKS 17.0 18.0
..............................................................................
U.S. TREASURY BONDS 40.2 38.0
..............................................................................
CASH AND EQUIVALENTS 1.5 2.0
------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 5.3 PERCENT OF TOTAL NET ASSETS ON JULY 31, 2000
<TABLE>
<CAPTION>
HOLDING PERCENT
<S> <C> <C>
CISCO SYSTEMS
1.2%
---------------------------------------------------------------
GENERAL ELECTRIC
1.2%
---------------------------------------------------------------
INTEL
1.2%
---------------------------------------------------------------
CITIGROUP
0.9%
---------------------------------------------------------------
MICROSOFT
0.8%
---------------------------------------------------------------
</TABLE>
*Portfolio composition 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, 2000 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR LIFE OF CLASS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
KEMPER HORIZON 5 PORTFOLIO CLASS A -5.41% 2.28% 5.82% (since 12/29/95)
...................................................................................................
KEMPER HORIZON 5 PORTFOLIO CLASS B -3.29 3.03 6.12 (since 12/29/95)
...................................................................................................
KEMPER HORIZON 5 PORTFOLIO CLASS C -0.63 3.51 6.39 (since 12/29/95)
...................................................................................................
</TABLE>
KEMPER HORIZON 5 PORTFOLIO CLASS A
Growth of an assumed $10,000 investment in Class A
shares from 12/29/95 to 07/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS A(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 9425.00 10000.00 10000.00 10000.00
10313.00 10985.00 12026.00 10290.00
12/31/97 11532.00 13079.00 15756.00 11294.00
12685.00 15403.00 19957.00 12366.00
12/31/99 13260.00 16801.00 23854.00 12099.00
7/31/00 12965.00 16934.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 5 PORTFOLIO FUND CLASS B
Growth of an assumed $10,000 investment in Class B
shares from 12/29/95 to 07/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS B(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10870.00 10985.00 12026.00 10290.00
12/31/97 12081.00 13079.00 15756.00 11294.00
13214.00 15403.00 19957.00 12366.00
12/31/99 13700.00 16801.00 23854.00 12099.00
7/31/00 13141.00 16934.00 23230.00 12736.00
</TABLE>
KEMPER HORIZON 5 PORTFOLIO FUND CLASS C
Growth of an assumed $10,000 investment in Class C
shares from 12/29/95 to 07/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
COMBINED STANDARD
& POOR'S 500 STOCK
INDEX AND LEHMAN
BROTHERS LEHMAN BROTHERS
KEMPER HORIZON 5 GOVERNMENT/CORPORATE STANDARD & POOR'S GOVERNMENT/CORPORATE
PORTFOLIO CLASS C(1) BOND INDEX(1) 500 STOCK INDEX+ BOND INDEX++
-------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
12/31/95 10000.00 10000.00 10000.00 10000.00
10859.00 10985.00 12026.00 10290.00
12/31/97 12058.00 13079.00 15756.00 11294.00
13204.00 15403.00 19957.00 12366.00
12/31/99 13665.00 16801.00 23854.00 12099.00
7/31/00 13291.00 16934.00 23230.00 12736.00
</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, STATEMENT OF ADDITIONAL
INFORMATION AND THE FINANCIAL
HIGHLIGHTS TABLE 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 WITH THE
STANDARD & POOR'S 500 INDEX (S&P
500) AND THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX.
KEMPER HORIZON 20+ PORTFOLIO IS
COMPARED WITH A BLEND OF 80% S&P 500
AND 20% LEHMAN BROTHERS
GOVERNMENT/CORPORATE. KEMPER HORIZON
10+ PORTFOLIO IS COMPARED WITH A
BLEND OF 60% S&P 500 AND 40% LEHMAN
BROTHERS GOVERNMENT/ CORPORATE.
KEMPER HORIZON 5 PORTFOLIO IS
COMPARED WITH A BLEND OF 40% S&P 500
AND 60 PERCENT LEHMAN BROTHERS
GOVERNMENT/CORPORATE. IN COMPARING
KEMPER HORIZON FUND WITH THE BLENDED
INDICES, YOU SHOULD NOTE THAT THE
FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH
CHARGES ARE REFLECTED IN THE
PERFORMANCE OF THE INDICES.
+THE STANDARD & POOR'S 500 STOCK INDEX
IS AN UNMANAGED INDEX GENERALLY
REPRESENTATIVE OF THE U.S. STOCK
MARKET. SOURCE: WIESENBERGER(R).
++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: WIESENBERGER(R).
INVESTORS CANNOT ACTUALLY MAKE
INVESTMENTS IN THE TWO INDICES.
14
<PAGE> 15
STATISTICS FOR 5 PORTFOLIO LARGEST HOLDINGS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
HORIZON 5 ON 7/31/00 ON 7/31/99
<S> <C> <C> <C> <C>
DOMESTIC STOCKS 26.7% 29.0%
..............................................................................
FOREIGN STOCKS 11.7 12.0
..............................................................................
U.S. TREASURY BONDS 59.2 59.0
..............................................................................
CASH AND EQUIVALENTS 2.4 --
------------------------------------------------------------------------------
</TABLE>
[PIE CHART] [PIE CHART]
THE FUND'S LARGEST EQUITY HOLDINGS*
REPRESENTING 3.5 PERCENT OF TOTAL NET ASSETS ON JULY 31, 2000
<TABLE>
<CAPTION>
HOLDING PERCENT
<S> <C> <C>
GENERAL ELECTRIC
0.8%
---------------------------------------------------------------
CISCO SYSTEMS
0.8%
---------------------------------------------------------------
INTEL
0.8%
---------------------------------------------------------------
CITIGROUP
0.6%
---------------------------------------------------------------
MICROSOFT
0.5%
---------------------------------------------------------------
</TABLE>
*Portfolio composition and holdings are subject to change.
15
<PAGE> 16
PORTFOLIO OF INVESTMENTS
KEMPER HORIZON 20+, 10+ AND 5
Portfolio of Investments at July 31, 2000
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
REPURCHASE AGREEMENTS--0.0%, PRINCIPAL
1.0% AND 0.8% AMOUNT VALUE
SECURITY NAME
<S> <C> <C> <C> <C> <C>
State Street Bank and Trust Company,
6.530%, to be repurchased at $0, $951,173
and $505,092 on 8/1/2000**
(Cost $0, $951,000 and $505,000) $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER--0.5%, 0.5% AND 1.6%
Xerox Credit Corp., 6.720%, 8/1/2000
(Cost $500,000, $500,000 and $1,000,000) 500,000 500,000
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. TREASURY AND AGENCIES OBLIGATIONS--20.5%,
40.2% AND 59.2%
<S> <C> <C> <C> <C> <C>
U.S. TREASURY SECURITIES--16.1%,
33.6% AND 46.9%
U.S. Treasury Note:
6.125%, 12/31/2001 -- --
6.25%, 02/28/2002 1,730,000 1,726,488
6.5%, 05/31/2001 1,820,000 1,820,000
6.625%, 07/31/2001 6,165,000 6,172,706
7.875%, 11/15/2004 1,606,000 1,702,103
8.0%, 05/15/2001 2,900,000 2,932,625
8.5%, 11/15/2000 915,000 920,142
----------------------------------------------------------------------------
15,274,064
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
MORTGAGED BACKED SECURITIES--4.4%,
6.6% AND 12.3%
Federal National Mortgage Association,
5.625%, 5/15/2004 3,170,000 3,026,843
Government National Mortgage Association,
6.50%, 3/16/2014 845,360 842,190
Federal Home Loan Mortgage Corp., 6.50%,
10/17/2014 282,846 281,785
----------------------------------------------------------------------------
4,150,818
----------------------------------------------------------------------------
TOTAL U.S. TREASURY AND AGENCIES OBLIGATIONS
(Cost $20,030,495, $40,226,561 and $37,605,955) 19,424,882
----------------------------------------------------------------------------
<CAPTION>
NUMBER
COMMON STOCKS--78.8%, 58.2% AND 38.3% OF SHARES
<S> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C>
CONSUMER DISCRETIONARY--5.0%, 3.9%
AND 2.3%
APPAREL & SHOES--0.3%, 0.2% AND 0.1%
Jones Apparel Group, Inc.* 4,922 112,591
Payless ShoeSource, Inc. 1,400 72,275
Reebok International Ltd.* 6,600 111,375
----------------------------------------------------------------------------
296,241
DEPARTMENT & CHAIN STORES--3.0%, 2.4%
AND 1.5%
Ames Department Stores, Inc.* 3,100 22,087
AnnTaylor Stores Corp.* 4,100 115,825
Best Buy Co., Inc.* 1,000 72,750
Burlington Coat Factory Warehouse Corp. 9,100 106,925
Charming Shoppes, Inc.* 39,200 220,500
Dillard's, Inc. 12,000 164,250
Home Depot, Inc. 11,000 569,250
</TABLE>
16 The accompanying notes are an integral part of the financial statements.
<PAGE> 17
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C>
$951,000 $ 951,000 $505,000 $ 505,000
------------------------------------------------------------------------------------------------------------------
<CAPTION>
500,000 500,000 1,000,000 1,000,000
------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-- -- 7,325,000 7,295,260
8,155,000 8,138,445 -- --
5,220,000 5,220,000 6,085,000 6,085,000
6,657,000 6,575,209 6,440,000 6,448,050
3,518,000 3,728,517 6,585,000 6,979,046
8,715,000 8,813,044 2,290,000 2,315,763
-- -- -- --
------------------------------------------------------------------------------------------------------------------
32,475,215 29,123,119
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
4,315,000 4,120,135 5,915,000 5,647,879
1,755,748 1,749,164 1,734,072 1,727,569
558,451 556,356 300,043 298,918
------------------------------------------------------------------------------------------------------------------
6,425,655 7,674,366
------------------------------------------------------------------------------------------------------------------
38,900,870 36,797,485
------------------------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER NUMBER
OF SHARES OF SHARES
<S> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C>
4,918 112,499 1,605 36,714
-- -- -- --
4,000 67,500 1,700 28,688
------------------------------------------------------------------------------------------------------------------
179,999 65,402
2,500 17,813 1,200 8,550
3,330 93,225 1,500 42,375
600 43,650 300 21,825
6,900 81,075 3,400 39,950
28,200 158,625 12,300 69,187
9,000 123,187 4,000 54,750
9,900 512,325 3,650 188,888
</TABLE>
The accompanying notes are an integral part of the financial statements. 17
<PAGE> 18
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
Kingfisher PLC 14,700 $ 123,422
Longs Drug Stores, Inc. 11,400 230,850
May Department Stores 6,000 142,500
Neiman Marcus Group, Inc.* 5,700 188,100
Pacific Sunwear of California, Inc.* 3,600 54,450
W.H. Smith Group PLC 15,300 86,940
Wal-Mart Stores, Inc. 13,900 763,631
----------------------------------------------------------------------------
2,861,480
HOME FURNISHINGS--0.3%, 0.2% AND 0.1%
Furniture Brands International, Inc.* 13,100 194,044
Linens 'n Things, Inc.* 2,300 68,856
----------------------------------------------------------------------------
262,900
RECREATIONAL PRODUCTS--0.3%, 0.2% AND
0.1%
Fairfield Communities, Inc.* 16,500 122,718
Nintendo Co., Ltd. 800 131,481
----------------------------------------------------------------------------
254,199
RESTAURANTS--0.2%, 0.2% AND 0.1%
Applebee's International, Inc. 3,900 86,531
Ryan's Family Steak Houses, Inc.* 14,100 128,663
----------------------------------------------------------------------------
215,194
SPECIALTY RETAIL--0.9%, 0.7% AND 0.4%
AutoZone, Inc.* 4,900 112,087
Avis Rent A Car, Inc.* 3,400 76,075
Central Garden & Pet Co.* 10,500 77,438
Family Dollar Stores, Inc. 6,100 102,937
Michael Stores, Inc.* 3,600 155,925
New England Business Service, Inc. 6,100 126,575
Pier 1 Imports, Inc. 7,600 90,725
The Finish Line, Inc. "A"* 3,600 29,025
Trans World Entertainment Corp.* 2,400 28,950
----------------------------------------------------------------------------
799,737
-------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.4%, 2.2% AND 1.6%
ALCOHOL & TOBACCO--0.6%, 0.4% AND
0.4%
Imperial Tobacco Group PLC 12,600 122,793
Philip Morris Companies, Inc. 1,650 41,663
SEITA 2,600 112,032
UST, Inc. 6,300 91,350
Universal Corp. 7,100 157,531
----------------------------------------------------------------------------
525,369
CONSUMER ELECTRONIC &
PHOTOGRAPHIC--0.4%, 0.3% AND 0.2%
Sanyo Electric Co., Ltd. 19,000 140,155
Sony Corp. 2,800 257,733
----------------------------------------------------------------------------
397,888
CONSUMER SPECIALTIES--0.3%, 0.2% AND
0.2%
American Greeting Corp. "A" 11,000 187,000
Duane Reade, Inc.* 5,600 128,100
----------------------------------------------------------------------------
315,100
FOOD & BEVERAGE--1.5%, 0.8% AND 0.5%
Coca-Cola Co. 9,300 570,206
Dean Foods Co. 1,800 62,663
Farmer Brothers Co. 500 88,000
Michael Foods, Inc. 6,600 158,400
SUPERVALU, Inc. 9,400 166,263
Seaboard Corp. 700 142,800
Smithfield Foods, Inc.* 5,800 164,938
Suiza Foods Corp.* 2,100 97,388
----------------------------------------------------------------------------
1,450,658
</TABLE>
18 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
15,300 $ 128,460 3,200 $ 26,867
7,800 157,950 3,200 64,800
6,000 142,500 2,750 65,313
5,000 165,000 1,900 62,700
2,300 34,788 1,000 15,125
-- -- 6,400 36,367
12,100 664,744 4,700 258,206
------------------------------------------------------------------------------------------------------------------
2,323,342 954,903
9,600 142,200 3,900 57,769
1,700 50,894 900 26,944
------------------------------------------------------------------------------------------------------------------
193,094 84,713
12,900 95,944 5,400 40,163
500 82,176 300 49,305
------------------------------------------------------------------------------------------------------------------
178,120 89,468
2,300 51,031 1,300 28,844
10,300 93,988 4,100 37,413
------------------------------------------------------------------------------------------------------------------
145,019 66,257
5,800 132,675 2,000 45,750
3,400 76,075 1,100 24,613
8,700 64,163 3,300 24,337
6,900 116,437 2,200 37,125
2,800 121,275 1,000 43,313
4,900 101,675 2,000 41,500
4,400 52,525 2,400 28,650
3,900 31,444 700 5,644
1,100 13,269 700 8,444
------------------------------------------------------------------------------------------------------------------
709,538 259,376
------------------------------------------------------------------------------------------------------------------
20,100 195,884 7,900 76,989
1,350 34,088 1,550 39,138
-- -- 1,400 60,325
-- -- 2,900 42,050
5,700 126,469 1,600 35,500
------------------------------------------------------------------------------------------------------------------
356,441 254,002
13,000 95,896 4,000 29,506
2,400 220,914 1,000 92,048
------------------------------------------------------------------------------------------------------------------
316,810 121,554
8,600 146,200 3,800 64,600
3,300 75,487 1,700 38,887
------------------------------------------------------------------------------------------------------------------
221,687 103,487
6,500 398,531 2,800 171,675
-- -- -- --
-- -- 300 52,800
3,200 76,800 900 21,600
-- -- 1,200 21,225
500 102,000 100 20,400
3,000 85,313 1,500 42,656
1,900 88,113 700 32,463
------------------------------------------------------------------------------------------------------------------
750,757 362,819
</TABLE>
The accompanying notes are an integral part of the financial statements. 19
<PAGE> 20
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
PACKAGE GOODS/ COSMETICS--0.4%, 0.2%
AND 0.2%
Chattem, Inc.* 3,400 $ 41,650
Gillette Co. 2,100 61,294
Procter & Gamble Co. 5,000 284,375
----------------------------------------------------------------------------
387,319
TEXTILES--0.2%, 0.3% AND 0.1%
VF Corp. 9,800 215,600
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
HEALTH--9.4%, 6.5% AND 4.3%
BIOTECHNOLOGY--1.2%, 0.9% AND 0.6%
Amgen, Inc. 3,400 220,787
Bio-Rad Laboratories, Inc. "A"* 4,100 96,863
Biogen, Inc.* 1,800 95,400
CYTOGEN Corp.* 8,300 52,912
Cell Genesys, Inc.* 3,800 80,987
Curagen Corp.* 2,100 72,843
Enzo Biochem, Inc.* 1,100 58,644
Enzon, Inc.* 2,000 89,500
Gene Logic, Inc.* 2,800 54,600
Myraid Genetics, Inc.* 900 119,531
Nanogen, Inc.* 2,200 58,300
Pharmacia Corp. 2,300 125,925
Triangle Pharmaceuticals, Inc.* 3,500 31,719
----------------------------------------------------------------------------
1,158,011
HEALTH INDUSTRY SERVICES--0.9%, 0.5%
AND 0.4%
Aegon NV 4,000 152,560
Aurora Biosciences Corp.* 1,400 112,700
Cardinal Health, Inc. 4,812 353,682
Hanger Orthopedic Group, Inc.* 10,300 41,844
MedQuist, Inc.* 811 17,437
Wellpoint Health Networks, Inc.* 2,000 174,375
----------------------------------------------------------------------------
852,598
HOSPITAL MANAGEMENT--0.3%, 0.3% AND
0.2%
Coventry Health Care, Inc.* 9,300 155,775
Universal Health Services, Inc.* 1,900 128,013
----------------------------------------------------------------------------
283,788
MEDICAL SUPPLY & SPECIALTY--0.7%,
0.7% AND 0.4%
ArthroCare Corp.* 2,800 101,675
C.R. Bard, Inc. 4,500 225,281
Cytyc Corp.* 500 24,000
Medtronic, Inc. 3,800 194,038
NBTY, Inc.* 9,200 58,650
VISX, Inc.* 3,900 98,231
----------------------------------------------------------------------------
701,875
PHARMACEUTICALS--6.1%, 3.9% AND 2.6%
Advance Paradigm, Inc.* 2,200 54,312
Alpharma, Inc. 2,100 137,550
AmeriSource Health Corp.* 3,100 108,306
American Home Products Corp. 6,700 355,518
Bristol-Myers Squibb Co. 5,400 267,975
CV Therapeutics, Inc.* 1,800 104,625
Cubist Pharmaceuticals, Inc.* 2,200 99,275
Eli Lilly & Co. 4,600 477,825
Glaxo Wellcome PLC 11,100 319,864
Johnson & Johnson 3,900 362,944
Jones Pharma, Inc. 2,850 93,159
King Pharmaceuticals, Inc.* 650 19,581
Maxim Pharmaceuticals, Inc.* 1,500 73,031
Medicis Pharmaceutical Corp.* 1,300 73,125
</TABLE>
20 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
3,100 $ 37,975 1,200 $ 14,700
-- -- -- --
3,000 170,625 1,500 85,313
------------------------------------------------------------------------------------------------------------------
208,600 100,013
13,100 288,200 3,600 79,200
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
2,800 181,825 1,100 71,431
3,100 73,238 1,000 23,625
1,200 63,600 500 26,500
6,700 42,712 2,500 15,937
3,300 70,331 1,200 25,575
1,700 58,969 800 27,750
800 42,650 300 15,994
1,700 76,075 600 26,850
2,300 44,850 900 17,550
600 79,688 300 39,844
1,600 42,400 700 18,550
2,200 120,450 1,200 65,700
2,800 25,375 1,000 9,063
------------------------------------------------------------------------------------------------------------------
922,163 384,369
-- -- 800 30,512
1,100 88,550 400 32,200
3,675 270,113 1,700 124,950
10,800 43,875 4,400 17,875
423 9,094 282 6,063
1,400 122,063 600 52,313
------------------------------------------------------------------------------------------------------------------
533,695 263,913
7,300 122,275 3,100 51,925
2,200 148,225 600 40,425
------------------------------------------------------------------------------------------------------------------
270,500 92,350
2,100 76,256 1,000 36,313
5,900 295,369 1,900 95,118
300 14,400 100 4,800
2,900 148,081 1,000 51,063
8,100 51,638 3,800 24,225
3,000 75,563 1,200 30,225
------------------------------------------------------------------------------------------------------------------
661,307 241,744
1,600 39,500 700 17,281
1,400 91,700 600 39,300
2,300 80,356 800 27,950
5,900 313,069 2,300 122,043
3,300 163,763 1,200 59,550
1,500 87,188 600 34,875
1,600 72,200 700 31,587
3,500 363,562 1,400 145,425
4,800 138,319 2,500 72,041
2,300 214,044 900 83,756
2,250 73,547 750 24,516
450 13,556 250 7,531
1,100 53,556 400 19,475
1,200 67,500 400 22,500
</TABLE>
The accompanying notes are an integral part of the financial statements. 21
<PAGE> 22
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
Merck & Co., Inc. 10,500 $ 752,719
Novartis AG (Registered) 300 463,156
Pfizer, Inc. 18,800 810,750
Sankyo Co., Ltd. 8,000 187,934
Santen Pharmaceutical Co. 3,000 65,814
Schering-Plough Corp. 4,600 198,663
SmithKline Beecham PLC 20,600 265,616
Suzuken Co., LTD 1,900 62,523
Taisho Pharmaceutical Co., Ltd. 3,000 101,188
Takeda Chemical Industries, Ltd. 3,000 178,245
Yamanouchi Pharmaceutical Co., Ltd. 2,000 93,967
----------------------------------------------------------------------------
5,727,665
MISCELLANEOUS--0.2%, 0.2% AND 0.1%
Trimeris, Inc.* 1,300 74,263
United Therapeutics Corp.* 1,300 127,400
----------------------------------------------------------------------------
201,663
-------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS--7.9%, 6.0% AND 3.9%
CELLULAR TELEPHONE--0.4%, 0.3% AND
0.2%
Leap Wireless International, Inc.* 1,100 69,713
Sprint Corp. (PCS Group)* 1,600 88,400
Telecom Italia Mobile SPA 23,000 217,439
----------------------------------------------------------------------------
375,552
TELEPHONE/ COMMUNICATIONS--7.1%, 5.4%
AND 3.5%
ADC Telecommunications, Inc.* 3,356 140,742
AT&T Corp. 13,959 431,856
BCE, Inc. 2,300 52,273
BellSouth Corp. 6,400 254,800
British Telecom PLC 24,500 323,984
Deutsche Telekom AG 8,900 390,919
Digital Microwave Corp.* 1,000 27,187
Ericsson LM "B" 23,200 453,457
France Telecom S.A. 3,200 406,035
IDT Corp.* 2,200 79,063
ITC DeltaCom, Inc.* 2,400 40,350
InterDigital Communication Corp.* 3,500 63,000
Intermedia Communications, Inc.* 2,400 42,300
JDS Uniphase Corp.* 2,000 236,250
Koninklijke Kpn NV 2,450 88,583
Level 3 Communications, Inc.* 900 61,594
MGC Communications* 1,200 54,000
MasTec, Inc.* 1,000 33,188
MRV Communications Inc.* 1,900 109,963
NEXTLINK Communications, Inc. "A"* 1,286 42,518
Nokia Oyj 11,200 496,302
Nortel Networks Corp. 1,411 104,943
Oki Electric Industry Co.* 13,000 82,706
SBC Communications, Inc. 11,559 491,980
Sirius Satellite Radio, Inc.* 1,300 49,888
Swisscom AG 400 133,237
TALK.com, Inc.* 4,000 20,500
Tekelec* 700 27,475
Telecom Italia SpA 21,530 276,977
Telefonica SA* 11,400 239,850
Verizon Communications 7,994 375,718
Viatel, Inc.* 1,100 15,331
Vodafone AirTouch PLC 147,600 652,825
WorldCom, Inc.* 9,700 378,906
Xircom, Inc.* 2,200 75,213
----------------------------------------------------------------------------
6,753,913
</TABLE>
22 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
8,900 $ 638,019 3,700 $ 265,244
200 308,771 100 154,385
12,675 546,609 5,600 241,500
3,000 70,475 1,000 23,492
-- -- 1,000 21,938
3,800 164,113 1,300 56,144
9,600 123,782 5,300 68,338
3,100 102,011 1,200 39,488
-- -- -- --
1,000 59,415 1,000 59,415
-- -- -- --
------------------------------------------------------------------------------------------------------------------
3,785,055 1,637,774
1,000 57,125 400 22,850
900 88,200 500 49,000
------------------------------------------------------------------------------------------------------------------
145,325 71,850
------------------------------------------------------------------------------------------------------------------
600 38,025 400 25,350
1,700 93,925 600 33,150
18,100 171,115 6,900 65,232
------------------------------------------------------------------------------------------------------------------
303,065 123,732
3,126 131,097 1,032 43,279
10,622 328,618 5,237 162,019
2,300 52,273 900 20,455
4,200 167,213 2,200 87,587
22,600 298,858 8,000 105,791
7,000 307,464 2,900 127,378
700 19,031 500 13,594
20,400 398,729 6,400 125,091
2,700 342,592 1,000 126,886
1,800 64,688 800 28,750
2,200 36,987 600 10,088
2,800 50,400 1,200 21,600
2,000 35,250 900 15,863
1,500 177,187 600 70,875
2,200 79,544 800 28,925
700 47,906 300 20,531
1,100 49,500 400 18,000
700 23,231 450 14,934
1,500 86,812 600 34,725
1,158 38,286 314 10,382
9,200 407,677 4,000 177,251
1,511 112,381 813 60,467
11,000 69,982 5,000 31,810
10,133 431,286 4,048 172,293
700 26,862 500 19,188
-- -- 100 33,309
3,100 15,888 1,300 6,663
700 27,475 300 11,775
18,200 234,137 6,780 87,223
4,900 103,094 2,900 61,015
4,200 197,400 1,910 89,770
600 8,363 400 5,575
125,800 556,405 44,300 195,936
7,300 285,156 2,900 113,281
1,900 64,956 700 23,931
------------------------------------------------------------------------------------------------------------------
5,276,728 2,176,240
</TABLE>
The accompanying notes are an integral part of the financial statements. 23
<PAGE> 24
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
MISCELLANEOUS--0.4%, 0.3% AND 0.2%
C-Cube Microsystems, Inc.* 1,800 $ 35,887
Emmis Communications "A" 2,100 75,731
Metricom, Inc.* 1,800 63,338
Tollgrade Communications, Inc.* 1,300 136,480
VoiceStream Wireless Corp.* 467 59,893
----------------------------------------------------------------------------
371,329
-------------------------------------------------------------------------------------------------------------------------
FINANCIAL--13.1%, 10.1%
AND 6.3%
BANKS--5.1%, 3.8% AND 2.3%
ABN AMRO Holding NV 10,400 252,452
Australia & New Zealand Banking Group
Ltd. 30,100 227,364
Bank United Corp. 2,900 105,668
Bank of America Corp. 4,600 217,925
Bank of Nova Scotia 10,900 275,212
Bank of Tokyo-Mitsubishi, Ltd. 16,000 162,194
Banque Nationale de Paris 2,100 207,290
Barclays PLC 7,000 158,476
Chase Manhattan Corp. 7,050 350,297
Christiania Bank og Kreditkasse 25,600 136,355
Credit Suisse Group (Registered) 900 193,296
Dresdner Bank AG 4,500 207,707
FleetBoston Financial Corp. 11,000 393,938
Fuji Bank, Ltd. 12,000 77,660
Lloyds TSB Group PLC 21,200 189,440
MAF Bancorp, Inc. 5,500 109,656
National Australia Bank Ltd. 14,800 212,760
PNC Bank Corp. 3,000 152,625
Royal Bank of Scotland Group plc 10,500 165,613
Sakura Bank, Ltd. 17,000 98,675
San Paolo -- IMI SpA 12,100 205,232
Societe Generale 2,100 130,408
Sumitomo Bank, Ltd. 11,000 112,011
UBS AG (Registered) 1,600 230,530
Wells Fargo Co. 6,900 285,056
----------------------------------------------------------------------------
4,857,840
INSURANCE--3.0%, 2.3% AND 1.5%
AMBAC Financial Group, Inc. 4,600 296,413
AXA SA 1,500 228,005
Aetna, Inc. 1,600 88,800
Allianz AG 800 300,299
American General Corp. 2,400 160,050
American International Group, Inc. 750 65,765
Fidelity National Financial, Inc. 5,500 97,281
First American Financial Co. 2,900 45,131
Hartford Financial Services Group, Inc. 1,900 122,075
ING Groep NV 2,535 169,498
Jefferson Pilot Corp. 4,450 271,450
Muenchener
Rueckversicherungs-Gesellschaft AG
(Registered) 900 297,797
Protective Life Corp. 8,100 219,713
Skandia Forsakrings AB 7,400 165,242
Stewart Information Services Corp. 5,200 68,900
XL Capital Ltd. "A" 3,041 200,706
----------------------------------------------------------------------------
2,797,125
BUSINESS FINANCE--0.3%, 0.3% AND 0.1%
Heller Financial, Inc. 11,100 266,400
----------------------------------------------------------------------------
</TABLE>
24 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
1,400 $ 27,913 600 $ 11,962
1,300 46,881 1,000 36,062
1,400 49,263 500 17,594
900 94,486 500 52,492
300 38,475 205 26,291
------------------------------------------------------------------------------------------------------------------
257,018 144,401
------------------------------------------------------------------------------------------------------------------
13,400 325,274 4,900 118,944
37,200 280,994 -- --
-- -- 900 32,793
5,900 279,513 1,100 52,113
2,400 60,597 5,500 138,868
10,000 101,371 6,000 60,823
2,200 217,161 800 78,968
5,700 129,045 1,900 43,015
7,200 357,750 2,400 119,250
-- -- 6,100 32,491
800 171,819 200 42,955
3,700 170,781 1,700 78,467
11,100 397,519 2,900 103,856
8,000 51,773 5,000 32,358
15,800 141,186 6,200 55,402
-- -- -- --
7,100 102,067 -- --
2,100 106,838 900 45,788
2,400 37,854 1,500 23,659
12,000 69,653 7,000 40,631
6,100 103,464 3,600 61,061
1,000 62,099 1,200 74,519
8,000 81,463 3,000 30,548
1,400 201,713 400 57,632
4,400 181,775 1,900 78,494
------------------------------------------------------------------------------------------------------------------
3,631,709 1,402,635
-- -- 2,100 135,319
1,300 197,604 620 94,242
1,200 66,600 500 27,750
400 150,150 300 112,612
4,500 300,094 -- --
-- -- -- --
3,740 66,151 1,900 33,606
-- -- 600 9,338
1,500 96,375 400 25,700
2,719 181,800 1,156 77,294
5,500 335,500 1,500 91,500
800 264,708 250 82,721
5,200 141,050 3,000 81,375
6,000 133,980 3,000 66,990
6,400 84,800 2,100 27,825
3,182 210,012 930 61,380
------------------------------------------------------------------------------------------------------------------
2,228,824 927,652
11,000 264,000 3,200 76,800
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 25
<PAGE> 26
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
CONSUMER FINANCE--1.7%, 1.2% AND 0.9%
AmeriCredit Corp.* 7,100 $ 147,325
Citigroup, Inc. 15,500 1,093,718
Promise Co., Ltd. 1,300 89,241
SLM Holding Corp. 3,900 167,944
Takefuji Corp. 1,000 100,548
----------------------------------------------------------------------------
1,598,776
OTHER FINANCIAL COMPANIES--2.9%, 2.4%
AND 1.4%
ACOM Co., Ltd. 1,000 75,868
Compagnie AG 100 273,185
Edwards (AG), Inc. 7,300 385,988
Federal Home Loan Mortgage Corp. 5,200 205,075
Federal National Mortgage Association 6,500 324,187
GreenPoint Financial Corp. 8,000 188,000
HSBC Holdings PLC 24,800 335,945
Halifax Group PLC 14,900 116,836
Legg Mason, Inc. 5,600 291,200
Man (ED&F) Group PLC 18,800 140,089
Morgan Stanley Dean Witter & Co. 2,100 191,625
Nichiei Co., Ltd. 2,700 28,654
Nomura Securities Co., Ltd. 11,000 215,676
----------------------------------------------------------------------------
2,772,328
REAL ESTATE--0.1%, 0.1% AND 0.1%
Cheung Kong Holdings Ltd. 4,000 47,060
China Resources Enterprises Ltd. -- --
Sun Hung Kai Properties Ltd. 3,200 25,133
----------------------------------------------------------------------------
72,193
-------------------------------------------------------------------------------------------------------------------------
MEDIA--1.6%, 1.2% AND 0.8%
BROADCASTING & ENTERTAINMENT--0.8%,
0.5% AND 0.4%
British Sky Broadcasting Group plc* 6,900 126,625
NBC Internet, Inc. "A" 2,900 29,906
The Walt Disney Co. 9,600 371,400
Time Warner, Inc. 800 61,350
Viacom, Inc. "B" 2,387 158,288
----------------------------------------------------------------------------
747,569
CABLE TELEVISION--0.6%, 0.5% AND 0.3%
ACTV, Inc.* 2,500 37,343
AT&T Corp. - Liberty Media Group "A" 11,800 262,550
Canal Plus SA 600 95,095
Comcast Corp. "A"* 4,500 153,070
----------------------------------------------------------------------------
548,058
PRINT MEDIA--0.1%, 0.1% AND 0.1%
Softbank Corp. 1,100 92,002
----------------------------------------------------------------------------
MISCELLANEOUS--0.1%, 0.1% AND 0.0%
Granada Compass 7,396 90,928
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
SERVICE INDUSTRIES--3.5%, 2.8% AND
1.8%
EDP SERVICES--0.6%, 0.5% AND 0.3%
Affiliated Computer Services* 4,000 180,250
First Data Corp. 5,700 262,556
VeriSign, Inc.* 700 111,081
----------------------------------------------------------------------------
553,887
</TABLE>
26 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
4,200 $ 87,150 1,700 $ 35,275
12,800 903,200 5,200 366,925
1,100 75,512 500 34,324
1,000 43,063 1,600 68,900
1,000 100,548 300 30,165
------------------------------------------------------------------------------------------------------------------
1,209,473 535,589
600 45,521 400 30,347
50 136,592 -- --
5,600 296,100 2,500 132,188
5,300 209,019 1,900 74,931
7,000 349,125 2,600 129,675
7,600 178,600 2,200 51,700
21,100 285,824 7,900 107,015
8,800 69,004 3,400 26,661
5,400 280,800 2,300 119,600
17,400 129,656 8,400 62,593
2,200 200,750 900 82,125
3,400 36,082 1,800 19,102
7,000 137,249 3,000 58,821
------------------------------------------------------------------------------------------------------------------
2,354,322 894,758
1,900 22,354 1,000 11,765
-- -- 200 289
6,300 49,480 2,700 21,206
------------------------------------------------------------------------------------------------------------------
71,834 33,260
------------------------------------------------------------------------------------------------------------------
6,700 122,955 2,800 51,384
2,700 27,844 1,200 12,375
6,300 243,731 2,800 108,325
-- -- -- --
1,953 129,508 651 43,169
------------------------------------------------------------------------------------------------------------------
524,038 215,253
2,000 29,875 800 11,950
9,000 200,250 3,800 84,550
500 79,246 200 31,698
3,900 132,661 1,200 40,819
------------------------------------------------------------------------------------------------------------------
442,032 169,017
800 66,910 400 33,455
------------------------------------------------------------------------------------------------------------------
10,565 129,889 -- --
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
3,100 139,694 1,200 54,075
6,100 280,981 2,000 92,125
400 63,475 300 47,606
------------------------------------------------------------------------------------------------------------------
484,150 193,806
</TABLE>
The accompanying notes are an integral part of the financial statements. 27
<PAGE> 28
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
INVESTMENT--0.9%, 0.8% AND 0.4%
Bear Stearns Companies, Inc. 3,232 $ 174,124
Charles Schwab Corp. 3,000 108,375
Paine Webber Group, Inc. 5,800 401,650
Raymond James Financial, Inc. 6,400 160,000
Southwest Securities Group, Inc. 1,300 35,831
----------------------------------------------------------------------------
879,980
MISCELLANEOUS
COMMERCIAL SERVICES--0.7%, 0.4% AND
0.3%
Aspect Communications Corp.* 1,100 20,213
Cap Gemini SA 700 137,480
Diamond Technology Partners, Inc.* 800 71,250
Pacific Century CyberWorks Ltd.* 21,000 44,027
Personnel Group of America, Inc.* 13,100 41,756
Siebel Systems, Inc.* 600 87,000
Vivendi 2,700 215,715
----------------------------------------------------------------------------
617,441
MISCELLANEOUS CONSUMER
SERVICES--0.7%, 0.6% AND 0.5%
Akamai Technologies, Inc.* 297 23,421
Go2Net, Inc.* 900 53,156
Navigant Consulting, Inc.* 9,100 30,713
Profit Recovery Group International,
Inc.* 4,700 43,475
Txu Corporation 7,200 225,000
United Utilities PLC 15,400 153,543
Yahoo!, Inc.* 700 90,081
eBay, Inc.* 900 45,000
----------------------------------------------------------------------------
664,389
PRINTING/PUBLISHING--
0.2%, 0.2% AND 0.1%
Mail-Well, Inc.* 13,200 93,225
Reuters Group PLC 6,700 128,480
----------------------------------------------------------------------------
221,705
MISCELLANEOUS--
0.4%, 0.3% AND 0.2%
Adecco SA 200 163,432
Metris Companies, Inc. 4,050 118,716
Startek, Inc.* 1,300 51,269
----------------------------------------------------------------------------
333,417
-------------------------------------------------------------------------------------------------------------------------
DURABLES--3.1%, 2.5% AND 1.6%
AEROSPACE--0.8%, 0.8%
AND 0.5%
Alliant Techsystems, Inc.* 2,300 162,725
Boeing Co. 4,400 215,600
Primex Technologies, Inc. 5,500 126,844
Teledyne Technologies, Inc.* -- --
United Technologies Corp. 5,400 315,225
----------------------------------------------------------------------------
820,394
AUTOMOBILES--1.1%, 0.8% AND 0.6%
Borg-Warner Automotive, Inc. 3,900 132,356
DaimlerChrysler AG (Registered) -- --
DaimlerChrysler AG 3,800 201,636
Honda Motor Co., Ltd. 3,000 109,689
Monaco Coach Corp.* 4,300 64,231
Renault SA 1,900 81,623
Toyota Motor Corp. 11,000 466,545
----------------------------------------------------------------------------
1,056,080
CONSTRUCTION/AGRICULTURAL
EQUIPMENT--0.1%, 0.1%
AND 0.0%
Terex Corp.* 6,400 105,600
----------------------------------------------------------------------------
</TABLE>
28 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
2,366 $ 127,468 1,155 $ 62,225
3,150 113,794 1,050 37,931
4,800 332,400 1,900 131,575
5,900 147,500 1,400 35,000
1,100 30,319 400 11,025
------------------------------------------------------------------------------------------------------------------
751,481 277,756
700 12,863 400 7,350
600 117,840 200 39,280
700 62,344 300 26,718
16,000 33,545 7,000 14,676
9,300 29,644 3,800 12,113
500 72,500 200 29,000
1,300 103,863 600 47,937
------------------------------------------------------------------------------------------------------------------
432,599 177,074
178 14,037 58 4,607
600 35,437 300 17,718
4,000 13,500 3,700 12,488
3,700 34,225 1,400 12,950
7,400 231,250 3,400 106,250
18,700 186,445 8,400 83,751
400 51,475 200 25,738
500 25,000 300 15,000
------------------------------------------------------------------------------------------------------------------
591,369 278,502
7,400 52,262 4,100 28,956
5,100 97,798 1,900 36,434
------------------------------------------------------------------------------------------------------------------
150,060 65,390
200 163,432 100 81,716
2,850 83,541 1,250 36,641
1,100 43,381 400 15,775
------------------------------------------------------------------------------------------------------------------
290,354 134,132
------------------------------------------------------------------------------------------------------------------
3,000 212,250 1,000 70,750
2,500 122,500 1,000 49,000
4,000 92,250 1,600 36,900
-- -- 300 5,981
5,800 338,575 2,100 122,588
------------------------------------------------------------------------------------------------------------------
765,575 285,219
2,100 71,269 1,200 40,725
1,353 71,793 1,000 53,062
1,247 65,701 -- --
3,000 109,689 2,000 73,126
4,000 59,750 1,100 16,431
1,400 60,143 400 17,184
8,000 339,305 4,000 169,653
------------------------------------------------------------------------------------------------------------------
777,650 370,181
3,700 61,050 2,000 33,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 29
<PAGE> 30
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS EQUIPMENT--1.1%,
0.8%
AND 0.5%
Alcatel 3,900 $ 287,731
Antec Corp.* 1,500 56,718
Com21, Inc.* 1,100 19,250
Lucent Technologies, Inc. 12,100 529,375
Scientific-Atlanta, Inc. 1,300 100,100
----------------------------------------------------------------------------
993,174
MISCELLANEOUS--0.0%, 0.0% AND 0.0%
GKN plc "B" 20,100 3,315
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--7.5%, 5.5% AND 3.8%
CHEMICALS--0.9%, 0.6%
AND 0.4%
Akzo Nobel NV 6,000 266,877
Aventis SA 2,100 161,745
BASF AG 3,300 135,802
BOC Group plc 4,500 66,794
Praxair, Inc. 5,600 221,550
----------------------------------------------------------------------------
852,768
CONTAINERS & PAPER--0.5%, 0.3% AND
0.5%
FPB Holding AG* 2,468 377,432
UPM-Kymmene Oyj 4,000 98,617
----------------------------------------------------------------------------
476,049
DIVERSIFIED MANUFACTURING--3.6%, 2.9%
AND 1.7%
Briggs & Stratton Corp. 5,600 197,050
Cooper Industries, Inc. 3,400 109,012
General Electric Co. 30,000 1,543,125
Hillenbrand Industries, Inc. 6,400 204,800
Honeywell International, Inc. 6,100 205,113
Hutchison Whampoa, Ltd. 25,950 361,038
Koninklijke Philips Electronics NV 4,432 200,789
Man AG 2,400 75,520
Derlikon-Bachrie Holding AG 300 74,587
Siemens AG 2,000 311,422
Sulzer Brothers Ltd. (Registered) 200 136,592
----------------------------------------------------------------------------
3,419,048
ELECTRICAL PRODUCTS--0.3%, 0.2% AND
0.2%
ABB, Ltd. 1,400 166,906
Anadigics, Inc.* 1,900 50,231
Taiyo Yuden Co., Ltd. 2,000 89,580
----------------------------------------------------------------------------
306,717
INDUSTRIAL SPECIALTY--1.0%, 0.7% AND
0.5%
Carlisle Companies, Inc. 5,200 235,300
Corning, Inc. 1,300 304,119
Kulicke & Soffa Industries, Inc.* 1,500 67,688
QUALCOMM, Inc.* 2,100 136,369
Sherwin-Williams Co. 10,400 216,450
----------------------------------------------------------------------------
959,926
MACHINERY/COMPONENTS/ CONTROLS--0.9%,
0.7% AND 0.4%
Asyst Technologies, Inc.* 1,400 33,775
Illinois Tool Works, Inc. 4,295 245,889
Ingersoll-Rand Co. 5,100 200,175
Okuma Corp. 19,000 68,254
Reliance Steel & Aluminum Co. 10,200 214,200
----------------------------------------------------------------------------
762,293
OFFICE EQUIPMENT/ SUPPLIES--0.2%,
0.1% AND 0.1%
Olivetti SPA 26,900 89,756
United Stationers, Inc.* 2,800 81,550
----------------------------------------------------------------------------
171,306
</TABLE>
30 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
3,000 $ 221,332 1,000 $ 73,777
1,300 49,156 500 18,906
900 15,750 400 7,000
9,900 433,125 3,700 161,875
900 69,300 300 23,100
------------------------------------------------------------------------------------------------------------------
788,663 284,658
20,300 3,348 7,100 1,171
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
3,000 133,439 1,700 75,615
-- -- 100 7,702
3,200 131,687 1,400 57,613
8,400 124,682 3,100 46,014
4,400 174,075 1,800 71,213
------------------------------------------------------------------------------------------------------------------
563,883 258,157
1,277 195,292 1,652 252,641
4,600 113,409 1,600 39,447
------------------------------------------------------------------------------------------------------------------
308,701 292,088
6,000 211,125 1,700 59,819
-- -- 1,400 44,888
22,700 1,167,631 9,600 493,800
6,700 214,400 2,400 76,800
6,300 211,837 2,600 87,425
18,230 253,631 5,510 76,660
4,400 199,340 1,440 65,238
3,200 100,693 800 25,173
1,400 217,995 500 77,855
300 204,889 100 68,296
------------------------------------------------------------------------------------------------------------------
2,781,541 1,075,954
700 83,453 400 47,688
1,650 43,622 750 19,828
1,000 44,790 1,000 44,790
------------------------------------------------------------------------------------------------------------------
171,865 112,306
2,500 113,125 2,000 90,500
1,100 257,331 400 93,575
1,100 49,637 600 27,075
1,200 77,925 600 38,963
6,600 137,363 1,500 31,219
------------------------------------------------------------------------------------------------------------------
635,381 281,332
700 16,888 400 9,650
3,930 224,992 1,278 73,166
5,500 215,875 1,900 74,575
17,000 61,069 11,000 39,516
7,500 157,500 3,000 63,000
------------------------------------------------------------------------------------------------------------------
676,324 259,907
17,700 59,059 9,500 31,698
2,000 58,250 1,100 32,038
------------------------------------------------------------------------------------------------------------------
117,309 63,736
</TABLE>
The accompanying notes are an integral part of the financial statements. 31
<PAGE> 32
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
WHOLESALE DISTRIBUTORS--0.1%, 0.0%
AND 0.0%
Insight Enterprises, Inc.* 1,700 $ 78,625
Owens and Minor, Inc. 1,700 27,200
----------------------------------------------------------------------------
105,825
MISCELLANEOUS--0.0%, 0.0% AND 0.0%
Cementir SpA Cementerie del Tirreno 18,400 27,286
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--16.1%,
11.7% AND 8.0%
COMPUTER SOFTWARE--4.2%,
3.1% AND 2.2%
Actuate Corp.* 1,800 88,650
Advanced Digital Information Corp.* 4,500 63,000
Advent Software, Inc.* 2,200 124,300
America Online, Inc.* 6,800 362,525
Ancor Communications, Inc.* 1,500 59,250
Avant! Corp.* 6,200 96,875
BEA Systems, Inc.* 1,400 60,288
Brocade Communications Systems, Inc* 500 89,313
Clarent Corp.* 700 30,013
Claruas Corp.* 1,400 51,800
Computer Associates International, Inc. 3,300 81,881
Digital Island, Inc.* 2,900 83,193
Documentum, Inc.* 1,000 46,875
Entrust Technologies, Inc.* 900 25,706
Exchange Applications, Inc.* 3,900 85,800
Exodus Communications, Inc.* 1,600 71,100
HNC Software, Inc.* 1,300 57,363
Hyperion Solutions Corp.* 1,900 50,588
Informatica Corp* 1,100 88,000
Mercator Software, Inc.* 1,500 30,750
Micrel, Inc.* 1,000 50,063
MicroStrategy, Inc.* 2,100 46,594
Microsoft Corp.* 13,200 921,525
NetIQ Corp.* 2,900 139,925
Netegrity, Inc.* 1,500 118,500
Oracle Corp.* 6,500 488,719
Remedy Corp.* 1,300 28,681
Reynolds and Reynolds Co. 3,900 65,081
SAP AG 600 134,579
Synopsys Ltd.* 1,100 35,819
THQ, Inc.* 2,700 44,550
Verity, Inc.* 1,100 40,081
Watchguard Technologies, Inc.* 3,800 186,438
i2 Technologies, Inc.* 270 35,033
----------------------------------------------------------------------------
3,982,858
DIVERSE ELECTRONIC PRODUCTS--0.9%,
0.6% AND 0.4%
Applied Materials, Inc.* 3,200 242,800
DSP Group, Inc.* 1,600 67,100
Dell Computer Corp.* 6,800 298,775
Motorola, Inc. 5,400 178,538
Teradyne, Inc.* 500 31,688
----------------------------------------------------------------------------
818,901
EDP PERIPHERALS--1.0%, 0.7% AND 0.5%
Ariba, Inc.* 800 92,750
EMC Corp.* 5,900 502,237
Iomega Corp.* 10,500 40,031
MMC Networks, Inc.* 1,600 79,100
Network Appliance, Inc.* 1,000 86,188
SCM Microsystems, Inc.* 1,000 51,625
VERITAS Software Corp.* 1,150 117,228
----------------------------------------------------------------------------
969,159
</TABLE>
32 The accompanying notes are an integral part of the financial statements.
<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> <C> <C>
1,100 $ 50,875 400 $ 18,500
-- -- -- --
------------------------------------------------------------------------------------------------------------------
50,875 18,500
16,100 23,876 -- --
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
1,500 73,875 600 29,550
3,600 50,400 1,200 16,800
1,300 73,450 700 39,550
5,300 282,556 2,300 122,618
900 35,550 600 23,700
4,500 70,313 2,200 34,375
1,000 43,063 400 17,225
300 53,588 200 35,725
500 21,437 200 8,575
900 33,300 500 18,500
2,800 69,475 1,000 24,813
2,300 65,981 900 25,819
600 28,125 400 18,750
400 11,425 400 11,425
2,600 57,200 1,300 28,600
1,300 57,769 400 17,775
1,100 48,537 400 17,650
1,100 29,288 500 13,313
700 56,000 300 24,000
1,300 26,650 500 10,250
1,000 50,063 300 15,019
1,600 35,500 600 13,313
10,700 746,994 4,400 307,175
2,200 106,150 1,000 48,250
1,200 94,800 500 39,500
4,600 345,863 2,100 157,894
1,100 24,269 400 8,825
3,100 51,731 1,200 20,025
600 134,579 300 67,289
500 16,281 200 6,513
1,400 23,100 1,150 18,975
500 18,219 300 10,931
3,000 147,188 1,300 63,781
105 13,624 220 28,545
------------------------------------------------------------------------------------------------------------------
2,996,343 1,345,048
2,600 197,275 1,200 91,050
1,200 50,325 500 20,968
5,100 224,081 2,200 96,662
4,200 138,862 1,500 49,594
200 12,675 200 12,675
------------------------------------------------------------------------------------------------------------------
623,218 270,949
500 57,969 300 34,781
4,100 349,013 2,000 170,250
5,300 20,206 3,500 13,344
1,300 64,269 500 24,719
700 60,331 400 34,475
800 41,300 400 20,650
750 76,453 350 35,678
------------------------------------------------------------------------------------------------------------------
669,541 333,897
</TABLE>
The accompanying notes are an integral part of the financial statements. 33
<PAGE> 34
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
ELECTRONIC
COMPONENTS/DISTRIBUTORS--3.0%, 2.1%
AND 1.5%
Altera Corp.* 900 $ 88,368
Analog Devices, Inc.* 1,200 80,250
Anaren Microwave, Inc.* 800 58,050
Broadcom Corp. Class "A"* 400 89,700
Cisco Systems, Inc.* 23,300 1,524,693
Imation Corp.* 2,400 58,200
Juniper Networks, Inc.* 600 85,463
Kyocera Corp. 900 129,406
Murata Manufacturing Co., Ltd. 1,000 118,830
PMC-Sierra, Inc.* 600 116,325
Pioneer-Standard Electronics, Inc. 4,200 56,700
SCI Systems, Inc.* 700 32,113
Sawtek, Inc.* 900 47,925
Technitrol, Inc. 3,100 341,775
----------------------------------------------------------------------------
2,827,798
ELECTRONIC DATA PROCESSING--2.4%,
1.9% AND 1.1%
Apple Computer, Inc.* 1,800 91,463
Compaq Computer Corp. 8,000 224,500
Fujitsu, Ltd. 6,000 168,921
Hewlett-Packard Co. 3,500 382,156
International Business Machines Corp. 6,800 764,575
Mips Technologies, Inc. "A"* 3,600 167,850
Sun Microsystems, Inc.* 4,400 463,925
----------------------------------------------------------------------------
2,263,390
MILITARY ELECTRONICS--0.6%, 0.4% AND
0.3%
Computer Sciences Corp.* 2,500 156,250
General Dynamics Corp. 6,500 366,844
Titan Corp.* 1,700 50,469
----------------------------------------------------------------------------
573,563
OFFICE/PLANT AUTOMATION--0.2%, 0.1%
AND 0.1%
3Com Corp. 1,500 20,344
Cognex Corp.* 1,500 73,593
Palm, Inc.* 2,224 86,736
----------------------------------------------------------------------------
180,673
PRECISION INSTRUMENTS--0.2%, 0.2% AND
0.1%
ADTRAN, Inc.* 800 48,150
Coherent, Inc.* 1,900 113,762
Credence Systems Corp.* 700 29,925
Harmonic Inc.* 1,076 25,353
----------------------------------------------------------------------------
217,190
</TABLE>
34 The accompanying notes are an integral part of the financial statements.
<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> <C> <C> <C>
700 $ 68,731 300 $ 29,456
1,000 66,875 400 26,750
700 50,794 300 21,769
300 67,275 200 44,850
18,200 1,190,963 7,400 484,237
-- -- 700 16,975
400 56,975 200 28,488
700 100,649 300 43,135
-- -- -- --
500 96,937 200 38,775
3,900 52,650 1,200 16,200
800 36,700 400 18,350
500 26,625 400 21,300
2,000 220,500 1,200 132,300
------------------------------------------------------------------------------------------------------------------
2,035,674 922,585
1,600 81,300 600 30,488
5,900 165,569 2,500 70,156
6,000 168,921 2,000 56,307
2,600 283,887 1,100 120,106
5,700 640,894 2,000 224,875
2,800 130,550 1,100 51,288
3,000 316,313 1,300 137,069
------------------------------------------------------------------------------------------------------------------
1,787,434 690,289
2,000 125,000 800 50,000
4,000 225,750 2,100 118,518
800 23,750 500 14,844
------------------------------------------------------------------------------------------------------------------
374,500 183,362
1,300 17,631 400 5,425
500 24,531 500 24,531
1,928 75,192 593 23,127
------------------------------------------------------------------------------------------------------------------
117,354 53,083
400 24,075 200 12,037
1,600 95,800 600 35,925
700 29,925 100 4,275
359 8,459 325 7,658
------------------------------------------------------------------------------------------------------------------
158,259 59,895
</TABLE>
The accompanying notes are an integral part of the financial statements. 35
<PAGE> 36
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
SEMICONDUCTORS--3.3%, 2.4% AND 1.6%
Alpha Industries, Inc.* 1,000 $ 34,062
Cymer, Inc.* 1,700 77,137
Cypress Semiconductor Corp.* 2,700 100,743
Emcore Corp.* 900 61,875
Intel Corp. 22,400 1,495,200
International Rectifier Corp* 1,200 66,375
KEMET Corp.* 4,200 100,800
Kopin Corp.* 2,300 57,356
Lattice Semiconductor Corp.* 1,400 76,825
Linear Technology Corp. 1,500 82,875
Micron Technology, Inc.* 1,600 130,400
Rohm Company Ltd. 500 131,399
S3, Inc.* 4,300 44,075
STMicroelectronics NV 4,000 227,634
Texas Instruments, Inc. 5,600 328,650
Triquint Semiconductor, Inc.* 1,400 53,638
Xilinx, Inc.* 800 60,050
----------------------------------------------------------------------------
3,129,094
MISCELLANEOUS--0.3%, 0.2% AND 0.2%
Advanced Radio Telecom Corp.* 2,900 33,168
Agilent Technologies, Inc.* 1,335 54,397
Osicom Technologies Inc.* 600 34,200
Puma Technology Inc.* 2,500 50,000
Wabtec 11,187 112,569
IGATE Capital Corp.* 4,100 38,694
----------------------------------------------------------------------------
323,028
-------------------------------------------------------------------------------------------------------------------------
ENERGY--3.7%, 2.3% AND 1.6%
OIL & GAS PRODUCTION--1.7%, 0.7% AND
0.5%
Cabot Oil & Gas Corp. "A" 8,400 155,400
Exxon Mobil Corp. 10,100 808,000
Marine Drilling Companies, Inc.* 2,700 58,725
Repsol SA 10,200 193,804
Swift Energy Co.* 5,400 118,463
Tosco Corp. 9,400 249,100
----------------------------------------------------------------------------
1,583,492
OIL COMPANIES--0.7%, 0.7% AND 0.4%
ENI SpA 44,400 248,559
Total Fina ELF SA "B" 2,500 370,508
----------------------------------------------------------------------------
619,067
OIL/GAS TRANSMISSION--0.5%, 0.5% AND
0.2%
Enron Corp. 2,800 206,150
Questar Corp. 15,400 300,300
----------------------------------------------------------------------------
506,450
OILFIELD SERVICES/EQUIPMENT--0.8%,
0.4% AND 0.5%
BP Amoco plc 70,900 620,794
Key Energy Group, Inc.* 7,600 57,950
Patterson Energy, Inc.* 4,100 102,244
----------------------------------------------------------------------------
780,988
-------------------------------------------------------------------------------------------------------------------------
METALS & MINERALS--0.3%, 0.2% AND
0.1%
PRECIOUS METALS--0.1%, 0.1% AND 0.0%
Stillwater Mining Co.* 4,100 107,625
----------------------------------------------------------------------------
STEEL & METALS--0.2%, 0.1% AND 0.1%
Nucor Corp. 5,200 196,300
----------------------------------------------------------------------------
</TABLE>
36 The accompanying notes are an integral part of the financial statements.
<PAGE> 37
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
700 $ 23,844 300 $ 10,218
1,400 63,525 500 22,687
1,700 63,431 900 33,581
700 48,125 300 20,625
17,000 1,134,750 7,200 480,600
900 49,781 300 16,594
4,000 96,000 1,400 33,600
1,700 42,394 600 14,963
800 43,900 400 21,950
800 44,200 400 22,100
1,100 89,650 500 40,750
500 131,399 100 26,280
2,700 27,675 1,200 12,300
2,400 136,581 1,200 68,290
4,600 269,963 1,800 105,638
1,000 38,312 400 15,325
600 45,037 400 30,025
------------------------------------------------------------------------------------------------------------------
2,348,567 975,526
1,400 16,013 1,100 12,581
992 40,409 420 17,096
400 22,800 200 11,400
2,100 42,000 700 14,000
9,042 90,985 3,380 34,011
2,700 25,481 1,300 12,269
------------------------------------------------------------------------------------------------------------------
237,688 101,357
------------------------------------------------------------------------------------------------------------------
6,700 123,950 2,800 51,800
-- -- 900 72,000
2,700 58,725 1,000 21,750
14,040 266,766 3,990 75,812
3,100 68,006 1,500 32,906
7,000 185,500 2,700 71,550
------------------------------------------------------------------------------------------------------------------
702,947 325,818
49,000 274,311 17,800 99,648
2,300 340,868 1,159 171,768
------------------------------------------------------------------------------------------------------------------
615,179 271,416
1,900 139,887 700 51,537
17,200 335,400 4,200 81,900
------------------------------------------------------------------------------------------------------------------
475,287 133,437
34,300 300,328 30,100 263,553
5,200 39,650 1,900 14,488
3,000 74,813 1,200 29,925
------------------------------------------------------------------------------------------------------------------
414,791 307,966
------------------------------------------------------------------------------------------------------------------
3,300 86,625 1,400 36,750
------------------------------------------------------------------------------------------------------------------
3,000 113,250 1,600 60,400
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 37
<PAGE> 38
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 20+ PORTFOLIO
NUMBER OF
SHARES VALUE
<S> <C> <C> <C> <C> <C>
CONSTRUCTION--1.5%, 1.2% AND 0.7%
BUILDING MATERIALS--1.0%, 0.8% AND
0.5%
Centex Construction Products, Inc. 4,500 $ 110,250
Elcor Corp. 4,975 95,457
Fletcher Challenge Building Corp. 36,200 39,128
Florida Rock Industries, Inc. 3,700 133,200
Grupo Dragados, SA 14,100 107,554
LaFarge Corp. 11,000 247,500
Sumitomo Osaka Cement Co., Ltd. 19,000 83,537
Taiheiyo Cement Corp. 61,000 103,711
----------------------------------------------------------------------------
920,337
BUILDING PRODUCTS--0.2%, 0.2% AND
0.1%
Genlyte Group, Inc.* 4,800 106,800
Nortek, Inc.* 5,800 113,825
----------------------------------------------------------------------------
220,625
HOMEBUILDING--0.2%, 0.1% AND 0.1%
Standard Pacific Corp. 13,900 176,356
----------------------------------------------------------------------------
MISCELLANEOUS--0.1%, 0.1% AND 0.0%
Quanta Services, Inc.* 1,150 52,613
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.5%, 0.5% AND 0.3%
MARINE TRANSPORTATION--0.2%, 0.2% AND
0.1%
Newport News Shipbuilding, Inc. 4,100 165,538
----------------------------------------------------------------------------
RAILROADS--0.2%, 0.2% AND 0.1%
Trinity Industries, Inc. 9,500 182,875
----------------------------------------------------------------------------
TRUCKING--0.1%, 0.1% AND 0.1%
Roadway Express, Inc. 6,000 142,500
----------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
UTILITIES--2.2%, 1.6% AND 1.2%
ELECTRIC UTILITIES--2.2%, 1.6% AND
1.1%
AES Corp.* 1,800 96,187
Avista Corp. 5,500 103,125
Black Hills Corp. 8,700 201,731
Calpine Corp.* 1,000 71,250
Chugoku Electric Power Co., Inc. 22,000 319,744
Electrabel NPV 500 114,049
Endesa S.A. 7,900 163,942
Kyushu Electric Power Co. 17,200 240,548
OGE Energy Corp. 6,200 117,800
Scottish Power plc 14,100 118,385
Shikoku Electric Power Co., Inc. 15,300 195,935
Tokyo Electric Power Co. 15,400 363,885
----------------------------------------------------------------------------
2,106,581
MISCELLANEOUS--0.0%, 0.0% AND 0.1%
SCANA Corp. -- --
----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $79,045,339, $59,926,884 and $25,147,116) 74,628,899
----------------------------------------------------------------------------
<CAPTION>
PREFERRED STOCK--0.2%, 0.1% AND 0.1%
<S> <C> <C> <C> <C> <C>
SERVICE INDUSTRIES--0.2%, 0.1% AND
0.1%
PRINTING/PUBLISHING
News Corp., Ltd. 21,000 221,101
----------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $252,861, $103,889 and $54,431) 221,101
----------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100.0%
(Cost $99,828,695, $101,708,334 and $64,312,502)
(a) $ 94,774,882
----------------------------------------------------------------------------
</TABLE>
38 The accompanying notes are an integral part of the financial statements.
<PAGE> 39
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
HORIZON 10+ PORTFOLIO HORIZON 5 PORTFOLIO
NUMBER OF NUMBER OF
SHARES VALUE SHARES VALUE
<S> <C> <C> <C> <C> <C> <C>
4,500 $ 110,250 1,200 $ 29,400
1,950 37,416 1,925 36,936
10,400 11,241 26,900 29,076
4,100 147,600 1,400 50,400
-- -- 4,400 33,563
11,400 256,500 2,900 65,250
12,000 52,761 6,000 26,380
77,000 130,914 32,000 54,406
------------------------------------------------------------------------------------------------------------------
746,682 325,411
4,400 97,900 1,600 35,600
4,300 84,388 2,000 39,250
------------------------------------------------------------------------------------------------------------------
182,288 74,850
12,500 158,594 4,100 52,019
------------------------------------------------------------------------------------------------------------------
1,200 54,900 500 22,875
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
2,900 117,087 900 36,338
------------------------------------------------------------------------------------------------------------------
8,900 171,325 2,800 53,900
------------------------------------------------------------------------------------------------------------------
5,700 135,375 2,100 49,875
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
600 32,063 800 42,750
4,500 84,375 2,000 37,500
6,000 139,125 1,900 44,056
1,200 85,500 500 35,625
42,500 617,687 13,300 193,300
700 159,668 200 45,620
-- -- -- --
12,800 179,013 -- --
-- -- -- --
3,300 27,707 10,000 83,961
6,500 83,240 10,200 130,623
5,000 118,144 2,300 54,346
------------------------------------------------------------------------------------------------------------------
1,526,522 667,781
-- -- 2,145 56,440
------------------------------------------------------------------------------------------------------------------
56,224,978 23,840,122
------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
8,100 85,282 4,400 46,326
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
$ 96,662,130 $ 62,188,933
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 39
<PAGE> 40
PORTFOLIO OF INVESTMENTS
NOTES TO PORTFOLIO OF INVESTMENTS
* Non-income producing security.
** Repurchase agreement is fully collateralized by U.S. Treasury or Government
agency securities.
(a) Based on the cost of investments for federal income tax purposes at July 31,
2000, the unrealized appreciation and depreciation on investments is as
follows:
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cost of investments for federal income tax purposes $99,885,770 101,772,182 64,464,385
-------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 8,144,568 5,740,201 2,572,847
-------------------------------------------------------------------------------------------------------------
Gross unrealized depreciation 13,255,456 10,850,253 4,848,299
-------------------------------------------------------------------------------------------------------------
Net unrealized depreciation $(5,110,888) (5,111,052) (2,275,452)
-------------------------------------------------------------------------------------------------------------
</TABLE>
40 The accompanying notes are an integral part of the financial statements.
<PAGE> 41
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
As of July 31, 2000
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
-------------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(Cost $99,828,695, $101,708,334, $64,312,502) $94,774,882 96,662,130 62,188,933
------------------------------------------------------------------------------------------------------------------
Cash 23,742 -- --
------------------------------------------------------------------------------------------------------------------
Foreign currency, at value (Cost $10,900, $13,679,
$8,749) 10,835 13,621 8,735
------------------------------------------------------------------------------------------------------------------
Dividend receivable 47,563 41,936 17,723
------------------------------------------------------------------------------------------------------------------
Interest receivable 203,412 546,142 337,482
------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 60,925 180,029 217,189
------------------------------------------------------------------------------------------------------------------
Foreign taxes recoverable 28,949 39,289 11,844
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 95,150,308 97,483,147 62,781,906
------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to custodian bank -- 5,528 4,677
------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 455,686 157,208 138,246
------------------------------------------------------------------------------------------------------------------
Accrued management fee 48,911 49,214 59,515
------------------------------------------------------------------------------------------------------------------
Other accrued expenses and payables 279,655 366,077 188,232
------------------------------------------------------------------------------------------------------------------
Total liabilities 784,252 578,027 390,670
------------------------------------------------------------------------------------------------------------------
NET ASSETS, AT VALUE $94,366,056 96,905,120 62,391,236
------------------------------------------------------------------------------------------------------------------
NET ASSETS
Net assets consist of:
Undistributed (accumulated distributions in excess of)
net investment income $ 70,382 (6,436) 76,619
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments (5,053,813) (5,046,204) (2,123,569)
------------------------------------------------------------------------------------------------------------------
Foreign currency related transactions (1,380) (434) (786)
------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) 7,435,827 6,464,026 1,884,632
------------------------------------------------------------------------------------------------------------------
Paid-in capital 91,915,040 95,494,168 62,554,340
------------------------------------------------------------------------------------------------------------------
NET ASSETS, AT VALUE $94,366,056 96,905,120 62,391,236
------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE
CLASS A SHARES
Net Assets applicable to shares outstanding $42,959,061 46,622,144 39,097,746
------------------------------------------------------------------------------------------------------------------
Outstanding shares of beneficial interest, $.01 par
value, unlimited number of shares authorized 3,507,267 4,154,340 3,688,014
------------------------------------------------------------------------------------------------------------------
Net Asset Value and redemption price per share $ 12.25 11.22 10.60
------------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(100/94.25 of net asset value) $ 13.00 11.90 11.25
------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Net Assets applicable to shares outstanding $41,347,412 40,198,713 18,643,250
------------------------------------------------------------------------------------------------------------------
Outstanding shares of beneficial interest, $.01 par
value, unlimited number of shares authorized 3,455,576 3,584,502 1,759,737
------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per
share (subject to contingent deferred sales charge) $ 11.97 11.21 10.59
------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Net Assets applicable to shares outstanding $ 9,677,463 9,963,557 4,486,426
------------------------------------------------------------------------------------------------------------------
Outstanding shares of beneficial interest, $.01 par
value, unlimited number of shares authorized 811,562 892,210 423,861
------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per
share (subject to contingent deferred sales charge) $ 11.92 11.17 10.58
------------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Net Assets applicable to shares outstanding $ 382,120 120,706 163,814
------------------------------------------------------------------------------------------------------------------
Outstanding shares of beneficial interest, $.01 par
value, unlimited number of shares authorized 31,077 10,763 15,465
------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per
share $ 12.30 11.21 10.59
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 41
<PAGE> 42
FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
Year Ended July 31, 2000
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
----------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $54,113, $39,995
and $16,831) $ 1,063,052 1,065,213 401,300
--------------------------------------------------------------------------------------------------------------
Interest 1,614,426 3,380,512 2,815,812
--------------------------------------------------------------------------------------------------------------
Total Income 2,677,478 4,445,725 3,217,112
--------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 681,127 707,252 408,320
--------------------------------------------------------------------------------------------------------------
Services to shareholders 855,542 708,181 359,741
--------------------------------------------------------------------------------------------------------------
Custodian fee 30,501 43,267 29,519
--------------------------------------------------------------------------------------------------------------
Distribution services fees 463,815 441,041 203,669
--------------------------------------------------------------------------------------------------------------
Administrative services fees 280,583 291,009 166,964
--------------------------------------------------------------------------------------------------------------
Auditing 35,514 40,092 27,186
--------------------------------------------------------------------------------------------------------------
Legal 9,356 9,946 4,612
--------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 17,644 19,567 12,264
--------------------------------------------------------------------------------------------------------------
Reports to shareholders 88,158 55,762 54,044
--------------------------------------------------------------------------------------------------------------
Registration fees 69,682 71,108 60,125
--------------------------------------------------------------------------------------------------------------
Other 20,153 14,873 3,441
--------------------------------------------------------------------------------------------------------------
Total expenses, before expense reductions 2,552,075 2,402,098 1,329,885
--------------------------------------------------------------------------------------------------------------
Expense reductions (8,045) (8,110) (5,087)
--------------------------------------------------------------------------------------------------------------
Total expenses, after expense reductions 2,544,030 2,393,988 1,324,798
--------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ 133,448 2,051,737 1,892,314
--------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments $ 10,216,355 6,874,068 2,032,759
--------------------------------------------------------------------------------------------------------------
Foreign currency related transactions (9,848) 302 (4,927)
--------------------------------------------------------------------------------------------------------------
10,206,507 6,874,370 2,027,832
--------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
Investments (14,988,813) (10,261,138) (3,982,414)
--------------------------------------------------------------------------------------------------------------
Foreign currency related transactions (5,244) (434) (1,786)
--------------------------------------------------------------------------------------------------------------
(14,994,057) (10,261,572) (3,984,200)
--------------------------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (4,787,550) (3,387,202) (1,956,368)
--------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ (4,654,102) (1,335,465) (64,054)
--------------------------------------------------------------------------------------------------------------
</TABLE>
42 The accompanying notes are an integral part of the financial statements.
<PAGE> 43
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
KEMPER HORIZON FUND
----------------------------------------------------------------------------------
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
-------------------------- ------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31, JULY 31, JULY 31,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income
(loss) $ 133,448 685,287 2,051,737 2,596,582 1,892,314 1,731,000
--------------------------------------------------------------------------------------------------------------
Net realized gain (loss)
on investment transactions 10,206,507 10,446,670 6,874,370 11,571,093 2,027,832 2,875,625
--------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) on
investment transactions
during the period (14,994,057) (5,321,656) (10,261,572) (7,380,071) (3,984,200) (1,915,364)
--------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations (4,654,102) 5,810,301 (1,335,465) 6,787,604 (64,054) 2,691,261
--------------------------------------------------------------------------------------------------------------
Distributions to
shareholders:
From net investment income
Class A (562,924) (61,376) (1,629,887) (1,353,629) (1,366,181) (921,767)
--------------------------------------------------------------------------------------------------------------
Class B (119,247) (290) (860,606) (560,174) (542,274) (654,100)
--------------------------------------------------------------------------------------------------------------
Class C -- -- (208,199) (133,131) (115,922) (158,455)
--------------------------------------------------------------------------------------------------------------
Class I (17,946) (12,381) (4,388) (3,850) (6,030) (6,678)
--------------------------------------------------------------------------------------------------------------
From net realized gains
Class A (4,929,133) (82,740) (6,099,503) (576,509) (1,631,496) (275,807)
--------------------------------------------------------------------------------------------------------------
Class B (4,487,649) (83,107) (4,315,787) (438,833) (839,414) (242,310)
--------------------------------------------------------------------------------------------------------------
Class C (1,002,242) (16,938) (1,195,997) (110,057) (188,565) (62,268)
--------------------------------------------------------------------------------------------------------------
Class I (72,549) (1,474) (14,270) (1,333) (5,772) (1,615)
--------------------------------------------------------------------------------------------------------------
Fund share transactions:
Proceeds from shares sold 36,488,616 59,206,981 26,427,775 59,657,223 42,448,750 36,506,924
--------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 11,068,528 257,662 14,074,902 3,112,243 4,595,259 2,077,050
--------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (74,315,895) (38,121,638) (66,043,393) (39,956,202) (39,846,934) (34,333,646)
--------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from Fund Share
transactions (26,758,751) 21,343,005 (25,540,716) 22,813,264 7,197,075 4,250,328
--------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS (42,604,543) 26,895,000 (41,204,818) 26,423,352 2,437,367 4,618,589
--------------------------------------------------------------------------------------------------------------
Net assets at beginning of
period 136,970,599 110,075,599 138,109,938 111,686,586 59,953,869 55,335,280
--------------------------------------------------------------------------------------------------------------
NET ASSETS AT END OF
PERIOD $ 94,366,056 136,970,599 96,905,120 138,109,938 62,391,236 59,953,869
--------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (ACCUMULATED
DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME $ 70,382 591,000 (6,436) 651,000 76,619 223,000
--------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements. 43
<PAGE> 44
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
CLASS A
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
20+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $14.01 13.48 12.89 9.72 9.50
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .08(a) .13(a) .04 .12 .18 (a)
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.57) .44 1.07 3.15 .04
----------------------------------------------------------------------------------------------------
Total from net investment income (.49) .57 1.11 3.27 .22
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.13) (.02) (.04) (.10) --
----------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.14) (.02) (.48) -- --
----------------------------------------------------------------------------------------------------
Total distributions (1.27) (.04) (.52) (.10) --
----------------------------------------------------------------------------------------------------
Net asset value, end of period $12.25 14.01 13.48 12.89 9.72
----------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (3.85) 4.21 9.04 33.90 2.32**(B)
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 42,959 63,294 49,276 25,696 8,073
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.70 1.90 2.00 1.69 1.54*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.69 1.90 2.00 1.69 1.48*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .59 .95 .49 1.08 1.51*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 72 44 130 122*
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
20+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $13.72 13.28 12.79 9.65 9.50
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03)(a) .03(a) (.03) .03 .11 (a)
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.55) .43 1.00 3.15 .04
----------------------------------------------------------------------------------------------------
Total from net investment income (.58) .46 .97 3.18 .15
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.03) -- -- (.04) --
----------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.14) (.02) (.48) -- --
----------------------------------------------------------------------------------------------------
Total distributions (1.17) (.02) (.48) (.04) --
----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.97 13.72 13.28 12.79 9.65
----------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (4.68) 3.55 7.98 33.01 1.58**(B)
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 41,347 59,209 50,253 32,159 8,431
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.54 2.61 2.79 2.47 2.32*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.54 2.61 2.79 2.47 2.26*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.25) .24 (.30) .30 .73*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 72 44 130 122*
----------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 45
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
FROM
DEC. 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON --------------------------------- TO JULY 31,
20+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $13.70 13.29 12.80 9.67 9.50
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.08)(a) (.01)(a) (.05) .04 .13 (a)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.56) .44 1.02 3.13 .04
---------------------------------------------------------------------------------------------------
Total from net investment income (.64) .43 .97 3.17 .17
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- (.04) --
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.14) (.02) (.48) -- --
---------------------------------------------------------------------------------------------------
Total distributions (1.14) (.02) (.48) (.04) --
---------------------------------------------------------------------------------------------------
Net asset value, end of year $11.92 13.70 13.29 12.80 9.67
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (5.07) 3.24 7.97 32.80 1.79**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 9,677 13,156 9,310 3,948 798
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.93 2.88 3.03 2.48 2.29*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.93 2.88 3.03 2.48 2.23*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.64) (.03) (.54) .29 .76*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 72 44 130 122*
---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
FROM
APRIL 6,
YEAR ENDED JULY 31, 1996
KEMPER HORIZON --------------------------------- TO JULY 31,
20+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $14.16 13.62 12.96 9.73 10.03
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .16(a) .27(a) .17 .19 .07
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.60) .46 1.09 3.17 (.37)
---------------------------------------------------------------------------------------------------
Total from net investment income (.44) .73 1.26 3.36 (.30)
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.28) (.17) (.12) (.13) --
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.14) (.02) (.48) -- --
---------------------------------------------------------------------------------------------------
Total distributions (1.42) (.19) (.60) (.13) --
---------------------------------------------------------------------------------------------------
Net asset value, end of year $12.30 14.16 13.62 12.96 9.73
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (3.47) 5.43 10.29 34.84 (2.99)**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 382 1,312 1,237 870 949
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.09 .84 .85 1.04 .79*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.08 .84 .85 1.04 .73*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 1.23 2.01 1.64 1.73 2.32*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 72 44 130 122*
---------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 46
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
10+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $12.79 12.49 12.01 9.60 9.50
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .26(a) .31(a) .24 .25 .20 (a)
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.36) .35 .87 2.36 (.04)
----------------------------------------------------------------------------------------------------
Total from net investment income (.10) .66 1.11 2.61 .16
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.34) (.25) (.22) (.20) (.06)
----------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.13) (.11) (.41) -- --
----------------------------------------------------------------------------------------------------
Total distributions (1.47) (.36) (.63) (.20) (.06)
----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.22 12.79 12.49 12.01 9.60
----------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (.94) 5.37 9.75 27.43 1.70**(B)
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 46,622 72,534 58,101 27,476 9,338
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.52 1.46 1.48 1.51 1.52*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.51 1.46 1.48 1.51 1.48*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.13 2.47 2.26 2.36 2.40*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 61 64 37 126 87*
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
10+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $12.78 12.48 12.00 9.60 9.50
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .15(a) .20(a) .15 .16 .17 (a)
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.36) .35 .86 2.35 (.04)
----------------------------------------------------------------------------------------------------
Total from net investment income (.21) .55 1.01 2.51 .13
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.23) (.14) (.12) (.11) (.03)
----------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.13) (.11) (.41) -- --
----------------------------------------------------------------------------------------------------
Total distributions (1.36) (.25) (.53) (.11) (.03)
----------------------------------------------------------------------------------------------------
Net asset value, end of period $11.21 12.78 12.48 12.00 9.60
----------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (1.83) 4.46 8.85 26.25 1.38**(B)
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 40,199 51,365 42,522 29,602 8,622
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.44 2.34 2.36 2.36 2.30*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.43 2.34 2.36 2.36 2.26*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 1.25 1.59 1.38 1.51 1.62*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 61 64 37 126 87*
----------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 47
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON --------------------------------- TO JULY 31,
10+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $12.73 12.44 11.98 9.60 9.50
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .13(a) .18(a) .14 .14 .17 (a)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.35) .35 .87 2.34 (.04)
---------------------------------------------------------------------------------------------------
Total from net investment income (.22) .53 1.01 2.48 .13
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.21) (.13) (.14) (.10) (.03)
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (1.13) (.11) (.41) -- --
---------------------------------------------------------------------------------------------------
Total distributions (1.34) (.24) (.55) (.10) (.03)
---------------------------------------------------------------------------------------------------
Net asset value, end of year $11.17 12.73 12.44 11.98 9.60
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (1.90) 4.29 8.83 25.97 1.39**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 9,964 14,034 10,697 5,921 850
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.59 2.50 2.39 2.61 2.27*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.59 2.50 2.39 2.61 2.23*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 1.09 1.43 1.35 1.26 1.65*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 61 64 37 126 87*
---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
FROM
YEAR ENDED JULY 31, APRIL 8, 1996
KEMPER HORIZON --------------------------------- TO JULY 31,
10+ PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $12.76 12.46 11.97 9.57 9.83
-----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .31(a) .36(a) .35 .26 .09 (a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.35) .36 .84 2.40 (.26)
-----------------------------------------------------------------------------------------------------
Total from net investment income (.04) .72 1.19 2.66 (.17)
-----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.38) (.31) (.29) (.26) (.09)
-----------------------------------------------------------------------------------------------------
Net realized gains on investment
transactions (1.13) (.11) (.41) -- --
-----------------------------------------------------------------------------------------------------
Total distributions (1.51) (.42) (.70) (.26) (.09)
-----------------------------------------------------------------------------------------------------
Net asset value, end of year $11.21 12.76 12.46 11.97 9.57
-----------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (.46) 5.86 10.47 28.09 (1.74)**(B)
-----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 121 177 367 401 102
-----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.09 1.07 .99 1.06 .77*
-----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.08 1.07 .99 1.06 .73*
-----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.56 3.10 2.75 2.81 3.21*
-----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 61 64 37 126 87*
-----------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 48
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
5 PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.31 11.26 11.06 9.57 9.50
------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .33(a) .38(a) .35 .34 .25 (a)
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.30) .17 .47 1.45 (.07)
------------------------------------------------------------------------------------------------------
Total from net investment income .03 .55 .82 1.79 .18
------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.34) (.38) (.35) (.30) (.11)
------------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (.40) (.12) (.27) -- --
------------------------------------------------------------------------------------------------------
Total distributions (.74) (.50) (.62) (.30) (.11)
------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.60 11.31 11.26 11.06 9.57
------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) .37 4.94 7.74 19.02 1.84**(B)
------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 39,098 29,714 26,449 11,832 4,411
------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.59 1.54 1.64 1.51 1.53*
------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions(%) 1.58 1.54 1.64 1.51 1.48*
------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.00 3.34 3.28 3.30 3.20*
------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 58 43 150 57
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON ---------------------------------- TO JULY 31,
5 PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.31 11.28 11.06 9.57 9.50
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .24(a) .30(a) .30 .27 .21 (a)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.29) .16 .47 1.44 (.07)
---------------------------------------------------------------------------------------------------
Total from net investment income (.05) .46 .77 1.71 .14
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.27) (.31) (.28) (.22) (.07)
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (.40) (.12) (.27) -- --
---------------------------------------------------------------------------------------------------
Total distributions (.67) (.43) (.55) (.22) (.07)
---------------------------------------------------------------------------------------------------
Net asset value, end of year $10.59 11.31 11.28 11.06 9.57
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (.49) 4.24 7.27 18.15 1.44**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 18,643 24,454 23,669 15,632 5,705
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.34 2.20 2.17 2.15 2.31*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.33 2.20 2.17 2.15 2.26*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.23 2.68 2.75 2.66 2.42*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 58 43 150 57*
---------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 49
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
FROM
DECEMBER 29,
YEAR ENDED JULY 31, 1995
KEMPER HORIZON --------------------------------- TO JULY 31,
5 PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.30 11.27 11.07 9.57 9.50
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .23(a) .28(a) .28 .28 .21 (a)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.30) .18 .47 1.43 (.07)
---------------------------------------------------------------------------------------------------
Total from net investment income (.07) .46 .75 1.71 .14
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.25) (.31) (.28) (.21) (.07)
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (.40) (.12) (.27) -- --
---------------------------------------------------------------------------------------------------
Total distributions (.65) (.43) (.55) (.21) (.07)
---------------------------------------------------------------------------------------------------
Net asset value, end of period $10.58 11.30 11.27 11.07 9.57
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (.63) 4.20 7.10 18.13 1.45**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 4,486 5,620 5,006 3,108 614
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 2.49 2.39 2.18 2.16 2.28*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 2.49 2.39 2.18 2.16 2.23*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.08 2.49 2.74 2.65 2.45*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 58 43 150 57*
---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS I
FROM
APRIL 8,
YEAR ENDED JULY 31, 1996
KEMPER HORIZON --------------------------------- TO JULY 31,
5 PORTFOLIO 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $11.31 11.28 11.06 9.58 9.69
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .35(a) .41(a) .41 .32 .08 (a)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions (.28) .18 .47 1.49 (.11)
---------------------------------------------------------------------------------------------------
Total from net investment income .07 .59 .88 1.81 (.03)
---------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.39) (.44) (.39) (.33) (.08)
---------------------------------------------------------------------------------------------------
Net realized gain on investment
transactions (.40) (.12) (.27) -- --
---------------------------------------------------------------------------------------------------
Total distributions (.79) (.56) (.66) (.33) (.08)
---------------------------------------------------------------------------------------------------
Net asset value, end of period $10.59 11.31 11.28 11.06 9.58
---------------------------------------------------------------------------------------------------
TOTAL RETURN (%) .61 5.47 8.29 19.27 (.31)**(B)
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period ($ in thousands) 164 165 211 128 101
---------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.32 1.13 1.03 1.20 .78*
---------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.32 1.13 1.03 1.20 .73*
---------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 3.26 3.75 3.89 3.61 4.11*
---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 72 58 43 150 57*
---------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect of sales change.
* Annualized.
** Not annualized.
49
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1
SIGNIFICANT
ACCOUNTING POLICIES 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
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 each Portfolio
have equal rights with respect to voting subject to
class specific arrangements.
Each Portfolio's financial statements are prepared
in accordance with accounting principles generally
accepted in the United States which require the use
of management estimates. The policies described
below are followed consistently by the Fund in the
preparation of its financial statements.
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 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.
50
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
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 TRANSLATIONS. 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
exchange 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. The Portfolios 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.
FEDERAL INCOME TAXES. Each Portfolio's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies and to distribute
all of its taxable income to its shareholders.
Accordingly, each Portfolio paid no federal income
taxes and no federal income tax provision was
required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made as follows:
annually for Kemper Horizon 20+ , semiannually for
Kemper Horizon 10+ and quarterly for 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. Certain dividends from
foreign securities may be recorded subsequent to
the ex-dividend date as
51
<PAGE> 52
NOTES TO FINANCIAL STATEMENTS
soon as the Fund is informed of such dividends.
Realized gains and losses from investment
transactions are recorded on an identified cost
basis.
--------------------------------------------------------------------------------
2
PURCHASE AND
SALES OF SECURITIES For the year ended July 31, 2000, investment
transactions (excluding short-term instruments) are
as follows:
<TABLE>
<CAPTION>
PURCHASES PROCEEDS FROM SALES
--------- -------------------
<S> <C> <C>
Kemper Horizon 20+ $82,439,502 $119,322,758
Kemper Horizon 10+ 72,641,883 109,011,225
Kemper Horizon 5 51,880,514 48,561,321
</TABLE>
--------------------------------------------------------------------------------
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% for 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, 2000 are as
follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE EFFECTIVE RATE
-------------- --------------
<S> <C> <C>
Kemper Horizon 20+ Portfolio $681,127 58%
Kemper Horizon 10+ Portfolio 707,252 58%
Kemper Horizon 5 Portfolio 408,320 58%
</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 the distribution
of each Portfolio's Class A shares for the year
ended July 31, 2000 are as follows:
<TABLE>
<CAPTION>
COMMISSIONS
RETAINED BY KDI
---------------
<S> <C>
Kemper Horizon 20+ $8,432
Kemper Horizon 10+ 7,628
Kemper Horizon 5 1,375
</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, 2000 are as follows:
<TABLE>
<CAPTION>
DISTRIBUTIONS FEES AND UNPAID AT
CDSC RECEIVED BY KDI JULY 31, 2000
---------------------- -------------
<S> <C> <C>
Kemper Horizon 20+ $694,153 $27,938
Kemper Horizon 10+ 589,312 68,122
Kemper Horizon 5 285,605 32,372
</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
52
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS
service. Administrative services fees (ASF) paid
for the year ended July 31, 2000 are as follows:
<TABLE>
<CAPTION>
ASF PAID BY
THE PORTFOLIOS UNPAID AT
TO KDI JULY 31, 2000
-------------- -------------
<S> <C> <C>
Kemper Horizon 20+ $280,583 $ 6,184
Kemper Horizon 10+ 291,009 85,296
Kemper Horizon 5 166,964 5,680
</TABLE>
SHAREHOLDER SERVICES AGREEMENT. Pursuant to a
Services Agreement with the Portfolios' transfer
agent, Kemper Service Company (KSvC) is the
shareholder service agent of each Portfolio. Under
the agreement, KSvC received shareholder services
fees as follows for the year ended July 31, 2000:
<TABLE>
<CAPTION>
FEES PAID BY
THE PORTFOLIOS UNPAID AT
TO KSVC JULY 31, 2000
-------------- -------------
<S> <C> <C>
Kemper Horizon 20+ $613,906 $137,500
Kemper Horizon 10+ 435,626 92,033
Kemper Horizon 5 264,595 53,657
</TABLE>
OFFICERS AND TRUSTEES. Certain officers or trustees
of the Portfolios are also officers or directors of
Scudder Kemper. During the year ended July 31,
2000, the Fund made no payments to its officers and
incurred trustees' fees of $49,475 to independent
trustees.
--------------------------------------------------------------------------------
4
CAPITAL SHARE
TRANSACTIONS The following tables summarize the activity in
capital shares of each Portfolio:
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 2000 YEAR ENDED JULY 31, 1999
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,445,918 $ 19,120,555 2,111,088 $ 27,982,001
------------------------------------------------------------------------------
Class B 906,715 11,672,277 1,684,762 21,882,000
------------------------------------------------------------------------------
Class C 339,571 4,385,920 622,646 8,127,981
------------------------------------------------------------------------------
Class I 12,028 163,184 49,274 665,999
------------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 428,692 5,465,820 10,873 143,808
------------------------------------------------------------------------------
Class B 361,509 4,529,711 6,366 82,999
------------------------------------------------------------------------------
Class C 78,475 982,505 1,287 16,999
------------------------------------------------------------------------------
Class I 7,081 90,492 1,041 13,856
------------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,973,737) (38,702,549) (1,301,872) (17,386,043)
------------------------------------------------------------------------------
Class B (2,036,727) (26,093,581) (1,117,897) (14,744,980)
------------------------------------------------------------------------------
Class C (567,049) (7,291,040) (362,964) (4,813,904)
------------------------------------------------------------------------------
Class I (80,740) (1,082,045) (48,385) (627,711)
------------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 88,248 $ 1,146,680 42,000 549,000
------------------------------------------------------------------------------
Class B (89,930) (1,146,680) (42,000) (549,000)
------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $(26,758,751) $ 21,343,005
------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 2000 YEAR ENDED JULY 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 1,193,942 $ 14,355,592 2,362,014 $ 29,026,233
-----------------------------------------------------------------------------
Class B 693,778 8,364,390 1,808,670 22,330,212
-----------------------------------------------------------------------------
Class C 254,733 3,081,857 516,658 6,352,199
-----------------------------------------------------------------------------
Class I 2,012 23,897 2,306 29,139
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 661,220 7,634,399 152,372 1,904,521
-----------------------------------------------------------------------------
Class B 437,593 5,052,329 77,459 967,216
-----------------------------------------------------------------------------
Class C 119,005 1,369,520 18,913 235,316
-----------------------------------------------------------------------------
Class I 1,621 18,654 415 5,190
-----------------------------------------------------------------------------
SHARES REDEEMED
Class A (3,422,158) (40,404,718) (1,650,630) (20,380,374)
-----------------------------------------------------------------------------
Class B (1,516,575) (18,058,530) (1,118,561) (13,815,449)
-----------------------------------------------------------------------------
Class C (583,606) (6,898,732) (293,156) (3,622,685)
-----------------------------------------------------------------------------
Class I (6,716) (79,374) (18,325) (218,601)
-----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 49,720 602,039 156,116 1,919,093
-----------------------------------------------------------------------------
Class B (49,824) (602,039) (156,383) (1,919,093)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $(25,540,716) $ 22,812,917
-----------------------------------------------------------------------------
</TABLE>
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 2000 YEAR ENDED JULY 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
SHARES SOLD
Class A 2,950,704 $ 38,267,043 1,796,248 $ 20,111,128
-----------------------------------------------------------------------------
Class B 273,134 3,012,223 1,165,296 12,908,923
-----------------------------------------------------------------------------
Class C 97,246 1,069,770 247,711 2,751,051
-----------------------------------------------------------------------------
Class I 5,007 53,931 1,752 19,822
-----------------------------------------------------------------------------
SHARES ISSUED IN REINVESTMENT OF DIVIDENDS
Class A 273,679 2,965,108 88,347 981,698
-----------------------------------------------------------------------------
Class B 121,624 1,317,362 78,637 871,320
-----------------------------------------------------------------------------
Class C 27,816 300,989 19,471 215,740
-----------------------------------------------------------------------------
Class I 1,090 11,800 750 8,292
-----------------------------------------------------------------------------
SHARES REDEEMED
Class A (2,658,558) (28,947,404) (1,671,440) (18,685,905)
-----------------------------------------------------------------------------
Class B (301,804) (8,627,009) (1,117,396) (12,454,868)
-----------------------------------------------------------------------------
Class C (198,440) (2,170,690) (214,067) (2,403,281)
-----------------------------------------------------------------------------
Class I (5,178) (56,048) (6,668) (73,592)
-----------------------------------------------------------------------------
CONVERSION OF SHARES
Class A 494,816 45,783 65,000 716,000
-----------------------------------------------------------------------------
Class B (494,816) (45,783) (65,000) (716,000)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $ 7,197,075 $ 4,250,328
-----------------------------------------------------------------------------
</TABLE>
54
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
5
EXPENSE OFF-SET
ARRANGEMENTS Each Portfolio has entered into arrangements with
its custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the Portfolio's
expenses. During the period, the Portfolio's
custodian and transfer agent fees were reduced by:
<TABLE>
<CAPTION>
CUSTODIAN TRANSFER AGENT
--------- --------------
<S> <C> <C>
Kemper Horizon 20+ $7,604 $441
Kemper Horizon 10+ 7,935 175
Kemper Horizon 5 4,920 167
</TABLE>
--------------------------------------------------------------------------------
6
LINE OF CREDIT Each Portfolio and several Kemper funds (the
"Participants") share in a $750 million revolving
credit facility with Chase Manhattan Bank for
temporary or emergency purposes, including the
meeting of redemption requests that otherwise might
require the untimely disposition of securities. The
Participants are charged an annual commitment fee
which is allocated, pro rata based upon net assets,
among each of the Participants. Interest is
calculated based on the market rates at the time of
borrowing. Each Portfolio may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
55
<PAGE> 56
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
KEMPER HORIZON FUND
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Kemper Horizon 20+ Portfolio, Kemper
Horizon 10+ Portfolio and Kemper Horizon 5 Portfolio, comprising Kemper Horizon
Fund (the Funds) as of July 31, 2000, and the related statements of operations
for the year then ended, and 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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, 2000, 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, 2000, the results
of their operations for the year then ended, the changes in their 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 in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
September 15, 2000
56
<PAGE> 57
TAX INFORMATION
TAX INFORMATION (UNAUDITED)
Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5 Portfolio paid distributions
of $1.01, $0.67 and $0.30 per share, respectively, from net long-term capital
gains during the year ended July 31, 2000, of which 100%, 100% and 100%
represents 20% rate gains, respectively.
Pursuant to Section 852 of the Internal Revenue Code, Kemper Horizon 20+
Portfolio, 10+ Portfolio and 5 Portfolio designate $5,290,000, $517,000 and
$1,038,000, respectively, as capital gain dividends for the year ended July 31,
2000, of which 100%, 100% and 100% represents 20% rate gains, respectively.
For corporate shareholders Kemper Horizon 20+ Portfolio, 10+ Portfolio and 5
Portfolio 45%, 14% and 8%, respectively, of the income dividends paid during the
Fund's fiscal year ended July 31, 2000 qualified for the dividends received
deduction.
Please contact a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your account, please call 1-800-Scudder.
57
<PAGE> 58
NOTES
58
<PAGE> 59
NOTES
59
<PAGE> 60
TRUSTEES&OFFICERS
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY LINDA J. WONDRACK
Trustee President Vice President
JAMES R. EDGAR PHILIP J. COLLORA MAUREEN E. KANE
Trustee Vice President and Assistant Secretary
Secretary
ARTHUR R. GOTTSCHALK CAROLINE PEARSON
Trustee JOHN R. HEBBLE Assistant Secretary
Treasurer
FREDERICK T. KELSEY BRENDA LYONS
Trustee ANN M. MCCREARY Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Chairman, Trustee and KATHRYN L. QUIRK
Vice President Vice President
FRED B. RENWICK WILLIAM F. TRUSCOTT
Trustee Vice President
JOHN G. WEITHERS ROBERT TYMOCZKO
Trustee Vice President
</TABLE>
<TABLE>
<S> <C>
.............................................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
.............................................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 219557
Kansas City, MO 64121
.............................................................................................
TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA 02110
.............................................................................................
CUSTODIAN THE CHASE MANHATTAN BANK
Chase MetroTech Center
Brooklyn, NY 11245
.............................................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
.............................................................................................
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza Chicago, IL 60606
www.kemper.com
</TABLE>
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 (9/25/00) 1120230
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
