<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1995.
1933 ACT REGISTRATION NO.
1940 ACT REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(Check appropriate box or boxes)
------------------
KEMPER HORIZON FUND
(Exact name of Registrant as Specified in Charter)
120 South LaSalle Street, Chicago, Illinois 60603
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
<TABLE>
<S> <C>
Philip J. Collora, With a copy to:
Vice President and Secretary
Kemper Horizon Fund Charles F. Custer
120 South LaSalle Street Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60603 222 North LaSalle Street
(Name and Address of Agent for Service) Chicago, Illinois 60601
</TABLE>
Approximate Date of Proposed Offering: As soon as practicable after the
effective date of this Registration Statement.
Pursuant to Reg. sec.270.24f-2 under the Investment Company Act of 1940,
Registrant hereby declares that an indefinite number or amount of shares are
being registered under the Securities Act of 1933. A registration filing fee of
$500 is being paid with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
KEMPER HORIZON FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------- -----------------------
<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis................................ Summary; Summary of Expenses; Supplement to
Prospectus
3. Condensed Financial Information......... Performance
4. General Description of Registrant....... Summary; Investment Objectives, Policies and
Risk Factors; Capital Structure
5. Management of the Fund.................. Summary; Investment Manager and Underwriter
5A. Management's Discussion of Financial
Performance............................. Inapplicable
6. Capital Stock and Other Securities...... Summary; Dividends and Taxes; Purchase of
Shares; Capital Structure
7. Purchase of Securities Being Offered.... Summary; Investment Manager and Underwriter;
Net Asset Value; Purchase of Shares; Special
Features; Supplement to Prospectus
8. Redemption or Repurchase................ Summary; Redemption or Repurchase of Shares
9. Pending Legal Proceedings............... Inapplicable
</TABLE>
<PAGE> 3
KEMPER HORIZON FUND
SUPPLEMENT TO PROSPECTUS
DATED __________, 1995
CLASS I SHARES
PORTFOLIOS
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
The Kemper Horizon Fund consists of three investment portfolios, Kemper Horizon
20+ Portfolio ("Horizon 20+ Portfolio"), Kemper Horizon 10+ Portfolio ("Horizon
10+ Portfolio") and Kemper Horizon 5 Portfolio ("Horizon 5 Portfolio")
(collectively the "Portfolios"), each currently offering four classes of shares
to provide investors with different purchasing options. These are Class A,
Class B and Class C shares, which are described in the prospectus, and Class I
shares, which are described in the prospectus as supplemented hereby.
Class I shares are available for purchase exclusively by the following
investors: (a) tax-exempt retirement plans of Kemper Financial Services, Inc.
("KFS") and its affiliates; and (b) the following investment advisory clients
of KFS and its investment advisory affiliates (including Kemper Asset
Management Company ("KAMCO") and Dreman Value Advisors, Inc. ("DVA")) that
invest at least $1 million in a Portfolio: (1) unaffiliated benefit plans, such
as qualified retirement plans (other than individual retirement accounts and
self-directed retirement plans); (2) unaffiliated banks and insurance companies
purchasing for their own accounts; and (3) endowment funds of unaffiliated
non-profit organizations. Class I shares currently are available for purchase
only from Kemper Distributors, Inc., principal underwriter for the Portfolios.
Share certificates are not available for Class I shares.
The primary distinctions among the classes of shares lie in their initial and
contingent deferred sales charge schedules and in their ongoing expenses,
including asset-based sales charges in the form of Rule 12b-1 distribution
fees. Class I shares are offered at net asset value without an initial sales
charge and are not subject to a contingent deferred sales charge or a Rule
12b-1 distribution fee. Also, there is no administrative services fee charged
to Class I shares. As a result of the relatively lower expenses for Class I
shares, the level of income dividends per share (as a percentage of net asset
value) and, therefore, the overall investment return, will be higher for Class
I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES (APPLICABLE TO ALL PORTFOLIOS)
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price) . . . . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Charge on Reinvested Dividends . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Charge (as a percentage of redemption proceeds) . . . . . . . . . . . . None
</TABLE>
<PAGE> 4
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Management Fees .58% .58% .58%
12b-1 Fees None None None
Other Expenses
(after expense
reimbursement) .15% .15% .15%
Total Operating
Expenses .73% .73% .73%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE PORTFOLIO 1 YEAR 3 YEARS
------- --------- ------ -------
<S> <C> <C> <C>
Horizon 20+ $ 7 $ 23
You would pay the following
expenses on a $1,000
investment, assuming (1) 5% Horizon 10+ $ 7 $ 23
annual return and
(2) redemption at the end of
each time period Horizon 5 $ 7 $ 23
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in Class I shares of a Portfolio
will bear directly or indirectly.
The Kemper Horizon Fund commenced the public offering of its shares on
__________, 1995; thus, expenses shown above are estimates.
KFS has agreed to temporarily reduce its management fee and reimburse or pay
certain operating expenses as described in the prospectus.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Portfolio of
the Fund. THE EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
SPECIAL FEATURES
Shareholders of a Portfolio's Class I shares may exchange their shares for (i)
shares of Kemper Money Market Fund - Money Market Portfolio if the shareholders
of Class I shares have purchased shares because they are participants in
tax-exempt retirement plans of KFS and its affiliates and (ii) Class I shares
of any other "Kemper Mutual Fund" listed under "Special Features - Class A
Shares - Combined Purchases" in the prospectus. Conversely, shareholders of
Kemper Money Market Fund - Money Market Portfolio who have purchased shares
because they are participants in tax-exempt retirement plans of KFS and its
affiliates may exchange their shares for Class I shares of "Kemper Mutual
Funds" to the extent that they are available through their plan. Exchanges
will be made at the relative net
<PAGE> 5
asset values of the shares. Exchanges are subject to the limitations
set forth in the prospectus under "Special Features - Exchange Privilege -
General."
__________, 1995
KHF-1I (__/95)
<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------
<S> <C>
Summary 1
- -------------------------------------------------
Summary of Expenses 3
- -------------------------------------------------
Investment Objectives, Policies and Risk 4
Factors
- -------------------------------------------------
Investment Manager and Underwriter 15
- -------------------------------------------------
Dividends and Taxes 19
- -------------------------------------------------
Net Asset Value 20
- -------------------------------------------------
Purchase of Shares 21
- -------------------------------------------------
Redemption or Repurchase of Shares 25
- -------------------------------------------------
Special Features 29
- -------------------------------------------------
Performance 33
- -------------------------------------------------
Capital Structure 34
- -------------------------------------------------
</TABLE>
This prospectus contains information about the Fund that you should know before
investing and should be retained for future reference. A Statement of Additional
Information dated , 1995, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available
upon request without charge from the Fund at the address or telephone number on
this cover or the firm from which this prospectus was obtained.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN THE
FUND'S SHARES INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[KEMPER LOGO]
KEMPER
HORIZON
FUND
PROSPECTUS , 1995
KEMPER HORIZON FUND
120 South LaSalle Street, Chicago, Illinois 60603 1-800-621-1048
Kemper Horizon Fund (the "Fund") offers a choice of three investment portfolios.
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
<PAGE> 7
KEMPER HORIZON FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-621-1048
SUMMARY
INVESTMENT OBJECTIVES. The Kemper Horizon Fund (the "Fund") is an open-end,
diversified management investment company. The Fund consists of three investment
portfolios ("Portfolios"), designed for investors with different investment
horizons. The three Portfolios are as follows:
KEMPER HORIZON 20+ PORTFOLIO ("Horizon 20+ Portfolio"). The Horizon 20+
Portfolio seeks growth of capital, with income as a secondary objective. Under
normal conditions, the Horizon 20+ Portfolio expects to maintain an asset
allocation of approximately 80% equity securities and 20% fixed income
securities.
KEMPER HORIZON 10+ PORTFOLIO ("Horizon 10+ Portfolio"). The Horizon 10+
Portfolio seeks a balance between growth of capital and income, consistent with
moderate risk. Under normal conditions, the Horizon 10+ Portfolio expects to
maintain an asset allocation of approximately 60% equity securities and 40%
fixed income securities.
KEMPER HORIZON 5 PORTFOLIO ("Horizon 5 Portfolio"). The Horizon 5 Portfolio
seeks income consistent with preservation of capital, with growth of capital as
a secondary objective. Under normal conditions, the Horizon 5 Portfolio expects
to maintain an asset allocation of approximately 40% equity securities and 60%
fixed income securities.
The Portfolios may purchase and write put and call options, engage in financial
futures transactions, invest in other derivatives, invest in foreign securities,
engage in related foreign currency transactions, lend portfolio securities and
engage in delayed delivery transactions. See "Investment Objectives, Policies
and Risk Factors."
RISK FACTORS. There is no assurance that the investment objective of any
Portfolio will be achieved and investment in each Portfolio includes risks that
vary in kind and degree depending upon the investment objective and policies of
that Portfolio. The returns and net asset value of each Portfolio will
fluctuate. Foreign investments by the Portfolios involve risk and opportunity
considerations not typically associated with investing in U.S. companies. The
U.S. Dollar value of a foreign security tends to decrease when the value of the
U.S. Dollar rises against the foreign currency in which the security is
denominated and tends to increase when the value of the U.S. Dollar falls
against such currency. Thus, the U.S. Dollar value of foreign securities in a
Portfolio, and the Portfolio's net asset value, may change in response to
changes in currency exchange rates even though the value of the foreign
securities in local currency terms may not have changed. While a Portfolio's
investments in foreign securities will principally be in developed countries,
the Portfolio may invest a portion of its assets in developing or "emerging"
markets, which involve exposure to economic structures that are generally less
diverse and mature than in the United States, and to political systems that may
be less stable. A limited portion of the assets of each Portfolio may be
invested in lower rated or unrated high yield bonds, which entail greater risk
of loss of principal and interest than higher rated fixed income securities.
There are special risks associated with options, financial futures and foreign
currency transactions and other derivatives and there is no assurance that use
of those investment techniques will be successful. See "Investment Objectives,
Policies and Risk Factors."
1
<PAGE> 8
PURCHASES AND REDEMPTIONS. The Fund provides investors with the option of
purchasing shares in the following ways:
<TABLE>
<S> <C>
Class A Shares..................... Offered at net asset value plus a maximum sales charge of
5.75% of the offering price. Reduced sales charges apply to
purchases of $50,000 or more. The redemption within one year
of Class A shares purchased at net asset value under the Large
Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge.
Class B Shares..................... Offered at net asset value, subject to a Rule 12b-1
distribution fee and a contingent deferred sales charge that
declines from 4% to zero on certain redemptions made within
six years of purchase. Class B shares automatically convert
into Class A shares (which have lower ongoing expenses) six
years after purchase.
Class C Shares..................... Offered at net asset value without an initial or contingent
deferred sales charge, but subject to a Rule 12b-1
distribution fee. Class C shares do not convert into another
class.
</TABLE>
Shares of all classes of a Portfolio represent interests in the same pool of
investments. The minimum initial investment is $1,000 and investments thereafter
must be at least $100. Shares are redeemable at net asset value, which may be
more or less than original cost, subject, in the case of Class A shares
purchased under the Large Order NAV Purchase Privilege and for Class B shares,
to any applicable contingent deferred sales charge. See "Purchase of Shares" and
"Redemption or Repurchase of Shares."
INVESTMENT MANAGER AND UNDERWRITER. Kemper Financial Services, Inc. ("KFS")
serves as investment manager for the Fund. KFS is paid an investment management
fee by each Portfolio based upon average daily net assets of that Portfolio at
an annual rate ranging from .58% to .42%. Dreman Value Advisors, Inc. ("DVA"), a
wholly-owned subsidiary of KFS, is the sub-adviser for the Fund. KFS pays DVA a
fee at the annual rate of .25% of the portion of the average daily net assets of
each Portfolio allocated by KFS to DVA for management. Kemper Distributors, Inc.
("KDI"), a wholly owned subsidiary of KFS, is principal underwriter and
administrator for the Fund. For Class B shares and Class C shares, KDI receives
a Rule 12b-1 distribution fee at the annual rate of .75% of average daily net
assets. KDI also receives the amount of any contingent deferred sales charges
paid on the redemption of shares. Administrative services are provided to
shareholders under an administrative services agreement with KDI for which KDI
receives an administrative services fee at the annual rate of up to .25% of
average daily net assets of each class of each Portfolio, which KDI, in turn,
pays to financial services firms. See "Investment Manager and Underwriter."
DIVIDENDS. Each Portfolio normally distributes dividends of net investment
income as follows: annually for the Horizon 20+ Portfolio; semi-annually for
Horizon 10+ Portfolio; and quarterly for the Horizon 5 Portfolio. Each Portfolio
distributes any net realized short-term and long-term capital gains at least
annually. Income and capital gain dividends of a Portfolio are automatically
reinvested in additional shares of that Portfolio, without a sales charge,
unless the shareholder makes a different election. See "Dividends and Taxes."
2
<PAGE> 9
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
(APPLICABLE TO ALL PORTFOLIOS)(1) CLASS A CLASS B CLASS C
------- -------------------- -------
<S> <C> <C> <C>
Maximum Sales Charge on Purchases
(as a percentage of offering price)........................ 5.75%(2) None None
Maximum Sales Charge on Reinvested Dividends............... None None None
Redemption Fees............................................ None None None
Exchange Fee............................................... None None None
Deferred Sales Charge (as a percentage of redemption None(3) 4% during the first None
proceeds)................................................ year, 3% during the
second and third
years, 2% during the
fourth and fifth
years and 1% in the
sixth year
</TABLE>
- ---------------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details.
(2) Reduced sales charges apply to purchases of $50,000 or more. See "Purchase
of Shares--Initial Sales Charge Alternative--Class A Shares."
(3) The redemption within one year of shares purchased at net asset value under
the Large Order NAV Purchase Privilege may be subject to a 1% contingent
deferred sales charge. See "Purchase of Shares--Initial Sales Charge
Alternative--Class A Shares."
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
HORIZON HORIZON
CLASS A SHARES 20+ 10+
-------------- ----------- ---------
<S> <C> <C> <C>
Management Fees................................................. .58% .58% .58%
12b-1 Fees...................................................... None None None
Other Expenses.................................................. .90% .90% .90%
----- ----- -----
Total Operating Expenses........................................ 1.48% 1.48% 1.48%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
HORIZON HORIZON
CLASS B SHARES 20+ 10+
-------------- ----------- ---------
<S> <C> <C> <C>
Management Fees................................................. .58% .58% .58%
12b-1 Fees(4)................................................... .75% .75% .75%
Other Expenses.................................................. .93% .93% .93%
----- ----- -----
Total Operating Expenses........................................ 2.26% 2.26% 2.26%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
HORIZON HORIZON
CLASS C SHARES 20+ 10+
-------------- ----------- ---------
<S> <C> <C> <C>
Management Fees................................................. .58% .58% .58%
12b-1 Fees(5)................................................... .75% .75% .75%
Other Expenses.................................................. .90% .90% .90%
----- ----- -----
Total Operating Expenses........................................ 2.23% 2.23% 2.23%
===== ===== =====
</TABLE>
- ---------------
(4) Long-term shareholders may pay more than the economic equivalent of the
maximum initial sales charges permitted by the National Association of
Securities Dealers, although KDI believes that it is unlikely because of the
automatic conversion feature described under "Purchase of Shares--Deferred
Sales Charge Alternative--Class B Shares."
(5) As a result of the accrual of 12b-1 fees, long-term shareholders may pay
more than the economic equivalent of the maximum initial sales charges
permitted by the National Association of Securities Dealers.
3
<PAGE> 10
EXAMPLE
<TABLE>
<CAPTION>
CLASS A SHARES PORTFOLIO 1 YEAR 3 YEARS
------ -------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming Horizon 20+ $72 $102
(1) 5% annual return and (2) redemption at the end of each time Horizon 10+ $72 $102
period: Horizon 5 $72 $102
CLASS B SHARES(6)
You would pay the following expenses on a $1,000 investment, assuming Horizon 20+ $53 $ 91
5% annual return and (2) redemption at the end of each time period: Horizon 10+ $53 $ 91
Horizon 5 $53 $ 91
You would pay the following expenses on the same investment, assuming Horizon 20+ $23 $ 71
no redemption: Horizon 10+ $23 $ 71
Horizon 5 $23 $ 71
CLASS C SHARES
You would pay the following expenses on a $1,000 investment, assuming Horizon 20+ $23 $ 70
(1) 5% annual return and (2) redemption at the end of each time Horizon 10+ $23 $ 70
period: Horizon 5 $23 $ 70
</TABLE>
- ---------------
(6) Calculated based upon the assumption that the shareholder was an owner of
the shares on the first day of the first year and the contingent deferred
sales charge was applied as follows: 1 year (3%) and 3 years (2%). See
"Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
B Shares" for more information regarding the calculation of the contingent
deferred sales charge.
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See "Investment Manager and Underwriter" for more information.
The Fund commenced the public offering of its shares on , 1995,
thus the expenses shown above are estimates for the current fiscal year. KFS has
agreed to temporarily reduce its management fee and reimburse or pay certain
operating expenses to the extent necessary to limit each Portfolio's "Total
Operating Expenses" to the levels indicated in the tables above.
The Example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance of any Portfolio.
The Example should not be considered to be a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Kemper Horizon Fund (the "Fund") consists of three investment portfolios
("Portfolios"), designed for investors with different investment horizons.
Investors are encouraged to choose the appropriate Portfolio based upon their
evaluation of their individual circumstances, including the anticipated timing
of major investment goals, such as sending a child to college, retirement or
purchasing a home, as well as their individual risk tolerance and investment
objective. As investors' horizons change, or as their investment goals change,
they are encouraged to re-evaluate their Portfolio choices to determine whether
they should move all or a portion of their investment to a different Portfolio
with a more appropriate objective and asset mix. The investment horizon of each
Portfolio should not be the sole factor in considering a Portfolio. Investors
should also review the investment objectives and policies of each Portfolio.
- - The Horizon 20+ Portfolio is designed for investors with approximately a 20+
year investment horizon.
- - The Horizon 10+ Portfolio is designed for investors with approximately a 10+
year investment horizon.
- - The Horizon 5 Portfolio is designed for investors with approximately a 5 year
investment horizon.
4
<PAGE> 11
Through professional management and diversification, each Portfolio seeks to
control risk for its given time horizon. Each Portfolio's investment objectives
and investment policies are described below.
HORIZON 20+ PORTFOLIO. The Horizon 20+ Portfolio seeks growth of capital, with
income as a secondary objective. Under normal conditions, the Horizon 20+
Portfolio expects to maintain an asset allocation of approximately 80% equity
securities and 20% fixed income securities.
HORIZON 10+ PORTFOLIO. The Horizon 10+ Portfolio seeks a balance between growth
of capital and income, consistent with moderate risk. Under normal conditions,
the Horizon 10+ Portfolio expects to maintain an asset allocation of
approximately 60% equity securities and 40% fixed income securities.
HORIZON 5 PORTFOLIO. The Horizon 5 Portfolio seeks income consistent with
preservation of capital, with growth of capital as a secondary objective. Under
normal conditions, the Horizon 5 Portfolio expects to maintain an asset
allocation of approximately 40% equity securities and 60% fixed income
securities.
<TABLE>
<CAPTION>
HORIZON 20+ HORIZON 10+ HORIZON 5
TARGET ALLOCATION TARGET ALLOCATION TARGET ALLOCATION
----------------- ----------------- -----------------
<S> <C> <C> <C>
Equities............................................. 80% 60% 40%
Fixed Income......................................... 20% 40% 60%
</TABLE>
Although each Portfolio has a target asset allocation of equity and fixed income
securities, the Fund's investment manager may adjust each Portfolio's asset mix
somewhat based upon cash flow, market conditions and an evaluation of the
anticipated returns and risk for various asset classes. For example, if equities
are considered to have greater appreciation potential relative to fixed income
securities during a given period, a Portfolio's percentage weighting of equities
may be increased. Allocating assets permits the Fund's investment manager to
seek optimum performance for each Portfolio consistent with its investment
objective and investment horizon. Allocation decisions are normally based upon
long-term considerations and it is expected that, over the long-term, the target
allocation percentages will be closely approximated.
When the investment manager determines that adverse market or economic
conditions exist and considers a temporary defensive position advisable, each
Portfolio may invest without limitation in high-grade debt securities,
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and high quality money market instruments, including
repurchase agreements, or retain cash or cash equivalents. Each Portfolio may
also purchase and write options, engage in financial futures transactions,
engage in foreign currency transactions, lend its portfolio securities and
engage in delayed delivery transactions.
The Portfolios do not generally make investments for short-term profits nor do
they have separate portfolio turnover policies for the equity and fixed income
asset classes. The Portfolios are not restricted in policy with regard to
portfolio turnover and will make changes in their investments from time to time
as business and economic conditions or market prices may dictate and as their
investment objectives and policies may require.
EQUITIES. Each Portfolio's investment in equity securities will be comprised
primarily of common stocks of U.S. and foreign (or "international") companies,
but may also include preferred stocks, securities convertible into and
exchangeable for common or preferred stocks, equity investments in partnerships,
joint ventures and other forms of noncorporate investments and warrants and
rights exercisable for equity securities. Investments will primarily include
stocks of large, established companies, but may also include stocks of smaller
companies. Each Portfolio's equity securities will be divided between U.S. and
international as described below. The U.S. equity portion of the Portfolio is
divided further into two parts, one invested in growth stocks and one invested
in value stocks. As with the overall asset allocation, the Fund's investment
manager may, from time to time, adjust the equity asset class of each Portfolio.
It is expected, however, that adjustments to the mix of the equity asset class
will be more dynamic than adjustments to the overall mix.
5
<PAGE> 12
U.S./INTERNATIONAL. The target mix between U.S. equities and international
equities seeks the optimum balance of risk reduction and return enhancement
available from international investing. This allows investors in each Portfolio
the opportunity to invest a portion of their assets in a diversified portfolio
of foreign securities. Under normal conditions, each Portfolio's equity
securities will consist of approximately 70% U.S. and 30% international. In the
case of the international equity exposure, allocations may range from 20% to
40%, although the investment manager may decrease the Portfolios' exposure to
zero if investments in foreign securities appear to be relatively unattractive
in the judgment of the investment manager because of current or anticipated
adverse political or economic conditions.
Foreign securities can be attractive because they increase diversification, as
compared to a portfolio comprised solely of U.S. securities. In addition, many
foreign economies have, from time to time, grown faster than the U.S. economy,
and the returns on investments in these countries have exceeded those of similar
U.S. investments, although there can be no assurance that these conditions will
continue. International diversification allows an investor to achieve greater
portfolio diversification and to take advantage of changes in foreign economies
and market conditions. Although international investing entails special risks,
the mixture of U.S. and international stocks is designed to reduce risk, while
also increasing potential return, relative to investing in U.S. or international
stocks alone. There is no assurance, however, that any specific allocation will
reduce risk or increase returns. See "Special Risk Factors--Foreign Securities"
below.
U.S. GROWTH/U.S. VALUE. The allocation between U.S. growth stocks and U.S. value
stocks seeks to reduce the risk, over a full market cycle, of holding growth
stocks or value stocks alone.
Growth stocks are stocks of companies whose earnings per share are expected by
the investment manager to grow faster than the market average. Growth stocks
tend to trade at higher price to earnings (P/E) ratios than the general market,
but the investment manager believes that the potential of such stocks for above
average earnings more than justifies their price. Value stocks are considered
"bargain stocks" because they are perceived as undervalued, i.e., attractively
priced in relation to their earnings potential (low P/E ratios). Value stocks
typically have dividend yields higher than the average of the companies
represented in the Standard & Poor's 500 Stock Index.
The allocation between growth and value stocks will be made by the investment
manager with the assistance of its Quantitative Research Department, which has a
proprietary model that evaluates macro-economic factors such as the strength of
the economy, interest rates and special factors concerning growth and value
stocks. Historically, the performance of growth and value stocks has tended to
be counter-cyclical, i.e., when one was in favor, the other was out of favor
relative to the equity market in general. Through the allocation process, the
investment manager will seek to weight the portfolio more heavily in the type of
stocks that are believed to present greater total return opportunities at the
time. The neutral allocation between growth and value stocks would be 50%/50%.
Although allocations in favor of growth or value normally would not be expected
to exceed 60%, the allocation to growth or value may be up to 75% at any time.
Allocation decisions are normally based upon long-term considerations and
changes would normally be expected to be gradual. There is no assurance that the
allocation process will improve investment results.
KFS manages the growth portion of the Fund. In managing the growth portion of
the portfolio, KFS emphasizes stock selection and fundamental research in
seeking to enhance long-term performance potential. KFS considers a number of
quantitative and qualitative factors in considering whether to invest in a stock
including high return on equity and earnings growth rate, low level of debt,
strong balance sheet, good management and industry leadership. DVA manages the
value portion of the Fund. DVA seeks stocks it believes to be undervalued. The
principal factor considered is P/E ratios. In selecting among stocks with low
P/E ratios, DVA considers other factors such as financial strength, book to
market value, earnings and dividend growth rates, return on equity and earnings
estimates.
FIXED INCOME. The fixed income portion of each Portfolio may be invested in a
broad variety of fixed income securities including, without limitation: (a)
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities; (b) bonds, debentures, convertible debt instruments,
assignments or participation in loans, notes, commercial paper, and other debt
securities of corporations, trusts and other entities; (c) certificates of
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deposit, bankers' acceptances and time deposits and (d) cash and cash
equivalents, including repurchase agreements. The fixed income portion of each
Portfolio will be comprised of U.S. Dollar denominated instruments.
Each portfolio attempts to limit its exposure to credit risk by imposing limits
on the quality of specific securities in the Portfolio and by maintaining a
relatively high average weighted credit quality. Credit quality refers to a
fixed income security issuer's expected ability to make all required interest
and principal payments in a timely manner. Higher rated fixed income securities
generally represent less risk than lower or non-rated securities. Ratings
published by nationally recognized rating agencies such as Standard & Poor's
("S&P") and Moody's Investors Service, Inc. ("Moody's") are widely accepted
measures of credit risk. The fixed income portion of each Portfolio will be
invested in securities that are rated at the time of purchase within the four
highest grades assigned by Moody's, S&P, Fitch Investors Service, Inc. ("Fitch")
or Duff & Phelps Credit Rating Co. ("Duff") or any other Nationally Recognized
Statistical Rating Organization ("NRSRO") as designated by the Securities and
Exchange Commission, or will be of comparable quality as determined by the
Fund's investment manager, provided that up to 10% of the fixed income portion
of each Portfolio may be invested in securities that are lower rated ("junk
bonds"). The top four ratings currently assigned by these organizations are as
follows: Moody's (Aaa, Aa, A or Baa), S&P (AAA, AA, A or BBB), Fitch (AAA, AA, A
or BBB) and Duff (AAA, AA, A or BBB). In addition, under normal conditions, each
Portfolio expects to maintain a relatively high average weighted credit quality
(i.e., within the top two rating categories of an NRSRO or comparable as
determined by the investment manager). Average weighted credit quality is not a
precise measure of the credit risk presented by a Portfolio of fixed income
securities. For instance, a combination of securities that are rated AAA and
securities that are rated BB that together result in an average weighted credit
quality of AA may present more risk than a group of just AA rated securities.
After a Portfolio purchases a security, its quality level may fall below the
minimum required for purchase by that Portfolio. In such instance, the Portfolio
would not be required to sell the security, but the investment manager will
consider such an event in determining whether the Portfolio should continue to
hold the security. The ratings of NRSROs represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings, and other opinions as to quality, are relative and
subjective and are not absolute standards of quality. For a discussion of lower
rated and non-rated securities and related risks, see "Special Risk
Factors--High Yield (High Risk) Bonds" below.
Each Portfolio attempts to limit its exposure to interest rate risk by
maintaining a relatively short duration. Interest rate risk is the risk that the
value of the fixed income securities may rise or fall as interest rates change.
Under normal conditions, the target duration of the fixed-income portion of the
Portfolio is approximately 2.5 years, although it may range from 1.5 to 3.5
years depending upon market conditions. "Duration," and the more traditional
"average weighted maturity," are measures of how a fixed income portfolio tend
to react to interest rate changes. Each fixed income security held by a
Portfolio has a stated maturity. The stated maturity is the date when the issuer
must repay the entire principal amount to an investor. A security's term to
maturity is the time remaining to maturity. Average weighted maturity is
calculated by averaging the terms to maturity of each fixed income security held
by the Portfolio with each maturity "weighted" according to the percentage of
assets that it represents. Unlike average weighted maturity, duration reflects
both principal and interest payments and is designed to measure more accurately
a portfolio's sensitivity to incremental changes in interest rates than does
average weighted maturity. By way of example, if the duration of a Portfolio's
fixed income securities were two years, and interest rates decreased by 100
basis points (a basis point is one-hundredth of one percent), the market price
of that portfolio of fixed income securities would be expected to increase by
approximately 2%.
RISKS. All investments, including those in mutual funds, have risks. No
investment is suitable for all investors. None of the Portfolios is intended to
be a complete investment program, and there is no assurance that any Portfolio
will achieve its objective.
The risks, the returns and the net asset value of each Portfolio will vary and
fluctuate depending upon the weightings of each asset class. Historically,
equities have experienced a higher level of volatility due to market
fluctuations than fixed income securities; and equities have also provided
higher levels of return over time. The value of equities
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typically change in response to general market and economic conditions and the
activities and changing circumstances of individual issues. The value of
equities may decline over short or even extended periods of time.
The value of fixed income securities typically changes in response to changes in
economic conditions, interest rates and the creditworthiness of individual
issues. In general, the value of the fixed income securities held by each
Portfolio will vary inversely with changes in interest rates. Thus, a decrease
in interest rates will generally result in an increase in value of the fixed
income securities held by each Portfolio. Conversely, during periods of rising
interest rates, the value of the fixed income securities held by each Portfolio
will generally decline. The magnitude of these fluctuations will generally be
greater for securities with longer maturities or durations. Fixed income
securities are subject to varying degrees of risk of default depending upon,
among other factors, the creditworthiness of the issuer and the ability of the
issuer to meet its obligations.
Investing in securities of smaller, less well-known companies may present
greater opportunities for capital appreciation, but may also involve greater
risks. These companies may have limited product lines, markets or financial
resources, or may depend upon a limited management group. Their securities may
trade less frequently and in limited volume. As a result, the prices of these
securities may fluctuate more than the prices of securities of larger, more
established companies.
SPECIAL RISK FACTORS--FOREIGN SECURITIES. Each Portfolio normally invests a
portion of its assets in foreign securities that are traded principally in
securities markets outside the United States. Each Portfolio may also invest in
U.S. Dollar denominated American Depository Receipts ("ADRs"), which are bought
and sold in the United States. For purposes of the allocation between U.S. and
international securities, ADRs are viewed as U.S. securities. In connection with
its foreign securities investments, each Portfolio may, to a limited extent,
engage in foreign currency exchange, options and futures transactions as a hedge
and not for speculation. Additional information concerning foreign securities
and related techniques is contained under "Additional Investment Information"
below and "Investment Policies and Techniques" in the Statement of Additional
Information.
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based upon the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
EMERGING MARKETS. While each Portfolio's investments in foreign securities will
principally be in developed countries, a Portfolio may make investments in
developing or "emerging" countries, which involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing or emerging
market country can be considered to be a country that is in the initial stages
of its industrialization cycle. Currently, emerging markets generally include
every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for a Portfolio's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As
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opportunities to invest in securities in emerging markets develop, a Portfolio
may expand and further broaden the group of emerging markets in which it
invests. In the past, markets of developing or emerging market countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. The investment
manager believes that these characteristics can be expected to continue in the
future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Portfolio to make intended securities purchases due to
settlement problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to a Portfolio due to subsequent declines
in value of the portfolio security or, if a Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. Certain emerging markets may lack clearing facilities equivalent to
those in developed countries. Accordingly, settlements can pose additional risks
in such markets and ultimately can expose a Portfolio to the risk of losses
resulting from the Portfolio's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for such securities in emerging markets may
not be readily available. In that case, securities in the affected markets will
be valued at fair value determined in good faith by or under the direction of
the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Portfolio. Emerging markets may require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked upon privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Portfolio's investments in the
securities of privatized enterprises include privately negotiated
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investments in a government- or state-owned or controlled company or enterprise
that has not yet conducted an initial equity offering, investments in the
initial offering of equity securities of a state enterprise or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.
In certain jurisdictions, the ability of foreign entities, such as a Portfolio,
to participate in privatizations may be limited by local law, or the price or
terms on which the Portfolio may be able to participate may be less advantageous
than for local investors. Moreover, there can be no assurance that governments
that have embarked on privatization programs will continue to divest their
ownership of state enterprises, that proposed privatization will be successful
or that governments will not re-nationalize enterprises that have been
privatized.
In the case of the enterprises in which a Portfolio may invest, large blocks of
the stock of those enterprises may be held by a small group of stockholders,
even after the initial equity offerings by those enterprises. The sale of some
portion or all of those blocks could have an adverse effect on the price of the
stock of any such enterprise.
Prior to making an initial equity offering, most state enterprises or former
state enterprises go through an internal reorganization of management. Such
reorganizations are made in an attempt to better enable these enterprises to
compete in the private sector. However, certain reorganizations could result in
a management team that does not function as well as the enterprise's prior
management and may have a negative effect on such enterprise. In addition, the
privatization of an enterprise by its government may occur over a number of
years, with the government continuing to hold a controlling position in the
enterprise even after the initial equity offering for the enterprise.
Prior to privatization, most of the state enterprises in which a Portfolio may
invest enjoy the protection of and receive preferential treatment from the
respective sovereigns that own or control them. After making an initial equity
offering these enterprises may no longer have such protection or receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
operate effectively in a competitive market and may suffer losses or experience
bankruptcy due to such competition.
DEPOSITORY RECEIPTS. For many foreign securities, there are U.S. Dollar
denominated ADRs, which are bought and sold in the United States and are issued
by domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in the domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund
avoids currency risks during the settlement period. In general, there is a
large, liquid market in the United States for most ADRs. Each Portfolio may also
invest in European Depository Receipts ("EDRs"), which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and are designed
for use in the European securities markets. EDRs are not necessarily denominated
in the currency of the underlying security.
SPECIAL RISK FACTORS--HIGH YIELD (HIGH RISK) BONDS. As stated above, each
Portfolio may invest a portion of its assets in fixed income securities that are
in the lower rating categories (below the fourth category) of recognized rating
agencies or are non-rated. These lower rated and non-rated fixed income
securities are considered, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation and generally will involve more credit risk than securities in
the higher rating categories. Lower rated and non-rated securities, which are
commonly referred to as "junk bonds," have widely varying characteristics and
quality. The market values of such securities tend to reflect individual
corporate developments to a greater extent than do those of higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also are more sensitive to economic
conditions than are higher rated securities. Adverse publicity and investor
perceptions regarding lower rated bonds, whether or not based upon fundamental
analysis, may depress the prices for such securities. These and other factors
adversely affecting the market value of high yield securities will adversely
affect a Portfolio's net asset value. Although some risk is inherent in all
securities ownership, holders of fixed income securities have a claim on the
assets of the issuer prior to the holders of common stock. Therefore, an
investment in fixed income securities generally entails less risk
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than an investment in common stock of the same issuer. A Portfolio may have
difficulty disposing of certain high yield securities because they may have a
thin trading market. The lack of a liquid secondary market may have an adverse
effect on market price and a Portfolio's ability to dispose of particular issues
and may also make it more difficult for a Portfolio to obtain accurate market
quotations for purposes of valuing these assets. Additional information
concerning high yield securities appears under "Investment Policies and
Techniques--Other Considerations--High Yield (High Risk) Bonds" and
"Appendix--Ratings of Fixed Income Investments" in the Statement of Additional
Information.
ADDITIONAL INVESTMENT INFORMATION. It is anticipated that, under normal
circumstances, the portfolio turnover rate for each Portfolio will not exceed
100%. Higher portfolio turnover involves correspondingly greater brokerage
commissions or other transaction costs. Higher portfolio turnover may result in
the realization of greater net short-term capital gains. In order to continue to
qualify as a regulated investment company for federal income tax purposes, less
than 30% of the annual gross income of a Portfolio must be derived from the sale
or other disposition of securities and certain other investments held by a
Portfolio for less than three months. See "Dividends and Taxes" in the Statement
of Additional Information.
No Portfolio may borrow money except as a temporary measure for extraordinary or
emergency purposes and not for leverage purposes, and then only in an amount up
to one-third of the value of its total assets in order to meet redemption
requests without immediately selling any portfolio securities or other assets.
If, for any reason, the current value of a Portfolio's total assets falls below
an amount equal to three times the amount of its indebtedness from money
borrowed, the Portfolio will, within three days (not including Sundays and
holidays), reduce its indebtedness to the extent necessary. A Portfolio may
pledge up to 15% of its total assets to secure any such borrowings.
No Portfolio will purchase illiquid securities, including repurchase agreements
maturing in more than seven days, if, as a result thereof, more than 15% of the
Portfolio's net assets, valued at the time of the transaction, would be invested
in such securities. See "Investment Policies and Techniques--Over-the-Counter
Options" in the Statement of Additional Information for a description of the
extent to which over-the-counter traded options are in effect considered as
illiquid for purposes of the limit on illiquid securities for the Portfolios.
Each Portfolio has adopted certain fundamental investment restrictions, which
are presented in the Statement of Additional Information and that, together with
the investment objective cannot be changed without approval by holders of a
majority of its outstanding voting shares. As defined in the Investment Company
Act of 1940, this means the lesser of the vote of (a) 67% of the shares of a
Portfolio present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy; or (b) more than 50% of the outstanding shares of
a Portfolio. Each Portfolio's investment policies that are not incorporated into
any of the fundamental investment restrictions referred to above are not
fundamental and may be changed by the Board of Trustees without shareholder
approval.
OPTIONS AND FINANCIAL FUTURES TRANSACTIONS. Each Portfolio may each deal in
options on securities, securities indexes and foreign currencies, which options
may be listed for trading on a national securities exchange or traded
over-the-counter. Each Portfolio may write (sell) covered call and secured put
options on up to 25% of net assets and may purchase put and call options
provided that no more than 5% of its net assets may be invested in premiums on
such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period. The writer of a covered call owns
securities or other assets that are acceptable for escrow and the writer of a
secured put invests an amount not less than the exercise price in eligible
securities or other assets to the extent that it is obligated as a writer. If a
call written by a Portfolio is exercised, the Portfolio foregoes any possible
profit from an increase in the market price of the underlying security or other
asset over the exercise price plus the premium received. In writing puts, there
is a risk that a Portfolio may be required to take delivery of the underlying
security or other asset at a disadvantageous price.
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Over-the-counter traded options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of the insolvency of such dealer or otherwise, in which event
a Portfolio may experience material losses. However, in writing options the
premium is paid in advance by the dealer. OTC options are available for a
greater variety of securities or other assets, and a wider range of expiration
dates and exercise prices, than for exchange traded options.
Each Portfolio may engage in financial futures transactions. Financial futures
contracts are commodity contracts that obligate the long or short holder to take
or make delivery of a specified quantity of a financial instrument, such as a
security, or the cash value of a securities index during a specified future
period at a specified price. A Portfolio will "cover" futures contracts sold by
the Portfolio and maintain in a segregated account certain liquid assets in
connection with futures contracts purchased by the Portfolio as described under
"Investment Policies and Techniques" in the Statement of Additional Information.
In connection with their foreign securities investments, the Portfolios may also
engage in foreign currency financial futures transactions. A Portfolio will not
enter into any futures contracts or options on futures contracts if the
aggregate of the contract value of the outstanding futures contracts of the
Portfolio and futures contracts subject to outstanding options written by the
Portfolio would exceed 50% of the total assets of the Portfolio.
The Portfolios may engage in financial futures transactions and may use index
options as an attempt to hedge against market risks. For example, when the
near-term market view is bearish but the portfolio composition is judged
satisfactory for the longer term, exposure to temporary declines in the market
may be reduced by entering into futures contracts to sell securities or the cash
value of a securities index. Conversely, where the near-term view is bullish,
but the Portfolio is believed to be well positioned for the longer term with a
high cash position, the Portfolio can hedge against market increases by entering
into futures contracts to buy securities or the cash value of a securities
index. In either case, the use of futures contracts would tend to reduce
portfolio turnover and facilitate the Portfolio's pursuit of its investment
objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators,
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Because of the
possibility of price distortions in the futures market, and because of imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager still may not result in a successful hedging
transaction. Any of these factors could cause a Portfolio to lose money on the
financial futures contracts and also on the value of its portfolio assets. The
costs incurred in connection with futures transactions could reduce a
Portfolio's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a
Portfolio may expire worthless, in which case a Portfolio would lose the premium
paid therefor.
A Portfolio may engage in futures transactions only on commodities exchanges or
boards of trade. A Portfolio will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities that the Portfolio owns or intends to
purchase.
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FOREIGN CURRENCY TRANSACTIONS. The Portfolios may invest a portion of their
assets in securities denominated in foreign currencies. The Portfolios may
engage in foreign currency transactions in connection with their investments in
foreign securities but will not speculate in foreign currency exchange.
The value of the foreign securities investments of a Portfolio measured in U.S.
Dollars (including ADRs) may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Portfolio may incur costs in connection with conversions between various
currencies. A Portfolio will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Portfolio is able to protect itself
against a possible loss between trade and settlement dates resulting from an
adverse change in the relationship between the U.S. Dollar and such foreign
currency. However, this tends to limit potential gains that might result from a
positive change in such currency relationships. A Portfolio may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Portfolio's securities denominated in such foreign
currency. The forecasting of short-term currency market movement is extremely
difficult and whether such a short-term hedging strategy will be successful is
highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for a Portfolio to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Portfolio is obligated to deliver
when a decision is made to sell the security and make delivery of the foreign
currency in settlement of a forward contract. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale of
the portfolio security if its market value exceeds the amount of foreign
currency the Portfolio is obligated to deliver.
A Portfolio will not speculate in foreign currency exchange. A Portfolio will
not enter into such forward contracts or maintain a net exposure in such
contracts where the Portfolio would be obligated to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities or other assets
denominated in that currency. The Portfolios do not intend to enter into such
forward contracts if they would have more than 15% of the value of their total
assets committed to forward contracts for the purchase of a foreign currency. A
Portfolio segregates cash or liquid high-grade securities in an amount not less
than the value of the Portfolio's total assets committed to forward foreign
currency exchange contracts entered into for the purchase of a foreign currency.
If the value of the securities segregated declines, additional cash or
securities are added so that the segregated amount is not less than the amount
of the Portfolio's commitments with respect to such contracts. A Portfolio
generally does not enter into a forward contract with a term longer than one
year.
DERIVATIVES. In addition to options, financial futures and foreign currency
transactions, consistent with its objective, each Portfolio may invest in a
broad array of financial instruments and securities in which the value of the
instrument or security is "derived" from the performance of an underlying asset
or a "benchmark" such as a security index, an interest rate or a currency
("derivatives"). Derivatives are most often used to manage investment risk, to
increase or decrease exposure to an asset class or benchmark (as a hedge or to
enhance return), or to create an investment position indirectly (often because
it is more efficient or less costly than direct investment). The types
13
<PAGE> 20
of derivatives used by each Portfolio and the techniques employed by the
investment manager may change over time as new derivatives and strategies are
developed or regulatory changes occur.
SPECIAL RISK FACTORS--OPTIONS, FUTURES, FOREIGN CURRENCIES AND OTHER
DERIVATIVES. The Statement of Additional Information contains further
information about the characteristics, risks and possible benefits of options,
futures, foreign currency and other derivative transactions. See "Investment
Policies and Techniques" in the Statement of Additional Information. The
principal risks are: (a) possible imperfect correlation between movements in the
prices of options, currencies, futures contracts or other derivatives and
movements in the prices of the securities or currencies hedged, used for cover
or that the derivative intended to replicate; (b) lack of assurance that a
liquid secondary market will exist for any particular option, futures, foreign
currency or other derivatives contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts resulting from market movements not
anticipated by the investment manager; (e) the possible need to defer closing
out certain options, futures contracts or other derivatives in order to continue
to qualify for beneficial tax treatment afforded "regulated investment
companies" under the Internal Revenue Code; and (f) the possible non-performance
of the counter-party to the derivative contract.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Portfolios may lend securities (principally to broker-dealers)
without limit where such loans are callable at any time and are continuously
secured by segregated collateral (cash or U.S. Government securities) equal to
no less than the market value, determined daily, of the securities loaned. The
Portfolios will receive amounts equal to dividends or interest on the securities
loaned. The Portfolios will also earn income for having made the loan. Any cash
collateral pursuant to these loans will be invested in short-term money market
instruments. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the investment manager to be of good standing, and when the investment
manager believes the potential earnings justify the attendant risk. Management
will limit such lending to not more than one-third of the value of a Portfolio's
total assets.
DELAYED DELIVERY TRANSACTIONS. Each Portfolio may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions arise when securities are purchased by a Portfolio with
payment and delivery to take place in the future in order to secure what is
considered to be an advantageous price and yield to the Portfolio at the time of
entering into the transactions. The value of fixed yield securities to be
delivered in the future will fluctuate as interest rates vary. Because a
Portfolio must set aside cash or liquid high grade securities to satisfy its
commitments to purchase when-issued or delayed delivery securities, flexibility
to manage the Portfolio's investments may be limited if commitments to purchase
when-issued or delayed delivery securities were to exceed 25% of the value of
its assets.
To the extent a Portfolio engages in when-issued or delayed delivery
transactions, it will generally do so for the purpose of actually acquiring
portfolio securities consistent with the Portfolio's investment objective and
policies. A Portfolio reserves the right to sell these securities before the
settlement date if deemed advisable. In some instances, the third-party seller
of when-issued or delayed delivery securities may determine prior to the
settlement date that it will be unable to meet its existing transaction
commitments without borrowing securities. If advantageous from a yield
perspective, a Portfolio may, in that event, agree to resell its purchase
commitment to the third-party seller at the current market price on the date of
sale and concurrently enter into another purchase commitment for such securities
at a later date. As an inducement for a Portfolio to "roll over" its purchase
commitment, the Portfolio may receive a negotiated fee.
REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements, under
which it acquires ownership of a security and a broker-dealer or bank agrees to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the Portfolio's holding period. The investment
manager will evaluate the creditworthiness of all entities with which the Fund
intends to engage in repurchase agreements pursuant to procedures adopted by the
Board of Trustees of the Fund. Maturity of the securities subject to
14
<PAGE> 21
repurchase may exceed one year. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, the Portfolio might have expenses in
enforcing its rights, and could experience losses, including a decline in the
value of the underlying securities and loss of income. Repurchase agreements
maturing in more than seven days will be considered illiquid for purposes of the
Portfolios' limitations on illiquid securities.
COLLATERALIZED OBLIGATIONS. Subject to its investment objectives and policies, a
Portfolio may purchase collateralized obligations, including interest only
("IO") and principal only ("PO") securities. A collateralized obligation is a
debt security issued by a corporation, trust or custodian, or by a U.S.
Government agency or instrumentality, that is collateralized by a portfolio or
pool of mortgages, mortgage-backed securities, U.S. Government securities or
other assets. The issuer's obligation to make interest and principal payments is
secured by the underlying pool or portfolio of securities. Collateralized
obligations issued or guaranteed by a U.S. Government Agency or instrumentality,
such as the Federal Home Loan Mortgage Corporation, are considered U.S.
Government securities for purposes of this prospectus. Privately-issued
collateralized obligations collateralized by a portfolio of U.S. Government
securities are not direct obligations of the U.S. Government or any of its
agencies or instrumentalities and are not considered U.S. Government securities
for purposes of this prospectus. A variety of types of collateralized
obligations are available currently and others may become available in the
future.
Since the collateralized obligations may be issued in classes with varying
maturities and interest rates, the investor may obtain greater predictability of
maturity than with direct investments in mortgage-backed securities. Classes
with shorter maturities may have lower volatility and lower yield while those
with longer maturities may have higher volatility and higher yield. This
provides the investor with greater control over the characteristics of the
investment in a changing interest rate environment. With respect to interest
only and principal only securities, an investor has the option to select from a
pool of underlying collateral the portion of the cash flows that most closely
corresponds to the investor's forecast of interest rate movements. These
instruments tend to be highly sensitive to prepayment rates on the underlying
collateral and thus place a premium on accurate prepayment projections by the
investor.
Each Portfolio may invest in collateralized obligations whose yield floats
inversely against a specified index rate. These "inverse floaters" are more
volatile than conventional fixed or floating rate collateralized obligations and
the yield thereon, as well as the value thereof, will fluctuate in inverse
proportion to changes in the index upon which rate adjustments are based. As a
result, the yield on an inverse floater will generally increase when market
yields (as reflected by the index) decrease and decrease when market yields
increase. The extent of the volatility of inverse floaters depends on the extent
of anticipated changes in market rates of interest. Generally, inverse floaters
provide for interest rate adjustments based upon a multiple of the specified
interest index, which further increases their volatility. The degree of
additional volatility will be directly proportional to the size of the multiple
used in determining interest rate adjustments.
Additional information concerning collateralized obligations is contained in the
Statement of Additional Information under "Investment Policies and
Techniques--Collateralized Obligations."
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides each Portfolio with continuous professional investment supervision.
Dreman Value Advisors, Inc. ("DVA") is the sub-adviser for the Fund. KFS is one
of the largest investment managers in the country and has been engaged in the
management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, the Kemper insurance companies, Kemper Corporation and other
corporate, pension, profit-sharing and individual accounts representing
approximately $60 billion under management. KFS acts as investment manager for
27 open-end and seven closed-end investment companies, with 67 separate
investment portfolios, representing more than 3 million shareholder accounts.
KFS is a wholly-owned subsidiary of Kemper Financial Companies, Inc., which is a
financial services holding company that is more than 99% owned by Kemper
Corporation, a diversified insurance and financial services holding company.
15
<PAGE> 22
Kemper Corporation has entered into a definitive agreement with an investor
group led by Zurich Insurance Company ("Zurich") pursuant to which Kemper
Corporation would be acquired by the investor group in a merger transaction. As
part of the transaction, Zurich or an affiliate would purchase KFS. The Kemper
Corporation and Zurich boards have approved the transaction. In addition,
because the transaction would constitute an assignment of the Fund's investment
management agreement with KFS and, potentially, Rule 12b-1 agreements under the
Investment Company Act of 1940, and therefore a termination of such agreements,
KFS has received approval of new agreements from the Fund's board and
shareholders. Consummation of the transaction is subject to remaining
contingencies, including approval by the stockholders of Kemper Corporation and
state insurance department regulatory approvals. The investor group has informed
Kemper Corporation that it expects the transaction to close early in 1996.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as the Fund's
investment adviser, manage its investments and provide it with various services
and facilities. KFS will from time to time use the services of Kemper Investment
Management Company Limited, 1 Fleet Place, London EC4M 7RQ, a wholly-owned
subsidiary of KFS, with respect to foreign securities investments of the Fund
including analysis, research, execution and trading services.
Thomas M. Regner has been the portfolio manager of the Fund since its inception
in 1995. Mr. Regner is a vice president of the Fund and is senior vice president
and equity strategist of KFS. He is responsible for managing the asset mix of
each Portfolio. He is assisted in managing the various asset classes by
investment personnel who specialize in certain areas. For the value portion of
the U.S. equities portion of each Portfolio, asset management is performed by
DVA as sub-adviser. Mr. Regner joined KFS in December, 1994. Immediately prior
to joining KFS he was a financial adviser for a major investment manager and
research company prior thereto, he was the chief investment officer and senior
portfolio manager for a professional association. Mr. Regner received his B.A.
and M.S. from the University of Wisconsin, Madison, Wisconsin. He is a Chartered
Financial Analyst.
KFS has an Equity Investment Committee that determines overall investment
strategy for equity portfolios managed by KFS. The Equity Investment Committee
is currently comprised of the following members: Daniel J. Bukowski, Tracy
McCormick Chester, James H. Coxon, Richard A. Goers, Karen A. Hussey, Frank D.
Korth, Gary A. Langbaum, Maura J. Murrihy, Thomas M. Regner, Steven H. Reynolds
and Stephen B. Timbers. The portfolio manager works together with the Equity
Investment Committee and various equity analysts and equity traders as a team to
manage each Portfolio's investments. Equity analysts--through research, analysis
and evaluation--work to develop investment ideas appropriate for each Portfolio.
These ideas are studied and debated by the Equity Investment Committee and, if
approved, are added to a list of eligible investments. The portfolio manager
uses the list of eligible investments to help them structure the Portfolio
investments in a manner consistent with the Portfolios' objectives. The KFS
International Equity Investments area, directed by Dennis H. Ferro, and the KFS
International Fixed Income Investments area, directed by Gordon K. Johns,
provide research and analysis regarding foreign investments to the portfolio
managers. After investment decisions are made, equity traders execute the
portfolio manager's instructions through various broker-dealer firms.
KFS also has a Fixed Income Investment Committee that determines overall
investment strategy for fixed income portfolios managed by KFS. The Fixed Income
Committee is currently comprised of the following members: J. Patrick Beimford,
Jr., Robert S. Cessine, George Klein, Michael A. McNamara, Christopher J. Mier,
Frank J. Rachwalski, Jr., Harry E. Resis, Jr., Robert H. Schumacher, John E.
Silvia, Paul F. Sloan, Stephen B. Timbers, Jonathan W. Trutter and Christopher
T. Vincent. The portfolio manager works together with the Fixed Income Committee
and various fixed income analysts and traders as a team to manage the
Portfolios' fixed income investments. Analysts provide market, economic and
financial research and analysis that is used by the Fixed Income Committee to
establish broad parameters for the Portfolios, including duration and cash
levels. In addition, credit research by analysts is used by the portfolio
manager in selecting securities appropriate for the Portfolios. After investment
decisions are made, fixed income traders execute the portfolio manager's
instructions through various broker-dealer firms.
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<PAGE> 23
KFS is paid an investment management fee, monthly, by each Portfolio, at the
annual rates shown below.
<TABLE>
<CAPTION>
MANAGEMENT FEE
AVERAGE DAILY NET ASSETS OF A PORTFOLIO RATES
-------------------------------------------------------------------- --------------
<S> <C>
$0 - $250 million................................................... .58%
$250 million - $1 billion........................................... .55
$1 billion - $2.5 billion........................................... .53
$2.5 billion - $5 billion........................................... .51
$5 billion - $7.5 billion........................................... .48
$7.5 billion - $10 billion.......................................... .46
$10 billion - $12.5 billion......................................... .44
Over $12.5 billion.................................................. .42
</TABLE>
KFS has agreed to temporarily reduce its investment management fee and reimburse
or pay operating expenses of each Portfolio to the extent necessary to limit the
Portfolio's operating expenses to the levels described under "Summary of
Expenses." For this purpose "operating expenses" do not include taxes, interest,
extraordinary expenses, brokerage commissions or transaction costs. KFS can
terminate this arrangement at any time upon notice to the Fund.
DVA. As mentioned above, DVA is the sub-adviser for the Fund. Under the terms of
the Sub-Advisory Agreement, DVA will manage the value portion of each Portfolio
and will provide such other investment advice, research and assistance as KFS
may, from time to time, reasonably request. DVA, which was formed in October,
1994, has served as investment manager for mutual funds and certain
institutional accounts since August, 1995 when it acquired substantially all the
assets of Dreman Value Management, L.P. DVA is a wholly-owned subsidiary of KFS
and is located at 10 Exchange Place, Suite 2050, Jersey City, New Jersey 07302.
KFS pays DVA for its services a sub-advisory fee, payable monthly at the annual
rate of .25% of the portion of the average daily net assets of each Portfolio
allocated by KFS to DVA for management.
[David N. Dreman has been primarily responsible for management of the value
portion of each Portfolio since the Fund's inception in 1995. Mr. Dreman is the
Chairman and a Director of DVA. Mr. Dreman is a pioneer of the philosophy of
contrarian investing (buying what is out of favor) and a leading proponent of
the low P/E investment style. He is a columnist for Forbes and the author of
several books on the value style of investing. Mr. Dreman received a Bachelor of
Finance in Commerce from the University of Manitoba, Winnipeg, Manitoba,
Canada.]
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with the Fund, Kemper Distributors, Inc.
("KDI"), an affiliate of KFS, is the principal underwriter and distributor of
the Fund's shares and acts as agent of the Fund in the sale of its shares. KDI
bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions. KDI provides for the
preparation of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. KDI bears the cost
of qualifying and maintaining the qualification of Fund shares for sale under
the securities laws of the various states and the Fund bears the expense of
registering its shares with the Securities and Exchange Commission. KDI may
enter into related selling group agreements with various broker-dealers,
including affiliates of KDI, that provide distribution services to investors.
KDI also may provide some of the distribution services.
CLASS A SHARES. KDI receives no compensation from the Fund as principal
underwriter for Class A shares and pays all expenses of distribution of the
Fund's Class A shares under the distribution agreements not otherwise paid by
dealers or other financial services firms. As indicated under "Purchase of
Shares," KDI retains the sales charge upon the purchase of shares and pays or
allows concessions or discounts to firms for the sale of the Fund's shares.
CLASS B SHARES. For its services under the distribution agreement, KDI receives
a fee from each Portfolio, payable monthly, at the annual rate of .75% of
average daily net assets of the Portfolio attributable to Class B shares. This
fee
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<PAGE> 24
is accrued daily as an expense of Class B shares. KDI also receives any
contingent deferred sales charges. See "Redemption or Repurchase of
Shares--Contingent Deferred Sales Charge--Class B Shares." KDI currently
compensates firms for sales of Class B shares at a commission rate of 3.75%.
CLASS C SHARES. For its services under the distribution agreement, KDI receives
a fee from each Portfolio, payable monthly, at the annual rate of .75% of
average daily net assets of the Portfolio attributable to Class C shares. This
fee is accrued daily as an expense of Class C shares. KDI currently pays firms
for sales of Class C shares a distribution fee, payable quarterly, at an annual
rate of .75% of net assets attributable to Class C shares maintained and
serviced by the firm. A firm becomes eligible for the distribution fee based
upon assets in accounts in the month of purchase and the fee continues until
terminated by KDI or the Fund.
RULE 12B-1 PLAN. Since the distribution agreement provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by KDI to
pay for distribution services for those classes, that agreement is approved and
reviewed separately for the Class B shares and the Class C shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940, which regulates the
manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares.
If the Rule 12b-1 Plan is terminated for any class of any Portfolio in
accordance with its terms, the obligation of the Fund to make payments to KDI
pursuant to the Plan for such class will cease and the Fund will not be required
to make any payments for such class past the termination date. Thus, there is no
legal obligation for the Fund to pay any expenses incurred by KDI in excess of
its fees under a Plan, if for any reason the Plan is terminated in accordance
with its terms. Future fees under a Plan may or may not be sufficient to
reimburse KDI for its expenses incurred.
ADMINISTRATIVE SERVICES. KDI also provides information and administrative
services for shareholders of the Fund pursuant to an administrative services
agreement ("administrative agreement"). KDI may enter into related arrangements
with various financial services firms, such as broker-dealer firms or banks
("firms"), that provide services and facilities for their customers or clients
who are shareholders of the Fund. Such administrative services and assistance
may include, but are not limited to, establishing and maintaining shareholder
accounts and records, processing purchase and redemption transactions, answering
routine inquiries regarding the Fund and its special features, and such other
services as may be agreed upon from time to time and permitted by applicable
statute, rule or regulation. KDI bears all its expenses of providing services
pursuant to the administrative agreement, including the payment of any service
fees. For services under the administrative agreement, KDI is paid a fee
monthly, at the annual rate of up to .25% of average daily net assets of each
class of each Portfolio. KDI then pays each firm a service fee at an annual rate
of up to .25% of net assets of each class of those accounts that it maintains
and services for each Portfolio. Firms to which service fees may be paid include
broker-dealers affiliated with KDI. A firm becomes eligible for the service fee
based on assets in the accounts in the month following the month of purchase (in
the month of purchase for Class C Shares) and the fee continues until terminated
by KDI or the Fund. The fees are calculated monthly and paid quarterly. KDI may
advance to financial services firms the first year service fee related to Class
B shares sold by such firms at a rate of up to .25% of the purchase price of
such shares. As compensation therefor, KDI may retain the administrative
services fee with respect to such shares for the first year after purchase.
Financial services firms will become eligible for future service fees with
respect to such shares commencing in the thirteenth month following the month of
purchase.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreements not paid to firms to compensate
itself for administrative functions performed for the Fund. Currently, the
administrative services fee payable to KDI is based only upon Portfolio assets
in accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Portfolio to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of a Portfolio
while this procedure is in effect will depend upon the proportion of Portfolio
assets that is in accounts for which there is a firm of record.
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<PAGE> 25
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian, and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Fund held outside the United States. IFTC also is the Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company, an affiliate of KFS, serves as "Shareholder
Service Agent" of the Fund and, as such, performs all of IFTC's duties as
transfer agent and dividend-paying agent. For a description of custodian,
transfer agent and shareholder service agent fees, see "Investment Manager and
Underwriter" in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS. KFS places all orders for purchases and sales of each
Portfolio's securities (except that DVA places all orders for the value portion
of each Portfolio). Subject to seeking best execution of orders, KFS or DVA may
consider sales of shares of the Fund and other funds managed by KFS and DVA as a
factor in selecting broker-dealers. See "Portfolio Transactions" in the
Statement of Additional Information.
DIVIDENDS AND TAXES
DIVIDENDS. Each Portfolio normally distributes dividends of net investment
income as follows: annually for the Horizon 20+ Portfolio; semi-annually for the
Horizon 10+ Portfolio and quarterly for the Horizon 5 Portfolio. Each Portfolio
distributes any net realized short-term and long-term capital gains at least
annually.
Dividends paid for a Portfolio as to each class of its shares will be calculated
in the same manner, at the same time and on the same day. The level of income
dividends per share (as a percentage of net asset value) will be lower for Class
B and Class C shares than for Class A shares primarily as a result of the
distribution services fee applicable to Class B and Class C shares.
Distributions of capital gains, if any, will be paid in the same amount for each
class.
Income and capital gain dividends, if any, of a Portfolio will be credited to
shareholder accounts in full and fractional shares of the same class of that
Portfolio at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gain dividends in cash and
long-term capital gain dividends in shares of the same class at net asset
value; or
(2) To receive income and capital gain dividends in cash.
Any dividends of a Portfolio that are reinvested normally will be reinvested in
shares of the same class of that same Portfolio. However, upon written request
to the Shareholder Service Agent, a shareholder may elect to have dividends of a
Portfolio invested in shares of the same class of another Kemper Fund at the net
asset value of such class of such other fund. See "Special Features--Class A
Shares--Combined Purchases" for a list of such other Kemper Funds. To use this
privilege of investing dividends of a Portfolio in shares of another Kemper
Fund, shareholders must maintain a minimum account value of $1,000 in the
Portfolio distributing the dividends and a minimum account value of $1,000 in
the Kemper Fund in which dividends are reinvested. Each Portfolio will reinvest
dividend checks (and future dividends) in shares of that same Portfolio and
class if checks are returned as undeliverable.
TAXES. The Fund intends each Portfolio to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, a Portfolio will not be liable for federal income taxes to the extent
its earnings are distributed. Dividends derived from net investment income and
net short-term capital gains are taxable to shareholders as ordinary income and
long-term capital gain dividends are taxable to shareholders as long-term
capital gain regardless of how long the shares have been held and whether
received in cash or shares. Long-term capital gain dividends received by
individual shareholders are taxed at a maximum rate of 28%. Dividends declared
in October, November or December to shareholders of record as of a date in one
of those months and paid during the following January are treated as paid on
December 31 of the calendar year declared. A
19
<PAGE> 26
portion of the dividends paid by the Fund may qualify for the dividends received
deduction available to corporate shareholders.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend and, although in effect a
return of capital, will be taxable to the shareholder. If the net asset value of
shares were reduced below the shareholder's cost by dividends representing gains
realized on sales of securities, such dividends would be a return of investment
though taxable as stated above.
The Fund is required by law to withhold 31% of taxable dividends and redemption
proceeds paid to certain shareholders who do not furnish a correct taxpayer
identification number (in the case of individuals, a social security number) and
in certain other circumstances. Trustees of qualified retirement plans and
403(b)(7) accounts are required by law to withhold 20% of the taxable portion of
any distribution that is eligible to be "rolled over." The 20% withholding
requirement does not apply to distributions from Individual Retirement Accounts
(IRAs) or any part of a distribution that is transferred directly to another
qualified retirement plan, 403(b)(7) account, or IRA. Shareholders should
consult with their tax advisers regarding the 20% withholding requirement.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction except that statements will be sent
quarterly for transactions involving reinvestment of dividends, periodic
investment and redemption programs and reinvestment programs for unit investment
trusts sponsored by Everen Securities, Inc. Information for income tax purposes,
including, when appropriate, information regarding any foreign taxes and
credits, will be provided after the end of the calendar year. Shareholders are
encouraged to retain copies of their account confirmation statements or year-end
statements for tax reporting purposes. However, those who have incomplete
records may obtain historical account transaction information at a reasonable
fee.
NET ASSET VALUE
The net asset value per share of a Portfolio is determined separately for each
class by dividing the value of the Portfolio's net assets attributable to that
class by the number of shares of that class outstanding. The per share net asset
value of the Class B and Class C shares of a Portfolio will generally be lower
than that of the Class A shares of the Portfolio because of the higher expenses
borne by Class B and Class C shares. Securities that are primarily traded on a
domestic securities exchange or securities listed on the NASDAQ National Market
are valued at the last sale price on the exchange or market where primarily
traded or listed or, if there is no recent sale price available, at the last
current bid quotation. Securities that are primarily traded on foreign
securities exchanges are generally valued at the preceding closing values of
such securities on their respective exchanges where primarily traded. A security
that is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the Board
of Trustees or its delegates. Securities not so traded or listed are valued at
the last current bid quotation if market quotations are available. Fixed income
securities are valued by using market quotations, or independent pricing
services that use prices provided by market makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or asked
priced is used. Exchange traded fixed income options are valued at the last sale
price unless there is no sale price, in which event current prices provided by
market makers are used. Over-the-counter traded options are valued based upon
current prices provided by market makers. Financial futures and options thereon
are valued at the settlement price established each day by the board of trade or
exchange on which they are traded. Other securities and assets are valued at
fair value as determined in good faith by the Board of Trustees. Because of the
need to obtain prices as of the close of trading on various exchanges throughout
the world, the calculation of net asset value of a Portfolio investing in
foreign securities does not necessarily take place contemporaneously with the
determination of the prices of the Portfolio's foreign securities, which may be
made prior to the determination of net asset value. For purposes of determining
a Portfolio's net asset value that invests in foreign securities, all assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. Dollar values at the mean between the bid and offered quotations of
such currencies against U.S. Dollars as last quoted by a recognized dealer.
20
<PAGE> 27
If an event were to occur, after the value of a security was so established but
before the net asset value per share was determined, which was likely to
materially change the net asset value, then that security would be valued using
fair value considerations by the Board of Trustees or its delegates. On each day
the New York Stock Exchange (the "Exchange") is open for trading, the net asset
value is determined as of the earlier of 3:00 p.m. Chicago time or the close of
the Exchange.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of the Fund are sold to
investors subject to an initial sales charge. Class B shares are sold without an
initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Class C shares are sold without an initial or a contingent deferred sales charge
but are subject to higher ongoing expenses than Class A shares and do not
convert into another class. When placing purchase orders, investors must specify
whether the order is for Class A, Class B or Class C shares.
The primary distinctions among the classes of shares lie in their initial and
contingent deferred sales charge structures and in their ongoing expenses,
including asset-based sales charges in the form of Rule 12b-1 distribution fees.
These differences are summarized in the table below. See, also, "Summary of
Expenses." Each class has distinct advantages and disadvantages for different
investors, and investors may choose the class that best suits their
circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge None Initial sales charge waived
of 5.75% of the public or reduced for certain
offering price purchases
Class B Maximum contingent deferred 0.75% Shares convert to Class A
sales charge of 4% of shares six years after
redemption proceeds; issuance
declines to zero after six
years
Class C None 0.75% No conversion feature
</TABLE>
The minimum initial investment for each Portfolio is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
[SPECIAL PROMOTION. From the date of this prospectus until at least
, 19 ("Special Offering Period"), KDI intends to reallow the
full applicable sales charge with respect to Class A shares purchased during the
Special Offering Period (not including shares acquired at net asset value) and
to pay an additional commission of .50% with respect to Class B shares purchased
during the Special Offering Period not including exchanges or other transactions
for which commissions are not paid.]
21
<PAGE> 28
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------------------------
ALLOWED TO
DEALERS AS A
AS A PERCENTAGE AS A PERCENTAGE PERCENTAGE OF
AMOUNT OF PURCHASE OF OFFERING PRICE OF NET ASSET VALUE* OFFERING PRICE
----------------- ------------------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75% 6.10% 5.20%
$50,000 but less than $100,000........................ 4.50 4.71 4.00
$100,000 but less than $250,000....................... 3.50 3.63 3.00
$250,000 but less than $500,000....................... 2.60 2.67 2.25
$500,000 but less than $1 million..................... 2.00 2.04 1.75
$1 million and over................................... .00** .00** ***
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent.
** Redemption of shares may be subject to a contingent deferred sales charge as
discussed below.
*** Commissions payable by KDI as discussed below.
Each Portfolio receives the entire net asset value of all its Class A shares
sold. KDI, the Fund's principal underwriter, retains the sales charge on sales
of Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is reallowed, such
dealers may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Class A shares may be purchased at net asset value to the extent that the amount
invested represents the net proceeds from a redemption of shares of a mutual
fund for which KFS or DVA does not serve as investment manager ("non-Kemper
fund") provided that: (a) the investor has previously paid either an initial
sales charge in connection with the purchase of the non-Kemper fund shares
redeemed or a contingent deferred sales charge in connection with the redemption
of the non-Kemper fund shares, and (b) the purchase of Fund shares is made
within 90 days after the date of such redemption. To make such a purchase at net
asset value, the investor or the investor's dealer must, at the time of
purchase, submit a request that the purchase be processed at net asset value
pursuant to this privilege. [During the Special Offering Period, dealers will be
paid a commission of .50% of the amount of shares of the Fund purchased pursuant
to this net asset value purchase privilege.] The redemption of the shares of the
non-Kemper fund is, for federal income tax purposes, a sale upon which a gain or
loss may be realized.
Class A shares may be purchased at net asset value by: (a) any purchaser
provided that the amount invested in a Portfolio or other Kemper Mutual Funds
listed under "Special Features--Class A Shares--Combined Purchases" totals at
least $1,000,000 including purchases of Class A shares pursuant to the "Combined
Purchases," "Letter of Intent" and "Cumulative Discount" features described
under "Special Features"; or (b) a participant-directed qualified retirement
plan described in Code Section 401(a) or a participant-directed non-qualified
deferred compensation plan described in Code Section 457 provided in either case
that such plan has not less than 200 eligible employees (the "Large Order NAV
Purchase Privilege"). Redemption within one year of shares purchased under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred sales
charge. See "Redemption or Repurchase of Shares--Contingent Deferred Sales
Charge--Large Order NAV Purchase Privilege."
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of the Fund to
employer sponsored employee benefit plans using the subaccount recordkeeping
system made available through the Shareholder Service Agent at net asset value
in accordance with the Large Order NAV Purchase Privilege up to the following
amounts: 1.00% of the net asset value of shares sold on amounts up to $5 million
in any calendar year, .50% on the next $5 million and .25% on amounts over $10
million
22
<PAGE> 29
in such calendar year. KDI may in its discretion compensate investment dealers
or other financial services firms in connection with the sale of Class A shares
to other purchasers at net asset value in accordance with the Large Order NAV
Purchase Privilege up to the following amounts: 1.00% of the net asset value of
shares sold on amounts up to $3 million, .50% on the next $2 million and .25% on
amounts over $5 million. For purposes of determining the appropriate commission
percentage to be applied to a particular sale under the foregoing schedules, KDI
will consider the cumulative amount invested by the purchaser in the Fund and
other Kemper Mutual Funds listed under "Special Features--Class A
Shares--Combined Purchases," including purchases pursuant to the "Combined
Purchases," "Letter of Intent" and "Cumulative Discount" features referred to
above. The privilege of purchasing Class A shares at net asset value under the
Large Order NAV Purchase Privilege is not available if another net asset value
purchase privilege is also applicable.
Class A shares may be sold at net asset value in any amount to: (a) officers,
trustees, directors, employees (including retirees) and sales representatives of
the Fund, its investment manager, its principal underwriter or certain
affiliated companies, for themselves or members of their families; (b)
registered representatives and employees of broker-dealers having selling group
agreements with KDI; (c) officers, directors and employees of service agents of
the Fund; (d) shareholders who owned shares of Kemper Dreman Fund, Inc. ("KDF")
on September 8, 1995, and have continuously owned shares of KDF (or a Kemper
Fund acquired by exchange of KDF shares) since that date, for themselves or
members of their families; and (e) any trust, pension, profit-sharing or other
benefit plan for only such persons. Class A shares may be sold at net asset
value in any amount to selected employees (including their spouses and dependent
children) of banks and other financial services firms that provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients pursuant to an agreement
with KDI or one of its affiliates. Only those employees of such banks and other
firms who as part of their usual duties provide services related to transactions
in Fund shares may purchase Class A shares at net asset value hereunder. Class A
shares may be sold at net asset value in any amount to unit investment trusts
sponsored by Everen Securities, Inc. In addition, unitholders of unit investment
trusts sponsored by Everen Securities, Inc. or its predecessors may purchase
Class A shares at net asset value through reinvestment programs described in the
prospectuses of such trusts which have such programs. Class A shares may be sold
at net asset value through certain investment advisers registered under the
Investment Advisers Act of 1940 and other financial services firms that adhere
to certain standards established by KDI, including a requirement that such
shares be sold for the benefit of their clients participating in a "wrap
account" or similar program under which such clients pay a fee to the investment
adviser or other firm. Such shares are sold for investment purposes and on the
condition that they will not be resold except through redemption or repurchase
by the Fund. The Fund may also issue Class A shares at net asset value in
connection with the acquisition of the assets of or merger or consolidation with
another investment company, or to shareholders in connection with the investment
or reinvestment of income and capital gain dividends.
The sales charge scale is applicable to purchases made at one time by any
"purchaser" which includes: an individual; or an individual, his or her spouse
and children under the age of 21; or a trustee or other fiduciary of a single
trust estate or single fiduciary account; or an organization exempt from federal
income tax under Section 501(c)(3) or (13) of the Code; or a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized group of persons whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying purchaser.
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
23
<PAGE> 30
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by the Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Class B shares of a Portfolio will automatically convert to Class A shares of
the same Portfolio six years after issuance on the basis of the relative net
asset value per share. Class B shareholders who originally acquired their shares
as Initial Shares of Kemper Portfolios, formerly known as Kemper Investment
Portfolios ("KIP"), hold them subject to the same conversion period schedule as
that of their KIP Portfolio. Class B shares representing Initial Shares of a
former KIP Portfolio will automatically convert to Class A shares of the
applicable Portfolio six years after issuance of the Initial Shares for shares
issued on or after February 1, 1991 and seven years after issuance of the
Initial Shares for shares issued before February 1, 1991. The purpose of the
conversion feature is to relieve holders of Class B shares from the distribution
services fee when they have been outstanding long enough for KDI to have been
compensated for distribution related expenses. For purposes of conversion to
Class A shares, shares purchased through the reinvestment of dividends and other
distributions paid with respect to Class B shares in a shareholder's account
will be converted to Class A shares on a pro rata basis.
PURCHASE OF CLASS C SHARES. The public offering price of the Class C shares of a
Portfolio is the next determined net asset value. No initial or contingent
deferred sales charge is imposed. Since Class C shares are sold without an
initial sales charge, the full amount of the investor's purchase payment will be
invested in Class C shares for his or her account. KDI pays firms for sales of
Class C shares a distribution fee, payable quarterly, at an annual rate of .75
of 1% of net assets attributable to Class C shares maintained and serviced by
the firm. KDI is compensated by the Fund for services as distributor and
principal underwriter for Class C shares. See "Investment Manager and
Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Portfolio or other Kemper Mutual Funds
listed under "Special Features--Class A Shares--Combined Purchases" is in excess
of $5 million including purchases pursuant to the "Combined Purchases," "Letter
of Intent" and "Cumulative Discount" features described under "Special
Features." For more information about the three sales arrangements, consult your
financial representative or the Shareholder Service Agent. Financial services
firms may receive different compensation depending upon which class of shares
they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Portfolio for their clients, and KDI may pay them a transaction fee
up to the level of the discount or commission allowable or payable to dealers,
as described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to
any Portfolio.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Fund. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some
24
<PAGE> 31
instances, such discounts, commissions or other incentives will be offered only
to certain firms that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund, or other funds underwritten by
KDI.
Orders for the purchase of shares of a Portfolio will be confirmed at a price
based on the net asset value of that Portfolio next determined after receipt by
KDI of the order accompanied by payment. However, orders received by dealers or
other financial services firms prior to the determination of net asset value
(see "Net Asset Value") and received by KDI prior to the close of its business
day will be confirmed at a price based on the net asset value effective on that
day. The Fund reserves the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
See "Purchase and Redemption of Shares" in the Statement of Additional
Information.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Fund's shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Fund's shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Fund's transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Fund through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Fund through the Shareholder Service Agent for
these services. This prospectus should be read in connection with such firms'
material regarding their fees and services.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, the Fund
may temporarily suspend the offering of any class of its shares of a Portfolio
to new investors. During the period of such suspension, persons who are already
shareholders of such class of such Portfolio normally are permitted to continue
to purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
this prospectus.
REDEMPTION OR REPURCHASE OF SHARES
GENERAL. Any shareholder may require the Fund to redeem his or her shares. When
shares are held for the account of a shareholder by the Fund's transfer agent,
the shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557. When certificates for shares have been
issued, they must be mailed to or deposited with the Shareholder Service Agent,
along with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
25
<PAGE> 32
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
The redemption price for shares of a Portfolio will be the net asset value per
share of that Portfolio next determined following receipt by the Shareholder
Service Agent of a properly executed request with any required documents as
described above. Payment for shares redeemed will be made in cash as promptly as
practicable but in no event later than seven days after receipt of a properly
executed request accompanied by any outstanding share certificates in proper
form for transfer. When the Fund is asked to redeem shares for which it may not
have yet received good payment, it may delay transmittal of redemption proceeds
until it has determined that collected funds have been received for the purchase
of such shares, which will be up to 15 days from receipt by the Fund of the
purchase amount. The redemption within one year of Class A shares purchased at
net asset value under the Large Order NAV Purchase Privilege may be subject to a
1% contingent deferred sales charge (see "Purchase of Shares") and the
redemption of Class B shares may be subject to a contingent deferred sales
charge (see "Contingent Deferred Sales Charge--Class B Shares" below).
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account (and, in the case of Class B shares, impose any
applicable contingent deferred sales charge) that falls below the minimum
investment level, currently $1,000 for a Portfolio, as a result of redemptions.
Currently, Individual Retirement Accounts and employee benefit plan accounts are
not subject to this procedure. A shareholder will be notified in writing and
will be allowed 60 days to make additional purchases to bring the account value
up to the minimum investment level before the Fund redeems the shareholder's
account. The investment required to reach that level may be made at net asset
value (without any initial sales charge in the case of Class A shares).
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions and EXPRESS-Transfer transactions (see "Special Features")
and exchange transactions for individual and institutional accounts and
pre-authorized telephone redemption transactions for certain institutional
accounts. Shareholders may choose these privileges on the account application or
by contacting the Shareholder Service Agent for appropriate instructions. Please
note that the telephone exchange privilege is automatic unless the shareholder
refuses it on the account application. A Fund or its agents may be liable for
any losses, expenses or costs arising out of fraudulent or unauthorized
telephone requests pursuant to these privileges unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
telephonic instructions are genuine. The SHAREHOLDER WILL BEAR THE RISK OF LOSS,
including loss resulting from fraudulent or unauthorized transactions, as long
as the reasonable verification procedures are followed. The verification
procedures include recording instructions, requiring certain identifying
information before acting upon instructions and sending written confirmations.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption (prior to the
imposition of any contingent deferred sales charge in the case of Class B
shares) are $50,000 or less and the proceeds are payable to the shareholder of
record at the address of record, normally a telephone request or a written
request by any one account holder without a signature guarantee is sufficient
for redemptions by individual or joint account holders, and trust, executor and
guardian account holders (excluding custodial accounts for gifts and transfers
to minors), provided the trustee, executor or guardian is named in the account
registration. Other institutional account holders and guardian account holders
of custodial accounts for gifts and transfers to minors may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Telephone requests may be
made by calling 1-800-621-1048. Shares purchased by check or through
EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this privilege
of redeeming shares by telephone request until such shares have been owned for
at least 15 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone
26
<PAGE> 33
redemption privilege, although investors can still redeem by mail. The Fund
reserves the right to terminate or modify this privilege at any time.
REPURCHASES (CONFIRMED REDEMPTIONS). A request for repurchase may be
communicated by a shareholder through a securities dealer or other financial
services firm to KDI, which the Fund has authorized to act as its agent. There
is no charge by KDI with respect to repurchases; however, dealers or other firms
may charge customary commissions for their services. Dealers and other financial
services firms are obligated to transmit orders promptly. The repurchase price
of a Portfolio will be the net asset value of that Portfolio next determined
after receipt of a request by KDI. However, requests for repurchases received by
dealers or other firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of KDI's business day will
be confirmed at the net asset value effective on that day. The offer to
repurchase may be suspended at any time. Requirements as to stock powers,
certificates, payments and delay of payments are the same as for redemptions.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to the determination of net asset value will
result in shares being redeemed that day at the net asset value of the Portfolio
effective on that day and normally the proceeds will be sent to the designated
account the following business day. Delivery of the proceeds of a wire
redemption of $250,000 or more may be delayed by the Fund for up to seven days
if KFS deems it appropriate under then current market conditions. Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Fund is not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Fund currently does not charge the account holder for wire
transfers. The account holder is responsible for any charges imposed by the
account holder's firm or bank. There is a $1,000 wire redemption minimum
(including any contingent deferred sales charge). To change the designated
account to receive wire redemption proceeds, send a written request to the
Shareholder Service Agent with signatures guaranteed as described above or
contact the firm through which shares of the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 15
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
redemption privilege. The Fund reserves the right to terminate or modify this
privilege at any time.
CONTINGENT DEFERRED SALES CHARGE--LARGE ORDER NAV PURCHASE PRIVILEGE. A
contingent deferred sales charge of 1% may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege if they
are redeemed within one year of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions by a participant-directed qualified retirement plan described in
Code Section 401(a) or a participant-directed non-qualified deferred
compensation plan described in Code Section 457; (b) redemptions by employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent; (c) redemption of shares of a
shareholder (including a registered joint owner) who has died; (d) redemption of
shares of a shareholder (including a registered joint owner) who after purchase
of the shares being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration); and (e)
redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A contingent deferred sales
charge may be imposed upon redemption of Class B shares. There is no such charge
upon redemption of any share appreciation or
27
<PAGE> 34
reinvested dividends on Class B shares. The charge is computed at the following
rates applied to the value of the shares redeemed excluding amounts not subject
to the charge.
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES
YEAR OF REDEMPTION AFTER PURCHASE CHARGE
----------------------------------------------------------------------- ----------
<S> <C>
First.................................................................. 4%
Second................................................................. 3%
Third.................................................................. 3%
Fourth................................................................. 2%
Fifth.................................................................. 2%
Sixth.................................................................. 1%
</TABLE>
Class B shareholders who originally acquired their shares as Initial Shares of
Kemper Portfolios, formerly known as Kemper Investment Portfolios, hold them
subject to the same CDSC schedule that applied when those shares were purchased,
as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
----------------------------------------------------------------------------------------
SHARES PURCHASED ON OR AFTER
YEAR OF REDEMPTION AFTER SHARES PURCHASED ON OR AFTER FEBRUARY 1, 1991 AND BEFORE SHARES PURCHASED BEFORE
PURCHASE MARCH 1, 1993 MARCH 1, 1993 FEBRUARY 1, 1991
- -------------------------------- ----------------------------- ----------------------------- ------------------------
<S> <C> <C> <C>
First........................... 4% 3% 5%
Second.......................... 3% 3% 4%
Third........................... 3% 2% 3%
Fourth.......................... 2% 2% 2%
Fifth........................... 2% 1% 2%
Sixth........................... 1% 1% 1%
</TABLE>
The following example will illustrate the operation of the contingent deferred
sales charge. Assume that an investor makes a single purchase of $10,000 of
Class B shares and that 16 months later the value of the shares has grown by
$1,000 through reinvested dividends and by an additional $1,000 in appreciation
to a total of $12,000. If the investor were then to redeem the entire $12,000 in
share value, the contingent deferred sales charge would be payable only with
respect to $10,000 because neither the $1,000 of reinvested dividends nor the
$1,000 of share appreciation is subject to the charge. The charge would be at
the rate of 3% ($300) because it was in the second year after the purchase was
made.
The rate of the contingent deferred sales charge under the schedule above is
determined by the length of the period of ownership. Investments are tracked on
a monthly basis. The period of ownership for this purpose begins the first day
of the month in which the order for the investment is received. For example, an
investment made in December, 1994 will be eligible for the 3% charge if redeemed
on or after December 1, 1995. In the event no specific order is requested, the
redemption will be made first from Class B shares representing reinvested
dividends and then from the earliest purchase of Class B shares. KDI receives
any contingent deferred sales charge directly.
The contingent deferred sales charge will be waived: (a) in the event of the
total disability (as evidenced by a determination by the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed, (b) in the event of
the death of the shareholder (including a registered joint owner), (c) for
redemptions made pursuant to a systematic withdrawal plan (see "Special
Features--Systematic Withdrawal Plan" below), (d) for redemptions made pursuant
to any IRA systematic withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic payments described
in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2 and (e) for
redemptions to
28
<PAGE> 35
satisfy required minimum distributions after age 70 1/2 from an IRA account
(with the maximum amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts). The contingent deferred sales charge will
also be waived in connection with the following redemptions of shares held by
employer sponsored employee benefit plans maintained on the subaccount record
keeping system made available by the Shareholder Service Agent: (a) redemptions
to satisfy participant loan advances (note that loan repayments constitute new
purchases for purposes of the contingent deferred sales charge and the
conversion privilege), (b) redemptions in connection with retirement
distributions (limited at any one time to 10% of the total value of plan assets
invested in a Portfolio), (c) redemptions in connection with distributions
qualifying under the hardship provisions of the Internal Revenue Code and (d)
redemptions representing returns of excess contributions to such plans.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed Class A shares of the
Fund or any other Kemper Mutual Fund listed under "Special Features--Class A
Shares--Combined Purchases" may reinvest up to the full amount redeemed at net
asset value at the time of the reinvestment in Class A shares of the Fund or of
the other listed Kemper Mutual Funds. A shareholder of the Fund or other Kemper
Mutual Fund who redeems Class A shares purchased under the Large Order NAV
Purchase Privilege (see "Purchase of Shares") or Class B shares and incurs a
contingent deferred sales charge may reinvest up to the full amount redeemed at
net asset value at the time of the reinvestment, in Class A shares or Class B
shares, as the case may be, of the Fund or of other Kemper Mutual Funds. The
amount of any contingent deferred sales charge also will be reinvested. These
reinvested shares will retain their original cost and purchase date for purposes
of the contingent deferred sales charge. Also, a holder of Class B shares who
has redeemed shares may reinvest up to the full amount redeemed, less any
applicable contingent deferred sales charge that may have been imposed upon the
redemption of such shares, at net asset value in Class A shares of the Fund or
of the other Kemper Mutual Funds listed under "Special Features--Class A
Shares--Combined Purchases." Purchases through the reinvestment privilege are
subject to the minimum investment requirements applicable to the shares being
purchased and may only be made for Kemper Funds available for sale in the
shareholder's state of residence as listed under "Special Features--Exchange
Privilege." The reinvestment privilege can be used only once as to any specific
shares and reinvestment must be effected within six months of the redemption. If
a loss is realized on the redemption of shares of a Portfolio, the reinvestment
in shares of the same Portfolio may be subject to the "wash sale" rules if made
within 30 days of the redemption, resulting in a postponement of the recognition
of such loss for federal income tax purposes. The reinvestment privilege may be
terminated or modified at any time.
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. Class A shares may be purchased at the rate
applicable to the discount bracket attained by combining concurrent investments
in Class A shares of any of the following funds: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Fund, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund,
Kemper Value+Growth Fund, Kemper-Dreman Fund, Inc. and Kemper Horizon Fund
("Kemper Mutual Funds"). Except as noted below, there is no combined purchase
credit for direct purchases of shares of Kemper Money Market Fund, Cash
Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust,
Tax-Exempt New York Money Market Fund or Investors Cash Trust ("Money Market
Funds"), which are not considered "Kemper Mutual Funds" for purposes hereof. For
purposes of the Combined Purchases feature described above as well as for the
Letter of Intent and Cumulative Discount features described below, employer
sponsored employee benefit plans using the subaccount record keeping system made
available through the Shareholder Service Agent may include: (a) Money Market
Funds as "Kemper Mutual Funds", (b) all classes of shares of any Kemper Mutual
Fund and (c) the value of any other plan investment, such as guaranteed
investment contracts and employer stock, maintained on such subaccount record
keeping system.
29
<PAGE> 36
CLASS A SHARES--LETTER OF INTENT. The same reduced sales charges for Class A
shares, as shown in the applicable prospectus, also apply to the aggregate
amount of purchases of such Kemper Mutual Funds listed above made by any
purchaser within a 24-month period under a written Letter of Intent ("Letter")
provided by KDI. The Letter, which imposes no obligation to purchase or sell
additional Class A shares, provides for a price adjustment depending upon the
actual amount purchased within such period. The Letter provides that the first
purchase following execution of the Letter must be at least 5% of the amount of
the intended purchase, and that 5% of the amount of the intended purchase
normally will be held in escrow in the form of shares pending completion of the
intended purchase. If the total investments under the Letter are less than the
intended amount and thereby qualify only for a higher sales charge than actually
paid, the appropriate number of escrowed shares are redeemed and the proceeds
used toward satisfaction of the obligation to pay the increased sales charge.
The Letter for an employer sponsored employee benefit plan maintained on the
subaccount record keeping system available through the Shareholder Service Agent
may have special provisions regarding payment of any increased sales charge
resulting from a failure to complete the intended purchase under the Letter. A
shareholder may include the value (at the maximum offering price) of all shares
of such Kemper Mutual Funds held of record as of the initial purchase date under
the Letter as an "accumulation credit" toward the completion of the Letter, but
no price adjustment will be made on such shares. Only investments in Class A
shares are included in this privilege.
CLASS A SHARES--CUMULATIVE DISCOUNT. Class A shares may also be purchased at the
rate applicable to the discount bracket attained by adding to the cost of shares
of the Portfolio being purchased, the value of all Class A shares of the above
mentioned Kemper Mutual Funds (computed at the maximum offering price at the
time of the purchase for which the discount is applicable) already owned by the
investor.
CLASS A SHARES--AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
CLASS A SHARES. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features--Class A Shares--Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds that were acquired by purchase (not
including shares acquired by dividend reinvestment) are subject to the
applicable sales charge on exchange. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Tax-Exempt New York Money
Market Fund and Investors Cash Trust are available on exchange but only through
a financial services firm having a services agreement with KDI. Exchanges may
only be made for funds that are available for sale in the shareholder's state of
residence. Currently, Tax-Exempt California Money Market Fund is available for
sale only in California and Tax-Exempt New York Money Market Fund is available
for sale only in New York, Connecticut, New Jersey and Pennsylvania.
Class A shares purchased under the Large Order NAV Purchase Privilege may be
exchanged for Class A shares of another Kemper Mutual Fund or a Money Market
Fund under the exchange privilege described above without paying any contingent
deferred sales charge at the time of exchange. If the Class A shares received on
exchange are redeemed thereafter, a contingent deferred sales charge may be
imposed in accordance with the foregoing requirements provided that the shares
redeemed will retain their original cost and purchase date for purposes of the
contingent deferred sales charge.
CLASS B SHARES. Class B shares of the Fund and Class B shares of any other
Kemper Mutual Fund listed under "Special Features--Class A Shares--Combined
Purchases" may be exchanged for each other at their relative net asset values.
Class B shares may be exchanged without a contingent deferred sales charge being
imposed at the time
30
<PAGE> 37
of exchange. For purposes of the contingent deferred sales charge that may be
imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
CLASS C SHARES. Class C shares of the Fund and Class C shares of any other
Kemper Mutual Fund listed under "Special Features--Class A Shares--Combined
Purchases" may be exchanged for each other at their relative net asset values.
GENERAL. Shares purchased by check or through EXPRESS-Transfer or Bank Direct
Deposit may not be exchanged until they have been owned for at least 15 days. In
addition, shares of a Kemper Mutual Fund (except Kemper Cash Reserves Fund)
acquired by exchange from another Kemper Mutual Fund, or from a Money Market
Fund, may not be exchanged thereafter until they have been owned for 15 days.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, dealers or other
firms may charge for their services in effecting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain prospectuses of the other funds from dealers,
other firms or KDI. Exchanges may be accomplished by a written request to Kemper
Mutual Funds, Attention: Exchange Department, P.O. Box 419557, Kansas City,
Missouri 64141-6557, or by telephone if the shareholder has given authorization.
Once the authorization is on file, the Shareholder Service Agent will honor
requests by telephone at 1-800-621-1048, subject to the limitations on liability
under "Redemption or Repurchase of Shares--General." Any share certificates must
be deposited prior to any exchange of such shares. During periods when it is
difficult to contact the Shareholder Service Agent by telephone, it may be
difficult to use the telephone exchange privilege. The exchange privilege is not
a right and may be suspended, terminated or modified at any time. Except as
otherwise permitted by applicable regulations, 60 days' prior written notice of
any termination or material change will be provided.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of any class of the
shares of a Kemper Mutual Fund or Money Market Fund may authorize the automatic
exchange of a specified amount ($100 minimum) of such shares for shares of the
same class of another such Kemper Fund. If selected, exchanges will be made
automatically until the privilege is terminated by the shareholder or the Kemper
Fund. Exchanges are subject to the terms and conditions described above under
"Exchange Privilege," including the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange. This privilege may not be used for the
exchange of shares held in certificated form.
EXPRESS-TRANSFER. EXPRESS-Transfer permits the transfer of money via the
Automated Clearing House System (minimum $100 and maximum $2,500) from a
shareholder's bank, savings and loan, or credit union account to purchase shares
of the Fund. Shareholders can also redeem shares (minimum $500 and maximum
$2,500) from their Fund account and transfer the proceeds to their bank, savings
and loan, or credit union checking account. By enrolling in EXPRESS-Transfer,
the shareholder authorizes the Shareholder Service Agent to rely upon telephone
instructions from any person to transfer the specified amounts between the
shareholder's Fund account and the predesignated bank, savings and loan or
credit union account, subject to the limitations on liability under "Redemption
or Repurchase of Shares--General." Once enrolled in EXPRESS-Transfer, a
shareholder can initiate a transaction by calling Kemper Shareholder Services
toll free at 1-800-621-1048 Monday through Friday, 8:00 a.m. to 3:00 p.m.
Chicago time. Shareholders may terminate this privilege by sending written
notice to Kemper Service Company, P.O. Box 419415, Kansas City, Missouri
64141-6415. Termination will become effective as soon as the Shareholder Service
Agent has had a reasonable time to act upon the request. EXPRESS-Transfer cannot
be used with passbook savings accounts or for tax-deferred plans such as
Individual Retirement Accounts ("IRAs").
BANK DIRECT DEPOSIT. A shareholder may purchase additional shares of the Fund
through an automatic investment program. With the Bank Direct Deposit Purchase
Plan, monthly investments are made automatically
31
<PAGE> 38
from the shareholder's account at a bank, savings and loan or credit union into
the shareholder's Fund account. By enrolling in Bank Direct Deposit, the
shareholder authorizes the Fund and its agents to either draw checks or initiate
Automated Clearing House debits against the designated account at a bank or
other financial institution. This privilege may be selected by completing the
appropriate section on the Account Application or by contacting the Shareholder
Service Agent for appropriate forms. A shareholder may terminate his or her Plan
by sending written notice to Kemper Service Company, P.O. Box 419415, Kansas
City, Missouri 64141-6415. Termination by a shareholder will become effective
within thirty days after the Shareholder Service Agent has received the request.
The Fund may immediately terminate a shareholder's Plan in the event that any
item is unpaid by the shareholder's financial institution. The Fund may
terminate or modify this privilege at any time.
PAYROLL DIRECT DEPOSIT AND GOVERNMENT DIRECT DEPOSIT. A shareholder may invest
in the Fund through Payroll Direct Deposit or Government Direct Deposit. Under
these programs, all or a portion of a shareholder's net pay or government check
is automatically invested in a Portfolio each payment period. A shareholder may
terminate participation in these programs by giving written notice to the
shareholder's employer or government agency, as appropriate. (A reasonable time
to act is required.) The Fund is not responsible for the efficiency of the
employer or government agency making the payment or any financial institutions
transmitting payments.
SYSTEMATIC WITHDRAWAL PLAN. The owner of $5,000 or more of a class of a
Portfolio's shares at the offering price (net asset value plus, in the case of
Class A shares, the initial sales charge) may provide for the payment from the
owner's account of any requested dollar amount to be paid to the owner or a
designated payee monthly, quarterly, semiannually or annually. The $5,000
minimum account size is not applicable to Individual Retirement Accounts. The
minimum periodic payment is $100. The maximum annual rate at which Class B
shares may be redeemed under a systematic withdrawal plan is 10% of the net
asset value of the account. Shares are redeemed so that the payee will receive
payment approximately the first of the month. Any income and capital gain
dividends will be automatically reinvested at net asset value. A sufficient
number of full and fractional shares will be redeemed to make the designated
payment. Depending upon the size of the payments requested and fluctuations in
the net asset value of the shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, the Fund will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. KDI will waive the contingent deferred sales charge on redemptions
of Class B shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Fund.
TAX-SHELTERED RETIREMENT PLANS. KFS provides retirement plan services and
documents and KDI can establish investor accounts in any of the following types
of retirement plans:
- - Individual Retirement Accounts ("IRAs") trusteed by IFTC. This includes
Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents.
- - 403(b)(7) Custodial Accounts also trusteed by IFTC. This type of plan is
available to employees of most non-profit organizations.
- - Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum annual contribution per participant is the lesser of
25% of compensation or $30,000.
Brochures describing the above plans as well as model defined benefit plans,
target benefit plans, 457 plans, 401(k) plans and materials for establishing
them are available from KDI upon request. The brochures for plans trusteed by
IFTC describe the current fees payable to IFTC for its services as trustee.
Investors should consult with their own tax advisers before establishing a
retirement plan.
32
<PAGE> 39
PERFORMANCE
The Fund may advertise several types of performance information for each
Portfolio and each class of shares of each Portfolio, including "average annual
total return" and "total return." Performance information will be computed
separately for Class A, Class B and Class C shares. Each of these figures is
based upon historical results and is not representative of the future
performance of any class of any Portfolio.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments held by a portfolio
for the period referenced, assuming the reinvestment of all dividends. Thus,
these figures reflect the change in the value of an investment in a Portfolio
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Portfolio for performance purposes). Average
annual total return figures represent the average annual percentage change over
the period in question. Total return figures represent the aggregate percentage
or dollar value change over the period in question.
A Portfolio's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Russell 1000(R)
Growth Index, the Wilshire Large Company Growth Index, the Wilshire 750 Mid Cap
Company Growth Index, the Standard & Poor's/Barra Value Index, Standard &
Poor's/Barra Growth Index and the Russell 1000(R) Value Index. The performance
of a Portfolio may also be compared to the combined performance of several
indexes. The performance of a Portfolio may also be compared to the performance
of other mutual funds or mutual fund indexes with similar objectives and
policies as reported by independent mutual fund reporting services such as
Lipper Analytical Services, Inc. ("Lipper"). Lipper performance calculations are
based upon changes in net asset value with all dividends reinvested and do not
include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
The Fund may depict the historical performance of the securities in which the
Portfolios may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. The Fund may
also describe each Portfolio's holdings and depict their size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolios. The relative
performance of growth stocks versus value stocks may also be discussed.
Class A shares are sold at net asset value plus a maximum sales charge of 5.75%
of the offering price. While the maximum sales charge is normally reflected in a
Portfolio's Class A performance figures, certain total return calculations may
not include such charge and those results would be reduced if it were included.
Class B shares and Class C shares are sold at net asset value. Redemptions of
Class B shares within the first six years after purchase may be subject to a
contingent deferred sales charge that ranges from 4% during the first year to 0%
after six years. Average annual total return figures do, and total return
figures may, include the effect of the contingent deferred sales charge for the
Class B shares that may be imposed at the end of the period in question.
Performance figures for
33
<PAGE> 40
the Class B shares not including the effect of the applicable contingent
deferred sales charge would be reduced if it were included.
Each Portfolio's returns and net asset value will fluctuate. Shares of each
Portfolio are redeemable by an investor at the then current net asset value,
which may be more or less than original cost. Redemption of Class B shares may
be subject to a contingent deferred sales charge as described above. Additional
information concerning each Portfolio's performance appears in the Statement of
Additional Information. Additional information about each Portfolio's
performance will also be contained in its Annual Report to Shareholders, which,
after the end of the Fund's first fiscal year, will be available without charge
from the Fund.
CAPITAL STRUCTURE
The Fund is an open-end management investment company, organized as a business
trust under the laws of Massachusetts. The investment manager invested the "seed
money" as the sole shareholder of each class of each Portfolio of the Fund
before the public offering of its shares and therefore as of the date of this
prospectus controls the Fund.
The Fund may issue an unlimited number of shares of beneficial interest in one
or more series or "Portfolios," all having no par value, which may be divided by
the Board of Trustees into classes of shares. Currently, the Fund offers three
Portfolios each with four classes of shares. These are Class A, Class B and
Class C shares, as well as Class I shares, which are available for purchase
exclusively by the following investors: (a) tax-exempt retirement plans of KFS
and its affiliates; and (b) the following investment advisory clients of KFS and
its investment advisory affiliates that invest at least $1 million in a
Portfolio: (1) unaffiliated benefit plans, such as qualified retirement plans
(other than individual retirement accounts and self-directed retirement plans);
(2) unaffiliated banks and insurance companies purchasing for their own
accounts; and (3) endowment funds of unaffiliated non-profit organizations. The
Board of Trustees may authorize the issuance of additional classes and
additional Portfolios if deemed desirable, each with its own investment
objectives, policies and restrictions. Since the Fund may offer multiple
Portfolios, it is known as a "series company." Shares of the Fund have equal
noncumulative voting rights except that Class B and Class C shares have separate
and exclusive voting rights with respect to the Rule 12b-1 Plan. Shares of each
class also have equal rights with respect to dividends, assets and liquidation
of a Portfolio subject to any preferences (such as resulting from different Rule
12b-1 distribution fees), rights or privileges of any classes of shares of the
Portfolio. Shares of each Portfolio are fully paid and nonassessable when
issued, are transferable without restriction and have no preemptive or
conversion rights. The Fund is not required to hold annual shareholder meetings
and does not intend to do so. However, it will hold special meetings as required
or deemed desirable for such purposes as electing trustees, changing fundamental
policies or approving an investment management agreement. Subject to the
Agreement and Declaration of Trust of the Fund, shareholders may remove
trustees. Shareholders will vote by Portfolio and not in the aggregate or by
class except when voting in the aggregate is required, under the Investment
Company Act of 1940, such as for the election of trustees or when voting by
class is appropriate.
34
<PAGE> 41
[KEMPER LOGO]
INVESTMENT MANAGER
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
1-800-621-1048
KTFIF-1S 11/95 (LOGO)printed on recycled paper
Kemper
Horizon
Fund
, 1995
KEMPER HORIZON
20+ PORTFOLIO
KEMPER HORIZON
10+ PORTFOLIO
KEMPER HORIZON
5 PORTFOLIO
[KEMPER LOGO]
<PAGE> 42
KEMPER HORIZON FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
------------- --------------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Investment Restrictions; Investment Policies
and Techniques
14. Management of the Fund................... Investment Manager and Underwriter;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Underwriter;
Officers and Trustees
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends and Taxes
21. Underwriters............................. Investment Manager and Underwriter
22. Calculation of Performance Data.......... Performance
23. Financial Statements..................... Report of Independent Auditors; Statement of
Net Assets
</TABLE>
<PAGE> 43
KEMPER HORIZON FUND
STATEMENT OF ADDITIONAL INFORMATION
, 1995
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for each of the portfolios (the
"Portfolios") of the Kemper Horizon Fund (the "Fund"). It should be read in
conjunction with the prospectus of the Fund dated , 1995. The
prospectus may be obtained without charge from the Fund.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions............................................. B-1
Investment Policies and Techniques.................................. B-2
Portfolio Transactions.............................................. B-10
Investment Manager and Underwriter.................................. B-11
Purchase and Redemption of Shares................................... B-14
Dividends and Taxes................................................. B-15
Performance......................................................... B-16
Officers and Trustees............................................... B-17
Shareholder Rights.................................................. B-19
Report of Independent Auditors...................................... B-21
Statement of Net Assets............................................. B-22
Appendix--Ratings of Fixed Income Investments....................... B-23
</TABLE>
KHF- /95 (LOGO)printed on recycled paper
<PAGE> 44
INVESTMENT RESTRICTIONS
Each Portfolio has adopted certain fundamental investment restrictions that,
together with its investment objective and any fundamental policies, cannot be
changed without approval of a majority of the outstanding voting shares of the
Portfolio. As defined in the Investment Company Act of 1940, this means the
lesser of the vote of (a) 67% of the shares of the Portfolio present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy or (b) more than 50% of the outstanding shares of the Portfolio.
NO PORTFOLIO MAY, AS A FUNDAMENTAL POLICY:
(1) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result,
more than 5% of the total value of the its assets would be invested in
securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any issuer.
(3) Make loans to others provided that it may purchase debt obligations or
repurchase agreements and it may lend its securities in accordance with its
investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets, in order to meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of the Portfolio's
total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Portfolio will, within three days (not
including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not purchase securities or make investments while
borrowings are in excess of 5% of its total assets.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of its
total assets and then only to secure borrowings permitted by restriction number
(4) above. (The collateral arrangements with respect to options, financial
futures and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, the Portfolio may
make margin deposits in connection with options and financial futures
transactions.
(7) Make short sales of securities or maintain a short position for its account
unless at all times when a short position is open it owns an equal amount of
such securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short and unless not more
than 10% of the Portfolio's total assets is held as collateral for such sales at
any one time.
(8) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
its total assets would be invested in any one industry.
(9) Invest in commodities or commodity futures contracts, although it may buy or
sell financial futures contracts and options on such contracts, and engage in
foreign currency transactions; or in real estate (including real estate limited
partnership interests), although it may invest in securities that are secured by
real estate and securities of issuers that invest or deal in real estate.
(10) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities.
(11) Issue senior securities except as permitted under the Investment Company
Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The
Portfolios
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do not have a present intention of borrowing as permitted by investment
restriction number 4 during the current year. Each Portfolio has adopted the
following non-fundamental restrictions, which may be changed by the Board of
Trustees without shareholder approval. No Portfolio may:
(i) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(ii) Invest for the purpose of exercising control or management of another
issuer.
(iii) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of issuers that
invest in or sponsor such programs.
(iv) Purchase securities of other open-end investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
(v) Invest more than 5% of its total assets in securities of issuers (other than
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities) that with their predecessors have a record of less than three
years continuous operation and equity securities of issuers that are not readily
marketable.
(vi) Invest more than 15% of its net assets in illiquid securities.
(vii) Invest in warrants if more than 5% of its net assets would be invested in
warrants. Included within that amount, but not to exceed 2% of the Portfolio's
net assets, may be warrants not listed on the New York or American Stock
Exchange. Warrants acquired in units or attached to securities may be deemed to
be without value for such purposes.
(viii) Invest in oil, gas, and other mineral leases.
(ix) Purchase or sell real property (including limited partnership interests but
excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies that invest in real estate).
(x) Invest more than 5% of its total assets in restricted securities, excluding
restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have been determined to be liquid pursuant to
procedures adopted by the Board of Trustees, provided that the total amount of
its assets invested in restricted securities and securities of issuers that with
their predecessors have a record of less than three years continuous operation
will not exceed 15% of total assets.
(xi) Invest more than 10% of its total assets in securities of real estate
investment trusts.
(xii) Write or sell put or call options, combinations thereof or similar options
on more than 25% of the its net assets; nor may it purchase put or call options
if more than 5% of the its net assets would be invested in premiums on put and
call options, combinations thereof or similar options; however, the Portfolio
may buy or sell options on financial futures contracts.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Portfolio may engage in options transactions and may engage in
financial futures transactions in accordance with its respective investment
objectives and policies. Each Portfolio intends to engage in such transactions
if it appears to the investment manager to be advantageous to do so in order to
pursue its investment objective and also to hedge against the effects of market
risks but not for speculative purposes. The use of futures and options, and
possible benefits and attendant risks, are discussed below along with
information concerning other investment policies and techniques.
OPTIONS ON SECURITIES. Each Portfolio may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an
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exercise price equal to or less than the exercise price of the "covered" option,
or will establish and maintain for the term of the option a segregated account
consisting of cash, U.S. Government securities or other liquid high-grade debt
obligations ("eligible securities") having a value at least equal to the
fluctuating market value of the optioned securities. Each Portfolio may write
"covered" put options provided that, as long as the Portfolio is obligated as a
writer of a put option, the Portfolio will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying security
at the exercise price during the option period. The premium received for writing
an option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to such market
price, the price volatility of the underlying security, the option period,
supply and demand and interest rates. The Portfolio may write or purchase spread
options, which are options for which the exercise price may be a fixed dollar
spread or yield spread between the security underlying the option and another
security that is used as a bench mark. The exercise price of an option may be
below, equal to or above the current market value of the underlying security at
the time the option is written. The buyer of a put who also owns the related
security is protected by ownership of a put option against any decline in that
security's price below the exercise price less the amount paid for the option.
The ability to purchase put options allows a Portfolio to protect capital gains
in an appreciated security it owns, without being required to actually sell that
security. At times a Portfolio would like to establish a position in a security
upon which call options are available. By purchasing a call option, a Portfolio
is able to fix the cost of acquiring the security, this being the cost of the
call plus the exercise price of the option. This procedure also provides some
protection from an unexpected downturn in the market, because a Portfolio is
only at risk for the amount of the premium paid for the call option which it
can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the eligible securities that
have been segregated. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received and
any interest income earned on the eligible securities that have been segregated.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives, Policies and Risk Factors"), the Portfolios may deal in
over-the-counter traded options ("OTC options"). OTC options differ from
exchange traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation, and there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise, in which event a Portfolio may experience material losses. However,
in writing options the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities, and a wider range of expiration
dates and exercise prices, than are exchange traded options. Since there is no
exchange, pricing is normally done by reference to information from market
makers, which information is carefully monitored by the investment manager and
verified in appropriate cases.
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A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Portfolio may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Portfolio writes an OTC option, it generally can close out
that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Portfolio originally wrote it. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Fund understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Portfolios have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Portfolios. A brief description of such
procedures is set forth below.
A Portfolio will only engage in OTC options transactions with dealers that have
been specifically approved by the investment manager pursuant to procedures
adopted by the Board of Trustees of the Fund. The investment manager believes
that the approved dealers should be able to enter into closing transactions if
necessary and, therefore, present minimal credit risks to a Portfolio. The
investment manager will monitor the credit-worthiness of the approved dealers on
an ongoing basis. A Portfolio currently will not engage in OTC options
transactions if the amount invested by the Portfolio in OTC options, plus a
"liquidity charge" related to OTC options written by the Portfolio, plus the
amount invested by the Portfolio in illiquid securities, would exceed 15% of the
Portfolio's net assets. The "liquidity charge" referred to above is computed as
described below.
The Portfolio anticipates entering into agreements with dealers to which a
Portfolio sells OTC options. Under these agreements the Portfolio would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow a Portfolio to repurchase a specific OTC
option written by the Portfolio, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. Each Portfolio may purchase and write, call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Portfolio owns or intends
to purchase, and not for speculation. Through the writing or purchase of index
options, a Portfolio can achieve many of the same objectives as through the use
of options on individual securities. Options on securities indices are similar
to options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to such difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike security options, all settlements are in cash
and gain or loss depends upon price movements in the market generally (or in a
particular industry or segment of the market), rather than upon price movements
in individual securities. Price movements in
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<PAGE> 48
securities that the Portfolio owns or intends to purchase will probably not
correlate perfectly with movements in the level of an index since the prices of
such securities may be affected by somewhat different factors and, therefore,
the Portfolio bears the risk that a loss on an index option would not be
completely offset by movements in the price of such securities.
When a Portfolio writes an option on a securities index, it will segregate, and
mark-to-market, eligible securities equal in value to 100% of the exercise price
in the case of a put, or the contract value in the case of a call. In addition,
where the Portfolio writes a call option on a securities index at a time when
the contract value exceeds the exercise price, the Portfolio will segregate and
mark-to-market, until the option expires or is closed out, cash or cash
equivalents equal in value to such excess.
A Portfolio may also purchase and sell options on other appropriate indices, as
available, such as foreign currency indices. Options on futures contracts and
index options involve risks similar to those risks relating to transactions in
financial futures contracts described below. Also, an option purchased by a
Portfolio may expire worthless, in which case the Portfolio would lose the
premium paid therefor.
FINANCIAL FUTURES CONTRACTS. The Portfolios may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Portfolio holds or intends to purchase. A "sale" of a futures contract means
the undertaking of a contractual obligation to deliver the securities or the
cash value of an index or foreign currency called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index or foreign currency at a specified price
during a specified delivery period. At the time of delivery, in the case of
fixed income securities pursuant to the contract, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than that specified in the contract. In some cases,
securities called for by a futures contract may not have been issued at the time
the contract was written.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case may be)
on a commodities exchange an identical futures contract calling for delivery in
the same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the underlying securities or
other assets. All transactions in the futures market are made, offset or
fulfilled through a clearing house associated with the exchange on which the
contracts are traded. A Portfolio will incur brokerage fees when it purchases or
sells contracts, and will be required to maintain margin deposits. At the time a
Portfolio enters into a futures contract, it is required to deposit with its
custodian, on behalf of the broker, a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded. Subsequent
payments, called "variation margin," to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. The costs incurred
in connection with futures transactions could reduce a Portfolio's return.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of markets or exchange rates is wrong, the overall performance
may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures
B-5
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markets are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities or other assets and movements in the prices of futures contracts, a
correct forecast of market trends by the investment manager may still not result
in a successful hedging transaction. If any of these events should occur, the
Portfolio could lose money on the financial futures contracts and also on the
value of its portfolio assets.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. A Portfolio may purchase and write call
and put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Portfolio would be
required to deposit with its custodian initial margin and maintenance margin
with respect to put and call options on futures contracts written by it. A
Portfolio will establish segregated accounts or will provide cover with respect
to written options on financial futures contracts in a manner similar to that
described under "Options on Securities." Options on futures contracts involve
risks similar to those risks relating to transactions in financial futures
contracts described above. Also, an option purchased by a Portfolio may expire
worthless, in which case the Portfolio would lose the premium paid therefor.
DELAYED DELIVERY TRANSACTIONS. A Portfolio may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions involve a commitment by a Portfolio to purchase or sell
securities with payment and delivery to take place in the future in order to
secure what is considered to be an advantageous price or yield to the Portfolio
at the time of entering into the transaction. When a Portfolio enters into a
delayed delivery purchase, it becomes obligated to purchase securities and it
has all the rights and risks attendant to ownership of a security, although
delivery and payment occur at a later date. The value of fixed income securities
to be delivered in the future will fluctuate as interest rates vary. At the time
a Portfolio makes the commitment to purchase a security on a when-issued or
delayed delivery basis, it will record the transaction and reflect the liability
for the purchase and the value of the security in determining its net asset
value. Likewise, at the time a Portfolio makes the commitment to sell a security
on a delayed delivery basis, it will record the transaction and include the
proceeds to be received in determining its net asset value; accordingly, any
fluctuations in the value of the security sold pursuant to a delayed delivery
commitment are ignored in calculating net asset value so long as the commitment
remains in effect. A Portfolio generally has the ability to close out or "roll
over" a purchase obligation on or before the settlement date, rather than take
delivery of the security.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
IC-10666, when purchasing a futures contract, writing a put option or entering
into a forward currency exchange purchase or a delayed delivery purchase, a
Portfolio will maintain in a segregated account cash, U.S. Government securities
or liquid high-grade debt obligations equal to the value of such contracts. A
Portfolio will use cover in connection with selling a futures contract.
A Portfolio will not engage in transactions in financial futures contracts or
options thereon for speculation, but only in an attempt to hedge against changes
in interest rates or market conditions affecting the value of securities which
the Portfolio holds or intends to purchase.
FOREIGN CURRENCY OPTIONS. The Portfolios may engage in foreign currency options
transactions. A foreign currency option provides the option buyer with the right
to buy or sell a stated amount of foreign currency at the exercise price at a
specified date or during the option period. A call option gives its owner the
right, but not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Portfolio against an adverse movement in
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<PAGE> 50
the value of a foreign currency, it does not limit the gain which might result
from a favorable movement in the value of such currency. For example, if a
Portfolio were holding securities denominated in an appreciating foreign
currency and had purchased a foreign currency put to hedge against a decline in
the value of the currency, it would not have to exercise its put. Similarly, if
the Portfolio had entered into a contract to purchase a security denominated in
a foreign currency and had purchased a foreign currency call to hedge against a
rise in value of the currency but instead the currency had depreciated in value
between the date of purchase and the settlement date, the Portfolio would not
have to exercise its call but could acquire in the spot market the amount of
foreign currency needed for settlement.
FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of their financial futures
transactions (see "Financial Futures Contracts" and "Options on Financial
Futures Contracts" above), the Portfolios may use foreign currency futures
contracts and options on such futures contracts. Through the purchase or sale of
such contracts, a Portfolio may be able to achieve many of the same objectives
as through forward foreign currency exchange contracts more effectively and
possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days ("term") from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. The investment manager believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that to do so is in the best interests of a Portfolio. A Portfolio
will not speculate in foreign currency exchange.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction with respect to a forward contract, the Portfolio will incur a gain
or a loss (as described below) to the extent that there has been movement in
forward contract prices. If the Portfolio engages in an offsetting transaction,
it may subsequently enter into a new forward contract to sell the foreign
currency. Should forward prices decline during the period between a Portfolio's
entering into a forward contract for the sale of foreign currency and the date
it enters into an offsetting contract for the purchase of the foreign currency,
the Portfolio would realize a gain to the extent the price of the currency it
has agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Portfolio would suffer a loss to the extent
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain that might result should the value of such
currency increase. A Portfolio may have to convert its holdings of foreign
currencies into U.S. Dollars from time to time in order to meet such needs as
Portfolio expenses and redemption requests. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies.
A Portfolio will not enter into forward contracts or maintain a net exposure in
such contracts when the Portfolio would be obligated to deliver an amount of
foreign currency in excess of the value of the Portfolio's securities or other
assets denominated in that currency. A Portfolio segregates cash or liquid
high-grade securities in an amount not less than the value of the Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the securities
segregated declines, additional cash or securities is added so that the
segregated amount is not less than the amount of the Portfolio's commitments
with respect to such contracts. A Portfolio generally does not enter into a
forward contract with a term longer than one year.
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REPURCHASE AGREEMENTS. A Portfolio may invest in repurchase agreements, which
are instruments under which the Portfolio acquires ownership of a security from
a broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Portfolio's holding period. In the
event of a bankruptcy or other default of a seller of a repurchase agreement,
the Portfolio might incur expenses in enforcing its rights, and could experience
losses, including a decline in the value of the underlying securities and loss
of income. The securities underlying a repurchase agreement will be
marked-to-market every business day so that the value of such securities is at
least equal to the investment value of the repurchase agreement, including any
accrued interest thereon. No Portfolio currently intends to invest more than 5%
of its net assets in repurchase agreements during the current year.
SHORT SALES AGAINST-THE-BOX. A Portfolio may make short sales against-the-box
for the purpose of deferring realization of gain or loss for federal income tax
purposes. A short sale "against-the-box" is a short sale in which the Portfolio
owns at least an equal amount of the securities sold short or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities sold short. A Portfolio may engage in such short sales only to
the extent that not more than 10% of the Portfolio's total assets (determined at
the time of the short sale) is held as collateral for such sales. No Portfolio
currently intends, however, to engage in such short sales to the extent that
more than 5% of its net assets will be held as collateral therefor during the
current year.
OTHER CONSIDERATIONS--HIGH YIELD (HIGH RISK) BONDS. As reflected in the
prospectus, a Portfolio may invest a portion of its assets in fixed income
securities that are in the lower rating categories of recognized rating agencies
or are non-rated. These lower rated or non-rated fixed income securities are
considered, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher rating
categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect a
Portfolio's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore, an investment in fixed
income securities generally entails less risk than an investment in common stock
of the same issuer.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss from default by the
issuer is significantly greater for the holders of high yielding securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
Zero coupon securities and pay-in-kind bonds involve additional special
considerations. Zero coupon securities are debt obligations that do not entitle
the holder to any periodic payments of interest prior to maturity or a specified
cash payment date when the securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at a discount from their face
amount or par value. The market prices of zero coupon securities are generally
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to
B-8
<PAGE> 52
changes in interest rates to a greater degree than do securities paying interest
currently with similar maturities and credit quality. Zero coupon, pay-in-kind
or deferred interest bonds carry additional risk in that unlike bonds that pay
interest throughout the period to maturity, a Portfolio will realize no cash
until the cash payment date unless a portion of such securities is sold and, if
the issuer defaults, the Portfolio may obtain no return at all on its
investment.
Additional information concerning high yield securities appears under
"Appendix--Ratings of Fixed Income Investments."
COLLATERALIZED OBLIGATIONS. Each Portfolio will currently invest in only those
collateralized obligations that are fully collateralized and that meet the
quality standards otherwise applicable to the Portfolio's investments. Fully
collateralized means that the collateral will generate cash flows sufficient to
meet obligations to holders of the collateralized obligations under even the
most conservative prepayment and interest rate projections. Thus, the
collateralized obligations are structured to anticipate a worst case prepayment
condition and to minimize the reinvestment rate risk for cash flows between
coupon dates for the collateralized obligations. A worst case prepayment
condition generally assumes immediate prepayment of all securities purchased at
a premium and zero prepayment of all securities purchased at a discount.
Reinvestment rate risk may be minimized by assuming very conservative
reinvestment rates and by other means such as by maintaining the flexibility to
increase principal distributions in a low interest rate environment. The
effective credit quality of the collateralized obligations in such instances is
the credit quality of the issuer of the collateral. The requirements as to
collateralization are determined by the issuer or sponsor of the collateralized
obligation in order to satisfy rating agencies, if rated. None of the Portfolios
currently intends to invest more than 5% of its total assets in collateralized
obligations that are collateralized by a pool of credit card or automobile
receivables or other types of assets rather than a pool of mortgages,
mortgage-backed securities or U.S. Government securities. Currently, none of the
Portfolios intends to invest more than 10% of its total assets in inverse
floaters as described in the prospectus (the "Investment
Techniques--Collateralized Obligations").
Payments of principal and interest on the underlying collateral securities are
not passed through directly to the holders of the collateralized obligations as
such. Collateralized obligations often are issued in two or more classes with
varying maturities and stated rates of interest. Because interest and principal
payments on the underlying securities are not passed through directly to holders
of collateralized obligations, such obligations of varying maturities may be
secured by a single portfolio or pool of securities, the payments on which are
used to pay interest on each class and to retire successive maturities in
sequence. These relationships may in effect "strip" the interest payments from
principal payments of the underlying securities and allow for the separate
purchase of either the interest or the principal payments, sometimes called
interest only ("IO") and principal only ("PO") securities. Collateralized
obligations are designed to be retired as the underlying securities are repaid.
In the event of prepayment on or call of such securities, the class of
collateralized obligation first to mature generally will be paid down first.
Therefore, although in most cases the issuer of collateralized obligations will
not supply additional collateral in the event of such prepayment, there will be
sufficient collateral to secure collateralized obligations that remain
outstanding. It is anticipated that no more than 5% of a Portfolio's total
assets will be invested in IO and PO securities. Governmentally-issued and
privately-issued IO's and PO's will be considered illiquid for purposes of a
Portfolio's limitation on illiquid securities, however, the Board of Trustees
may adopt guidelines under which governmentally-issued IO's and PO's may be
determined to be liquid.
In reliance on an interpretation by the SEC, a Portfolio's investments in
certain qualifying collateralized obligations are not subject to the limitations
in the 1940 Act regarding investments by a registered investment company, such
as a Portfolio, in another investment company.
ZERO COUPON GOVERNMENT SECURITIES. Subject to its investment objective and
policies, a Portfolio may invest in zero coupon U.S. Government securities. Zero
coupon bonds are purchased at a discount from the face amount. The buyer
receives only the right to receive a fixed payment on a certain date in the
future and does not receive any periodic interest payments. These securities may
include those created directly by the U.S. Treasury and those
B-9
<PAGE> 53
created as collateralized obligations through various proprietary custodial,
trust or other relationships. The effect of owning instruments which do not make
current interest payments is that a fixed yield is earned not only on the
original investment but also, in effect, on all discount accretion during the
life of the obligations. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest distributions at a rate as high
as the implicit yield on the zero coupon bond, but at the same time eliminates
any opportunity to reinvest earnings at higher rates. For this reason, zero
coupon bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than those of comparable securities
that pay interest currently, which fluctuation is greater as the period to
maturity is longer. Zero coupon bonds created as collateralized obligations are
similar to those created through the U.S. Treasury, but the former investments
do not provide absolute certainty of maturity or of cash flows after prior
classes of the collateralized obligations are retired. No Portfolio currently
intends to invest more than 5% of its net assets in zero coupon U.S. Government
securities during the current year.
PORTFOLIO TRANSACTIONS
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment management services to other clients including Kemper
Corporation and the Kemper insurance companies. KFS is the sole shareholder of
Kemper Asset Management Company and Kemper Investment Management Company
Limited. These three entities share some common research and trading facilities.
Dreman Value Advisors, Inc. ("DVA") is the investment manager for mutual funds
and other institutional accounts and the sub-adviser for the Fund. At times
investment decisions may be made to purchase or sell the same investment
securities for a Portfolio and for one or more of the other clients managed by
KFS or DVA. When two or more of such clients are simultaneously engaged in the
purchase or sale of the same security through the same trading facility, the
transactions are allocated as to amount and price in a manner considered
equitable to each.
National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options a
Portfolio will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to a Portfolio. On
the other hand, the ability of a Portfolio to participate in volume transactions
may produce better executions for a Portfolio in some cases. The Board of
Trustees of the Fund believes that the benefits of KFS's and DVA's organization
outweigh any limitations that may arise from simultaneous transactions or
position limitations.
KFS and DVA, in effecting purchases and sales of portfolio securities for the
account of each Portfolio, will implement the Fund's policy of seeking best
execution of orders, which includes best net prices, except to the extent that
KFS and DVA may be permitted to pay higher brokerage commissions for research
services as described below. Consistent with this policy, orders for portfolio
transactions are placed with broker-dealer firms giving consideration to the
quality, quantity and nature of each firm's professional services, which include
execution, clearance procedures, wire service quotations and statistical and
other research information provided to a Portfolio and KFS or DVA. Any research
benefits derived are available for all clients, including clients of affiliated
companies. Since it is only supplementary to KFS's and DVA's own research
efforts and must be analyzed and reviewed by KFS' and DVA's staff, the receipt
of research information is not expected to materially reduce expenses. In
selecting among firms believed to meet the criteria for handling a particular
transaction, KFS and DVA may give consideration to those firms that have sold or
are selling shares of the Fund and of other funds managed by KFS and DVA, as
well as to those firms that provide market, statistical and other research
information to a Portfolio and KFS and DVA, although neither KFS nor DVA is
authorized to pay higher commissions or, in the case of principal trades, higher
prices to firms that provide such services, except as described below.
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<PAGE> 54
KFS and DVA may in certain instances be permitted to pay higher brokerage
commissions (not including principal trades) solely for receipt of market,
statistical and other research services. Subject to Section 28(e) of the
Securities Exchange Act of 1934 and procedures that may be adopted by the Board
of Trustees, a Portfolio could pay a firm that provides research services to KFS
or DVA commissions for effecting a securities transaction for the Portfolio in
excess of the amount other firms would have charged for the transaction if KFS
or DVA determines in good faith that the greater commission is reasonable in
relation to the value of the research services provided by the executing firm
viewed in terms either of a particular transaction or KFS's or DVA's overall
responsibilities to the Portfolio or other clients. Not all of such research
services may be useful or of value in advising a particular Portfolio. Research
benefits will be available for all clients of KFS and its subsidiaries. The
investment management fee paid by a Portfolio to KFS is not reduced because KFS
or DVA receives these research services.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the Fund's investment manager. Pursuant to
an investment management agreement, KFS acts as the Fund's investment adviser,
manages its investments, administers its business affairs, furnishes office
facilities and equipment, provides clerical, bookkeeping and administrative
services, and permits any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions.
The investment management agreement provides that the Fund pays the charges and
expenses of its operations, including the fees and expenses of the trustees
(except those who are officers or employees of KFS), independent auditors,
counsel, custodian and transfer agent and the cost of share certificates,
reports and notices to shareholders, brokerage commissions or transaction costs,
costs of calculating net asset value, taxes and membership dues. The Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors, Inc. ("KDI"), as principal underwriter,
pays the cost of qualifying and maintaining the qualification of the Fund's
shares for sale under the securities laws of the various states. KFS has agreed
to reimburse a Portfolio to the extent required by applicable state expense
limitations should all operating expenses of the Portfolio, including the
investment management fees of KFS but excluding taxes, interest, distribution
fees, extraordinary expenses, brokerage commissions or transaction costs and any
other properly excludable expenses, exceed the applicable state expense
limitations. The Fund believes that the most restrictive state expense
limitation currently in effect would require that such operating expenses not
exceed 2.5% of the first $30 million of average daily net assets, 2% of the next
$70 million and 1.5% of average daily net assets over $100 million. Under such
state expense limitation, custodian costs attributable to foreign securities
that are in excess of similar domestic custodian costs are excluded from
operating expenses.
The investment management agreement provides that KFS shall not be liable for
any error of judgment or of law, or for any loss suffered by the Fund in
connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
KFS in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under each agreement.
The Fund's investment management agreement is for an initial term ending April
1, 1997 and continues in effect from year to year so long as its continuation is
approved at least annually (a) by a majority of the trustees who are not parties
to such agreement or interested persons of any such party except in their
capacity as trustees of the Fund and (b) by the shareholders or the Board of
Trustees. The Fund's investment management agreement may be terminated at any
time for a Portfolio upon 60 days notice by either party, or by a majority vote
of the outstanding shares of the Portfolio, and will terminate automatically
upon assignment. If additional Portfolios become subject to the investment
management agreement, the provisions concerning continuation, amendment and
termination shall be on a Portfolio-by-Portfolio basis. Additional Portfolios
may be subject to a different agreement.
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<PAGE> 55
KFS is paid an investment management fee, monthly, by each Portfolio, at the
annual rates shown below.
<TABLE>
<CAPTION>
MANAGEMENT FEE
AVERAGE DAILY NET ASSETS OF A PORTFOLIO RATES
- ---------------------------------------------------------------------------------- --------------
<S> <C>
$0 - $250 million................................................................. .58%
$250 million - $1 billion......................................................... .55
$1 billion - $2.5 billion......................................................... .53
$2.5 billion - $5 billion......................................................... .51
$5 billion - $7.5 billion......................................................... .48
$7.5 billion - $10 billion........................................................ .46
$10 billion - $12.5 billion....................................................... .44
Over $12.5 billion................................................................ .42
</TABLE>
KFS has agreed to temporarily reduce its investment management fee and reimburse
or pay operating expenses of each Portfolio to the extent necessary to limit the
Portfolio's operating expenses to the levels described under "Summary of
Expenses" in the Prospectus. For this purpose "operating expenses" do not
include taxes, interest, extraordinary expenses, brokerage commissions or
transaction costs. KFS can terminate this arrangement at any time upon notice to
the Fund.
FUND SUB-ADVISER--DREMAN VALUE ADVISORS, INC. Dreman Value Advisors, Inc.
("DVA"), 10 Exchange Place, Jersey City, New Jersey 07302, is the sub-adviser
for the value portion of each Portfolio. DVA is a wholly owned subsidiary of
KFS. DVA will act as sub-adviser pursuant to the terms of a Sub-Advisory
Agreement between it and KFS.
Under the terms of the Sub-Advisory Agreement, DVA will manage the value portion
of each Portfolio and will provide such investment advice, research and
assistance as KFS may, from time to time, reasonably request. DVA may, under the
terms of the Sub-Advisory Agreement, render similar services to others including
other investment companies. For its services, DVA will receive from KFS a
monthly fee at the annual rate of .25% of the portion of the average daily net
assets of each Portfolio allocated by KFS to DVA for management. DVA permits any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
The Sub-Advisory Agreement provides that DVA will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVA in the performance of its duties or from reckless disregard by DVA of its
obligations and duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement is for an initial term ending April 1, 1997 and
continues in effect from year to year so long as its continuation is approved at
least annually (a) by a majority of the trustees who are not parties to such
agreement or interested persons of any such party except in their capacity as
trustees of the Fund and (b) by the shareholders or the Board of Trustees. The
Sub-Advisory Agreement may be terminated at any time for a Portfolio upon 60
days notice by KFS, DVA or the Board of Trustees, or by a majority vote of the
outstanding shares of the Portfolio, and will terminate automatically upon
assignment or upon the termination of the Fund's investment management
agreement. If additional Portfolios become subject to the Sub-Advisory
Agreement, the provisions concerning continuation, amendment and termination
shall be on a Portfolio-by-Portfolio basis. Additional Portfolios may be subject
to a different agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly-owned subsidiary of KFS, is the principal underwriter and
distributor for the shares of the Fund and acts as agent of the Fund in the
continuous offering of its shares. KDI bears all its expenses of providing
services pursuant to the distribution agreements, including the payment of any
commissions. The Fund pays the cost for the prospectus and shareholder reports
to be set in type and printed for existing shareholders, and KDI, as principal
underwriter, pays for the printing and distribution of
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<PAGE> 56
copies thereof used in connection with the offering of shares to prospective
investors. KDI also pays for supplementary sales literature and advertising
costs.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Trustees of the Fund, including the Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
agreement. The agreement automatically terminates in the event of its assignment
and may be terminated for a class or a Portfolio at any time without penalty by
the Fund or by KDI upon 60 days' notice. Termination by the Fund with respect to
a class or a Portfolio may be by vote of a majority of the Board of Trustees, or
a majority of the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the agreement, or a "majority
of the outstanding voting securities" of the class or the Portfolio, as defined
under the Investment Company Act of 1940. The agreement may not be amended for a
class to increase the fee to be paid by the Portfolio with respect to such class
without approval by a majority of the outstanding voting securities of such
class of such Portfolio and all material amendments must in any event be
approved by the Board of Trustees in the manner described above with respect to
the continuation of the agreement. The provisions concerning the continuation,
amendment and termination of the distribution agreement are on a
Portfolio-by-Portfolio basis and for the Portfolio on a class by class basis.
CLASS B SHARES AND CLASS C SHARES. Since the distribution agreement provides for
fees charged to Class B and Class C shares that are used by KDI to pay for
distribution services (see the prospectus under "Investment Manager and
Underwriter"), the agreement (the "Plan") is approved and renewed separately for
the Class B and Class C shares in accordance with Rule 12b-1 under the
Investment Company Act of 1940, which regulates the manner in which an
investment company may, directly or indirectly, bear expenses of distributing
its shares.
ADMINISTRATIVE SERVICES. Administrative services are provided to the Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and the Fund, including the payment of service fees. Each
Portfolio pays KDI an administrative services fee, payable monthly, at an annual
rate of up to .25% of average daily net assets of each class of the Portfolio.
KDI has entered into related arrangements with various financial services firms,
such as broker-dealers or banks ("firms"), that provide services and facilities
for their customers or clients who are shareholders of the Fund. The firms
provide such office space and equipment, telephone facilities and personnel as
is necessary or beneficial for providing information and services to their
clients. Such services and assistance may include, but are not limited to,
establishing and maintaining shareholder accounts and records, processing
purchase and redemption transactions, answering routine inquiries regarding the
Fund, assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. KDI pays
each firm a service fee, payable quarterly, at an annual rate of up to .25% of
the net assets in each Portfolio account that it maintains and services
attributable to Class A, Class B and Class C shares, respectively, in each case
commencing with the month after investment (month of investment for Class C
shares); provided, however, KDI may advance the first year service fee as
described in the prospectus under "Investment Manager and Underwriter." Firms to
which service fees may be paid include broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for the Portfolio. Currently, the
administrative services fee payable to KDI is based only upon Portfolio assets
in accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Portfolio to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of a Portfolio
while this procedure is in effect will depend upon the proportion of Portfolio
assets that is in accounts for which there is a firm of record. The Board of
Trustees, in its discretion, may approve basing the fee to KDI on all Portfolio
assets in the future.
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<PAGE> 57
Certain trustees or officers of the Fund are also directors or officers of KFS
or KDI as indicated under "Officers and Trustees."
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as custodian and
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, as sub-custodian, have custody of all securities and cash of the Fund
maintained in the United States. The Chase Manhattan Bank, N.A., Chase MetroTech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Fund held outside of the United States. They attend to the
collection of principal and income, and payment for and collection of proceeds
of securities bought and sold by each Portfolio. IFTC is also the Fund's
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Kemper Service Company ("KSvC"), an affiliate of KFS, serves as
"Shareholder Service Agent." IFTC receives an annual fee as custodian for the
Fund, payable monthly, at a rate of $.10 per $1,000 of average monthly net
assets of each Portfolio plus certain transaction charges and out-of-pocket
expense reimbursement. IFTC receives as transfer agent, and pays to KSvC, annual
account fees of $6 per account plus account set up, transaction and maintenance
charges, annual fees associated with the contingent deferred sales charge (Class
B only) and out-of-pocket expense reimbursement. IFTC's fee is reduced by
certain earnings credits in favor of the Portfolios.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax returns, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PURCHASE AND REDEMPTION OF SHARES
As described in the Fund's prospectus, shares of a Portfolio are sold at their
public offering price, which is the net asset value per share of the Portfolio
next determined after an order is received in proper form plus, with respect to
Class A shares, an initial sales charge. The minimum initial investment is
$1,000 and the minimum subsequent investment is $100 but such minimum amounts
may be changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until the Fund determines that it has received payment of the proceeds of
the check. The time required for such a determination will vary and cannot be
determined in advance.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Portfolio will be redeemed by the Fund at the applicable net asset
value per share of such Portfolio as described in the Fund's prospectus. The
redemption within one year of Class A shares purchased at net asset value under
the Large Order NAV Purchase Privilege described in the prospectus may be
subject to a 1% contingent deferred sales charge (see "Purchase of Shares" in
the prospectus). Redemption of Class B shares may be subject to a contingent
deferred sales charge. When the Fund is asked to redeem shares for which it may
not yet have received good payment, it may delay the mailing of a redemption
check until it has determined that collected funds have been received for the
purchase of such shares, which will be up to 15 days.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B shares by certain classes of persons or through certain
types of transactions as described in the prospectus is provided because of
anticipated economies in sales and sales related efforts.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists
B-14
<PAGE> 58
as a result of which (i) disposal of a Portfolio's investments is not reasonably
practicable, or (ii) it is not reasonably practicable for the Fund to determine
the value of a Portfolio's net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of the
Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to the Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in a Portfolio's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
DIVIDENDS AND TAXES
DIVIDENDS. Each Portfolio normally distributes dividends of net investment
income as follows: annually for the Horizon 20+ Portfolio; semi-annually for the
Horizon 10+ Portfolio and quarterly for the Horizon 5 Portfolio. Each Portfolio
distributes any net realized short-term and long-term capital gains at least
annually.
The Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of a Portfolio's net investment income and net short-term and
long-term capital gains as the Board of Trustees determines appropriate under
the then current circumstances. In particular, and without limiting the
foregoing, the Fund may make additional distributions of a Portfolio's net
investment income or capital gain net income in order to satisfy the minimum
distribution requirements contained in the Internal Revenue Code (the "Code").
Dividends will be reinvested in shares of the Portfolio paying such dividends
unless shareholders indicate in writing that they wish to receive them in cash
or in shares of other Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
TAXES. The Fund intends each Portfolio to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, a Portfolio will
not be liable for federal income taxes to the extent its earnings are
distributed. One of the Subchapter M requirements to be satisfied is that less
than 30% of a Portfolio's gross income during its fiscal year must be derived
from gains (not reduced by losses) from the sale or other disposition of
securities and certain other investments held for less than three months. A
Portfolio may be limited in its options, futures and foreign currency
transactions in order to prevent recognition of such gains.
A Portfolio's options, futures and foreign currency transactions are subject to
special tax provisions that may accelerate or defer recognition of certain gains
or losses, change the character of certain gains or losses, or alter the holding
periods of certain of the Portfolio's securities.
The mark-to-market rules of the Code may require a Portfolio to recognize
unrealized gains and losses on certain options and futures held by the Portfolio
at the end of the fiscal year. Under these provisions, 60% of any capital gain
net income or loss recognized will generally be treated as long-term and 40% as
short-term. However, although certain forward contracts and futures contracts on
foreign currency are marked-to-market, the gain or loss is generally ordinary
under Section 988 of the Code. In addition, the straddle rules of the Code would
require deferral of certain losses realized on positions of a straddle to the
extent that the Portfolio had unrealized gains in offsetting positions at year
end.
B-15
<PAGE> 59
Gains and losses attributable to fluctuations in the value of foreign currencies
will be characterized generally as ordinary gain or loss under Section 988 of
the Code. For example, if a Portfolio sold a foreign security and part of the
gain or loss on the sale was attributable to an increase or decrease in the
value of a foreign currency, then the currency gain or loss may be treated as
ordinary income or loss. If such transactions result in greater net ordinary
income, the dividends paid on behalf of the Portfolio will be increased; if the
result of such transactions is lower net ordinary income, a portion of dividends
paid could be classified as a return of capital.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is the sum of 98% of the Portfolio's net investment income for the
calendar year plus 98% of its capital gain net income for the one-year period
ending October 31, plus any undistributed net investment income from the prior
calendar year, plus any undistributed capital gain net income from the one year
period ended October 31 of the prior calendar year, minus any overdistribution
in the prior calendar year. For purposes of calculating the required
distribution, foreign currency gains or losses occurring after October 31 are
taken into account in the following calendar year. The Fund intends to declare
or distribute dividends of the Portfolios during the appropriate periods of an
amount sufficient to prevent imposition of the 4% excise tax.
A shareholder who redeems shares of a Portfolio will recognize capital gain or
loss for federal income tax purposes measured by the difference between the
value of the shares redeemed and the adjusted cost basis of the shares. Any loss
recognized on the redemption of Portfolio shares held six months or less will be
treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares. A shareholder who
has redeemed shares of a Portfolio or other Kemper Mutual Fund listed in the
prospectus under "Special Features--Class A Shares--Combined Purchases" may
reinvest the amount redeemed at net asset value at the time of the reinvestment
in shares of the Portfolio or in shares of a Kemper Mutual Fund within six
months of the redemption as described in the prospectus under "Redemption or
Repurchase of Shares--Reinvestment Privilege." If a shareholder realized a loss
on the redemption or exchange of a Portfolio's shares and reinvests in shares of
the same Portfolio 30 days before or after the redemption or exchange, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. An exchange of
a Portfolio's shares for shares of another fund is treated as a redemption and
reinvestment for federal income tax purposes upon which gain or loss may be
recognized.
A Portfolio's investment income derived from foreign securities may be subject
to foreign income taxes withheld at the source. Because the amount of a
Portfolio's investments in various countries will change from time to time, it
is not possible to determine the effective rate of such taxes in advance.
Shareholders who are non-resident aliens are subject to U.S. withholding tax on
ordinary income dividends (whether received in cash or shares) at a rate of 30%
or such lower rate as prescribed by any applicable tax treaty.
PERFORMANCE
As described in the prospectus, each Portfolio's historical performance or
return for a class of shares may be shown in the form of "average annual total
return" and "total return" figures. These various measures of performance are
described below. Performance information will be computed separately for each
class of each Portfolio.
Each Portfolio's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Portfolio for a specific
period is found by first taking a hypothetical $1,000 investment ("initial
investment") in the Portfolio's shares on the first day of the period, adjusting
to deduct the maximum sales charge (in the case of Class A shares), and
computing the "redeemable value" of that investment at the end of the period.
The redeemable value in the case of Class B shares includes the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then
B-16
<PAGE> 60
expressed as a percentage. The calculation assumes that all income and capital
gains dividends paid by the Portfolio have been reinvested at net asset value on
the reinvestment dates during the period. Average annual total return may also
be calculated without deducting the maximum sales charge.
Calculation of a Portfolio's total return is not subject to a standardized
formula, except when calculated for purposes of the Portfolio's "Financial
Highlights" table in the Fund's financial statements and prospectus. Total
return performance for a specific period is calculated by first taking an
investment (assumed below to be $10,000) ("initial investment") in a Portfolio's
shares on the first day of the period, either adjusting or not adjusting to
deduct the maximum sales charge (in the case of Class A shares), and computing
the "ending value" of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and expressing
the result as a percentage. The ending value in the case of Class B shares may
or may not include the effect of the applicable contingent deferred sales charge
that may be imposed at the end of the period. The calculation assumes that all
income and capital gains dividends paid by the Portfolio have been reinvested at
net asset value on the reinvestment dates during the period. Total return may
also be shown as the increased dollar value of the hypothetical investment over
the period. Total return calculations that do not include the effect of the
sales charge for Class A shares or the contingent deferred sales charge for
Class B shares would be reduced if such charge were included.
A Portfolio's performance figures are based upon historical results and are not
representative of future performance. Each Portfolio's Class A shares are sold
at net asset value plus a maximum sales charge of 5.75% of the offering price.
Class B shares and Class C shares are sold at net asset value. Redemptions of
Class B shares may be subject to a contingent deferred sales charge that is 4%
in the first year following the purchase, declines by a specified percentage
thereafter and becomes zero after six years. Returns and net asset value will
fluctuate. Factors affecting each Portfolio's performance include general market
conditions, operating expenses and investment management. Any additional fees
charged by a dealer or other financial services firm would reduce the returns
described in this section. Shares of each Portfolio are redeemable at the then
current net asset value, which may be more or less than original cost.
Investors may want to compare the performance of a Portfolio to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Portfolio to that of
U.S. Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Portfolio to the performance
of two indexes, such as, in the case of the Horizon 10+ Portfolio, a
hypothetical portfolio weighted 60% in the Standard & Poor's 500 Stock Index (an
unmanaged index generally representative of the U.S. stock market) and 40% in
the Lehman Brothers Government/Corporate Bond Index (an unmanaged index
generally representative of intermediate and long-term
B-17
<PAGE> 61
government and investment grade corporate debt securities). For the percentage
of a Portfolio's assets invested in each type of security, see "Investment
Objectives, Policies and Risk Factors" in the Prospectus.
Investors may want to compare the performance of a Portfolio to that of money
market funds. Money market funds seek to maintain a stable net asset value and
yield fluctuates. Information regarding the performance of money market funds
may be based upon, among other things, IBC/Donoghue's Money Fund Averages(R)
(All Taxable). As reported by IBC/Donoghue's, all investment results represent
total return (annualized results for the period net of management fees and
expenses) and one year investment results are effective annual yields assuming
reinvestment of dividends.
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the investment manager,
DVA, the sub-adviser, and KDI, the principal underwriter, are as follows (The
number following each person's title is the number of investment companies
managed by KFS and its affiliates for which he or she holds similar positions):
JAMES B. AKINS (10/15/26), Trustee (12), 2904 Garfield Terrace, N.W.,
Washington, D.C.; Consultant on International, Political and Economic Affairs;
formerly a career United States Foreign Service Officer, Energy Adviser for the
White House; United States Ambassador to Saudi Arabia.
FRED B. RENWICK (2/1/30), Trustee (12), 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director;
TIFF Industrial Program, Inc., Director, the Wartberg Home Foundation; Chairman
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; previously member of the Investment
Committee of Atlanta University Board of Trustees; previously Director of Board
of Pensions Evangelical Lutheran Church of America.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee (12), 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Member, Board of Governors, Heartland
Institute/Illinois; formerly, Illinois State Senator.
FREDERICK T. KELSEY (4/25/27), Trustee (12), 3133 Laughing Gull Court, John's
Island, South Carolina; Retired; formerly, consultant to Goldman, Sachs & Co.;
formerly, President, Treasurer and Trustee of Institutional Liquid Assets and
its affiliated mutual funds; Trustee of the Benchmark Fund and the Pilot Fund.
*DAVID B. MATHIS (4/13/38), Trustee (34), Kemper Center, Long Grove, Illinois;
Chairman, Chief Executive Officer and Director, Kemper Corporation; Director,
KFS, Kemper Financial Companies, Inc., several other Kemper Corporation
subsidiaries and IMC Global, Inc.; Chairman of the Board, Kemper National
Insurance Companies.
*STEPHEN B. TIMBERS (8/8/44), President and Trustee (34), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Operating Officer and Director,
Kemper Corporation; Chairman, Chief Executive Officer, Chief Investment Officer
and Director, KFS; Director, Kemper Financial Companies, Inc., KDI, DVA, several
other Kemper Corporation subsidiaries, Gillett Holdings, Inc. and LTV
Corporation.
JOHN B. TINGLEFF (5/4/35), Trustee (12), 2015 South Lake Shore Drive, Harbor
Springs, Michigan; Retired; formerly, President, Tingleff & Associates
(management consulting firm); formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Trustee (12), 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company, President of the
Members of the Corporation and Trustee, DePaul University.
*JOHN E. NEAL (3/9/50), Vice President (4), 120 South LaSalle Street, Chicago,
Illinois; President, Chief Operating Officer and Director, KFS; Director, DVA,
KDI and several other Kemper Corporation subsidiaries; prior thereto, Senior
Vice President, Kemper Real Estate Management Company.
B-18
<PAGE> 62
*JOHN E. PETERS (11/4/47), Vice President (34), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President and Director, KFS; President
and Director, KDI; Director, DVA.
*CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary (34), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
*JEROME L. DUFFY (6/29/36), Treasurer (34), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
*PHILIP J. COLLORA (11/15/45), Vice President and Secretary (34), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
*ELIZABETH C. WERTH (10/1/47), Assistant Secretary (26), 120 South LaSalle
Street, Chicago, Illinois; Vice President, KFS and Vice President and Director
of State Registrations, KDI.
*THOMAS M. REGNER (7/1/52), Vice President (1), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President, KFS.
- ---------------
* "Interested persons" as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund, except that Mr. Custer's law firm
receives fees from the Fund as counsel to the Fund. The table below shows
amounts estimated to be paid or accrued to those trustees who are not designated
"interested persons" during the Fund's first full fiscal year and the total
compensation that the Kemper funds paid to such trustees during the calendar
year 1994.
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION ACCRUED AS PART OF KEMPER FUNDS PAID
NAME OF BOARD MEMBER FROM FUND FUND EXPENSES TO BOARD MEMBERS(2)
-------------------- ------------ ------------------- -------------------
<S> <C> <C> <C>
James B. Akins..................................... $8,100 $ 0 $66,600
Arthur R. Gottschalk(1)............................ $8,100 $ 0 $72,000
Frederick T. Kelsey(1)............................. $8,100 $ 0 $73,800
Fred B. Renwick.................................... $8,100 $ 0 $66,600
John B. Tingleff................................... $8,100 $ 0 $70,500
John G. Weithers................................... $8,100 $ 0 $70,100
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with Kemper funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Kemper Money Market Fund--Money
Market Portfolio.
(2) Includes estimated compensation for service for calendar year 1994 on the
Boards of 12 Kemper funds, with 28 fund portfolios and amounts for new funds
as if the fund had existed at the beginning of the year and for one fund as
if it had been affiliated with the Kemper funds for all of 1994 and the
Board Members had been such for all the Kemper funds during the period.
As of [ ], 1995, KFS owned all the shares of each class of each
Portfolio of the Fund.
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of the shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Fund, a Portfolio or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund or any Portfolio, establishing a
Portfolio, supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); and (e) such
additional matters as may be required by law,
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<PAGE> 63
the Declaration of Trust, the By-laws of the Fund, or any registration of the
Fund with the Securities and Exchange Commission or any state, or as the
trustees may consider necessary or desirable. The shareholders also would vote
upon changes in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares of the Fund at a meeting called for that purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding shares. Upon the written request of ten or more
shareholders who have been such for at least six months and who hold shares
constituting at least 1% of the outstanding shares of the Fund stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Fund has undertaken to disseminate appropriate materials at the
expense of the requesting shareholders.
The Fund's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of the Fund
could take place even if less than a majority of the shareholders was
represented on its scheduled date. Shareholders would in such a case be
permitted to take action that does not require a larger vote than a majority of
a quorum, such as the election of trustees and ratification of the selection of
auditors. Some matters requiring a larger vote under the Declaration of Trust,
such as termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
that under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Fund's Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund or any Portfolio or class by notice to the shareholders
without shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by KFS remote and not
material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
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<PAGE> 64
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Kemper Horizon Fund
We have audited the accompanying statement of net assets of Kemper Horizon Fund
as of [ ], 1995. This statement of net assets is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of net assets. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall statement of net assets
presentation. We believe that our audit of the statement of net assets provides
a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the financial position of Kemper Horizon Fund at
[ ], 1995 in conformity with generally accepted accounting
principles.
Chicago, Illinois
[ ], 1995
B-21
<PAGE> 65
KEMPER HORIZON FUND
STATEMENT OF NET ASSETS-- , 1995
<TABLE>
<S> <C>
ASSETS
Cash.................................................................................. $100,000
========
NET ASSETS
Net assets, applicable to shares of beneficial interest (unlimited number of shares
authorized, no par value) outstanding as follows:
Kemper Horizon 20+ Portfolio
Class A 1,169.591
Class B 1,169.591
Class C 1,169.590
Kemper Horizon 10+ Portfolio
Class A 1,169.591
Class B 1,169.591
Class C 1,169.590
Kemper Horizon 5 Portfolio
Class A 1,169.591
Class B 1,169.591
Class C 1,169.590 $100,000
========
THE PRICING OF SHARES
Net asset value and redemption price per share, applicable to all Portfolios..........
Class A............................................................................. $ 9.50
Class B*............................................................................ $ 9.50
Class C............................................................................. $ 9.50
Maximum offering price per share, applicable to all Portfolios........................
Class A (net asset value, plus 6.10% of net asset value or 5.75% of offering
price)........................................................................... $ 10.88
Class B (net asset value)........................................................... $ 9.50
Class C (net asset value)........................................................... $ 9.50
</TABLE>
- ---------------
* Subject to contingent deferred sales charge.
NOTES:
Kemper Horizon Fund (the "Fund"), was organized as a business trust under the
laws of The Commonwealth of Massachusetts on June 12, 1995; All Class A, Class B
and Class C shares of beneficial interest of each Portfolio of the Fund were
issued to Kemper Financial Services, Inc. ("KFS"), the investment manager on
[ ], 1995. The Fund may establish multiple portfolios; currently,
three portfolios have been established.
The costs of organization of the Fund will be paid by KFS.
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<PAGE> 66
APPENDIX--RATINGS OF FIXED INCOME INVESTMENTS
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears. Moody's Investors Service, Inc. Bond Ratings.
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
B-23
<PAGE> 67
CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC. BOND RATINGS
AAA. Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA. Bonds rated AA are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
A. Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB. Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment.
BB. Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B. Bonds rated B are considered highly speculative. While these bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC. Bonds rated CCC have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC. Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C. Bonds rated C are in imminent default in payment of interest or principal.
DDD, DD AND D. Bonds rated DDD, DD and D are in default on interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds,
and D represents the lowest potential for recovery.
DUFF & PHELPS RATING CO. BOND RATINGS
AAA. Bonds rated AAA have the highest rating assigned to a debt obligation. They
are of the highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA. Bonds rated AA are of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
B-24
<PAGE> 68
A. Bonds rated A have protection factors that are average but adequate. However,
risk factors are more variable and greater in periods of economic stress.
BBB. Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. They have considerable volatility
in risk during economic cycles.
BB. Bonds rated BB are below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B. Bonds rated B are below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC. Bonds rated CCC are well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal or interest. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
D. Bonds rated D are in default. The issuer failed to meet scheduled principal
and/or principal payments.
B-25
<PAGE> 69
KEMPER HORIZON FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(i) Financial statements included in Part A of the Registration
Statement:
None.
(ii) Financial statements included in Part B of the Registration
Statement:
Statement of Net Assets.
Report of Independent Auditors.
Schedules I, II, III, IV, V, VI and VII are omitted as the required
information is not present.
(b) Exhibits
<TABLE>
<S> <C>
99.B1(a). Agreement and Declaration of Trust.
99.B1(b). Written Instrument Amending the Agreement and Declaration of Trust
99.B2. By-Laws.*
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate Classes of
Shares.*
99.B4(c). Written Instrument Changing the Name of the Existing Series and
Establishing and Designating Two Additional Series.*
99.B4(d). Written Instrument Changing the Name of the Series of the Trust.*
99.B5(a). Investment Management Agreement.*
99.B5(b). Sub-Advisory Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10(a). Legal Opinion and Consent of Vedder, Price, Kaufman & Kammholz.*
99.B10(b). Legal Opinion and Consent of Ropes & Gray.*
99.B11. Consent and Report of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24 Powers of Attorney.
</TABLE>
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* To be filed before the effective date of the Registration Statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of September 30, 1995, there were no holders of record of any class of
shares of Registrant.
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28.(A) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment adviser and sub-adviser is hereby incorporated by
reference to the section of the Prospectus captioned "Investment Manager and
Underwriter," and to the section of the Statement of Additional Information
captioned "Investment Manager and Underwriter."
Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of the following:
Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Horizon Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund
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Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund,
Sterling Funds and Kemper International Bond Fund.
Dreman Value Advisors, Inc., sub-adviser of Kemper Horizon Fund is the
investment adviser for Kemper-Dreman Fund, Inc., in addition to institutional
accounts, and sub-adviser for Kemper Value Plus Growth Fund.
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Item 28(b)(i) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor
BORIS, JAMES R.
Director, Chairman of the Board and Chief Executive Officer,
Everen Capital Corporation
Chairman of the Board and Chief
Executive Officer, Everen Securities, Inc.
Director, Kemper Financial Services, Inc.
Director, INVEST Financial Corporation
Director, INVEST Financial Corporation Holding Company
Executive Vice President, Kemper Corporation
Director, Executive Vice President, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
MATHIS, DAVID B.
Director, Kemper Financial Services, Inc.
Director, Federal Kemper Life Assurance Company
Director, Fidelity Life Association
Director, Chairman and Chief Executive Officer, Kemper Corporation
Director, Kemper Financial Companies, Inc.
Director, Kemper Investors Life Insurance Company
Director, IMC Global, Inc.
Trustee, Kemper Funds
Director, Vice President, Lumbermen's Mutual Casualty Company
TIMBERS, STEPHEN B.
Director, Chairman, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Vice President, Kemper Asset Holdings, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Kemper Asset Management Company
Director, Chairman, Kemper Service Company
Director, Federal Kemper Life Assurance Company
Director, Dreman Value Advisors, Inc.
Director, Vice President, FKLA Loire Court, Inc.
Vice President, FKLA Realty Corporation
Director, President, Galaxy Offshore, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Vice President, FLA Realty Corp.
Director, President and Chief Operating Officer, Kemper
Corporation
Director, Chairman, President and Chief Executive Officer, Kemper Financial
Companies, Inc.
Director, President, Kemper International Management, Inc.
Director, Kemper Investors Life Insurance Company
Trustee and President, Kemper Funds
Vice President, Kemper Portfolio Corp.
Director, Vice President, Kemper Real Estate, Inc.
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Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
Director, The LTV Corporation
Director, Gillett Holdings, Inc.
Director, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Dreman Value Advisors, Inc.
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Coast Broadcasting Company
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Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper Cymrot, Inc.
Director, President, Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc.
Director, Lafayette Apartments, Inc.
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Red Hill Associates, Inc.
Director, Seagate Associates, Inc.
Director, Seattle Gateway, Inc.
Director, Sutter Street, Inc.
Director, Technology Way, Inc.
Director, Time DC, Inc.
Director, Tourelle Corporation
Director, Two Corporate Centre, Inc.
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
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Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Director, Urban Shopping Centers, Inc.
Vice President, Kemper-Dreman Fund, Inc.
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Horizon Fund
PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Kemper Asset Management Company
Vice President, Kemper Funds
Director, Kemper Service Company
FITZPATRICK, JOHN H.
Director, Chief Financial Officer, Kemper Financial Services, Inc.
Director, Ardenwood Financial Corporation
Director, Camelot Financial Corporation
Director, Crow Canyon, Inc.
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kacor Trust Deed Company
Director, Senior Vice President and Chief Financial Officer,
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Federal Kemper Life Assurance Company
Senior Vice President, Chief Financial Officer, Fidelity Life
Association
Director, Vice President, FKLA Loire Court, Inc.
Director, Vice President, FLA First Nationwide, Inc.
Director, Vice President, FLA Plate Building, Inc.
Director, Executive Vice President and Chief Financial Officer,
Kemper Corporation
Director, Executive Vice President and Chief Financial
Officer, Kemper Financial Companies, Inc.
Senior Vice President, Kemper Investors Life Insurance Company
Director, Vice President, Kemper/Cymrot Management, Inc.
Director, Vice President, Kemper/Cymrot, Inc.
Director, Vice President, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management
Company
Director, KRDC, Inc.
Director, Margarita Village Retirement Community, Inc.
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Montgomery Gallery, Inc.
Director, One Corporate Centre, Inc.
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Seattle Gateway, Inc.
Director, SMS Realty Corporation
Director, Sutter Street, Inc.
Director, Time DC, Inc.
Director, Two Corporate Centre, Inc.
Director, Vice President, KFC Portfolio Corp.
Director, Vice President, KI Arnold Industrial, Inc.
Director, Vice President, KI Canyon Park, Inc.
Director, Vice President, KI Centreville, Inc.
Director, Vice President, KI Colorado Boulevard, Inc.
Director, Vice President, KI Dublin Boulevard, Inc.
Director, Vice President, KI LaFiesta Square, Inc.
Director, Vice President, KI Lewinsville, Inc.
Director, Vice President, KI Monterey Research, Inc.
Director, Vice President, KI Olive Street, Inc.
Director, Vice President, KI Sutter Street, Inc.
Director, Vice President, KI Thornton Boulevard, Inc.
Director, Vice President, KILICO Realty Corporation
Director, Vice President, KR 77 Fitness Center, Inc.
Director, Vice President, KR Avondale Redmond, Inc.
Director, Vice President, KR Black Mountain, Inc.
Director, Vice President, KR Brannan Resources, Inc.
Director, Vice President, KR Clay Capital, Inc.
Director, Vice President, KR Cranbury, Inc.
Director, Vice President, KR Delta Wetlands, Inc.
Director, Vice President, KR Gainesville, Inc.
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Director, Vice President, KR Hotels, Inc.
Director, Vice President, KR Lafayette Apartments, Inc.
Director, Vice President, KR Lafayette BART, Inc.
Director, Vice President, KR Palm Plaza, Inc.
Director, Vice President, KR Red Hill Associates, Inc.
Director, Vice President, KR Seagate/Gateway North, Inc.
Director, Vice President, KR Venture Way, Inc.
Director, Vice President, KR Walnut Creek, Inc.
BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company
FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
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Vice President, The Growth Fund of Spain, Inc.
GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited
LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund
REYNOLDS, STEVEN H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.
CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.
CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Value Plus Growth Fund
CIARLELLI, ROBERT W.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Service Company
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COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Centreville, Inc.
Vice President, KI Colorado Boulevard, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Lewinsville, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Sutter Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Lafayette BART, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.
COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
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Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Kemper Asset Management Company
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Vice President and Treasurer, Kemper Asset Management Company
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company
Limited
DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Funds
GALLAGHER, MICHAEL L.
Senior Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.
GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
GUENTHER, HAROLD E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Galaxy Offshore, Inc.
HUSSEY, KAREN A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Small Capitalization Equity Fund
INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters
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KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Asset Management
Company
KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Sterling Funds
MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.
NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Corporation
RABIEGA, CRAIG F.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
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Vice President, Sterling Funds
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Horizon Fund
RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.
SLOAN, PAUL F.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Investors Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Portfolios
Vice President, Kemper U.S. Government Securities Fund
Vice President, Kemper Adjustable Rate U.S. Government Fund
SMITH, JR., EDWARD BYRON
Senior Vice President, Kemper Financial Services, Inc.
VINCENT, CHRISTOPHER T.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Asset Management Company
BAZAN, KENNETH M.
First Vice President, Kemper Financial Services, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
BOEHM, JONATHAN J.
First Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust
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CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.
DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.
DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.
FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.
HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.
HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.
HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.
JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.
KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios
KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.
LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.
LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.
McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.
MINER, EDWARD
First Vice President, Kemper Financial Services, Inc.
MURRAY, SCOTT S.
First Vice President, Kemper Financial Services, Inc.
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Vice President, Kemper Service Company
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.
PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.
RADIS, STEVE A.
First Vice President, Kemper Financial Services, Inc.
RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.
SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.
STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
THOUIN-LEERKAMP, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company Limited
TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
WETHERALD, ROBERT F.
First Vice President, Kemper Financial Services, Inc.
WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.
BARRY, JOANN M.
Vice President, Kemper Financial Services, Inc.
BODEM, RICHARD A.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
C-16
<PAGE> 85
CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.
CARTER, PAUL J.
Vice President, Kemper Financial Services, Inc.
CHRISTIANSEN, HERBERT A.
Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.
ESOLA, CHARLES J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
FRIHART, THORA A.
Vice President, Kemper Financial Services, Inc.
GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.
GERICKE, KATHLEEN E.
Vice President, Kemper Financial Services, Inc.
GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.
HESS, THOMAS L.
Vice President, Kemper Financial Services, Inc.
HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.
KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.
KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.
KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.
KOURY, KATHRYN E.
Vice President, Kemper Financial Services, Inc.
KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.
KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.
C-17
<PAGE> 86
KYCE, JOYCE
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.
MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.
McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.
MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.
MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.
MURPHY, THOMAS M.
Vice President, Kemper Financial Services, Inc.
NEVILLE, BRIAN P.
Vice President, Kemper Financial Services, Inc.
PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.
PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.
QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.
ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.
ROSE, KATIE M.
Vice President, Kemper Financial Services, Inc.
SHULTZ, KAREN D.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.
SOPHER, EDWARD O.
Vice President, Kemper Financial Services, Inc.
STROMM, LAWRENCE D.
Vice President, Kemper Financial Services, Inc.
C-18
<PAGE> 87
TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.
VANDEMERKT, RICHARD J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WATKINS, JAMES K.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Sterling Funds
Assistant Secretary, Kemper-Dreman Fund, Inc.
Assistant Secretary, Kemper Horizon Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-19
<PAGE> 88
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Kemper Distributors, Inc. acts as principal underwriter and distributor
of the Registrant's shares, the Kemper Mutual Funds, Kemper Investors Fund,
Sterling Funds and Kemper International Bond Fund.
(b) Information on the officers and directors of Kemper Distributors, Inc.
is set forth below. The principal business address is 120 South LaSalle Street,
Chicago, Illinois 60603.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITIONS AND OFFICES REGISTRANT
- --------------------- ----------------------------------------------------------- -------------------
<S> <C> <C>
John E. Peters Principal, Director and President Vice President
William E. Chapman,
II Director, Executive Vice President None
James L. Greenwalt Director, Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President, Trustee
Patrick H. Dudasik Financial Principal, Treasurer and Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Thomas V. Bruns Vice President None
Carlene D. Merold Vice President None
Jeff M. Warland Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Kathleen A. Gallichio Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, the offices of the investment manager, Kemper Financial
Services, Inc. and the principal underwriter, Kemper Distributors, Inc., 120
South LaSalle Street, Chicago, Illinois 60603, the offices of the sub-adviser,
Dreman Value Advisors, Inc., 10 Exchange Place, Jersey City, New Jersey 07302 or
at the offices of the custodian and transfer agent, Investors Fiduciary Trust
Company, 127 West 10th Street, Kansas City, Missouri 64105 or at the offices of
the shareholder service agent, Kemper Service Company, 811 Main Street, Kansas
City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Registrant undertakes to file a Post-Effective Amendment using
financial statements of Registrant which need not be certified, within four to
six months from the effective date of the Registration Statement.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-20
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago and State of Illinois, on the 16th day of
October, 1995.
KEMPER HORIZON FUND
By: /s/ STEPHEN B. TIMBERS
--------------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 16, 1995 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------------- --------------------
<C> <S>
/s/ STEPHEN B. TIMBERS President (Principal
- ---------------------------------------------------------------------- Executive Officer)
Stephen B. Timbers and Trustee
/s/ JAMES E. AKINS* Trustee
- ----------------------------------------------------------------------
/s/ ARTHUR R. GOTTSCHALK* Trustee
- ----------------------------------------------------------------------
/s/ FREDERICK T. KELSEY* Trustee
- ----------------------------------------------------------------------
/s/ DAVID B. MATHIS* Trustee
- ----------------------------------------------------------------------
/s/ FRED B. RENWICK* Trustee
- ----------------------------------------------------------------------
/s/ JOHN B. TINGLEFF* Trustee
- ----------------------------------------------------------------------
/s/ JOHN G. WEITHERS* Trustee
- ----------------------------------------------------------------------
/s/ JEROME L. DUFFY Treasurer (Principal
- ---------------------------------------------------------------------- Financial and
Jerome L. Duffy Accounting Officer)
</TABLE>
* Philip J. Collora signs this document pursuant to powers of attorney filed
herewith.
/s/ PHILIP J. COLLORA
--------------------------------------
Philip J. Collora
<PAGE> 90
KEMPER HORIZON FUND
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
REFERENCE
------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C> <C>
Exhibits
99.B1(a). Agreement and Declaration of Trust.
99.B1(b). Written Instrument Amending the Agreement and Declaration of
Trust
99.B2. By-Laws.*
99.B3. Inapplicable.
99.B4(a). Text of Share Certificate.*
99.B4(b). Written Instrument Establishing and Designating Separate
Classes of Shares.*
99.B4(c). Written Instrument Changing the Name of the Existing Series
and Establishing and Designating Two Additional Series.*
99.B4(d). Written Instrument Changing the Name of the Series of the
Trust.*
99.B5(a). Investment Management Agreement.*
99.B5(b). Sub-Advisory Agreement.*
99.B6(a). Underwriting and Distribution Services Agreement.*
99.B6(b). Form of Selling Group Agreement.*
99.B7. Inapplicable.
99.B8(a). Custody Agreement (Form 1).*
99.B8(b). Custody Agreement (Form 2).*
99.B9. Agency Agreement.*
99.B9(c). Administrative Services Agreement.*
99.B10(a). Legal Opinion and Consent of Vedder, Price, Kaufman &
Kammholz.*
99.B10(b). Legal Opinion and Consent of Ropes & Gray.*
99.B11. Consent and Report of Independent Auditors.*
99.B12. Inapplicable.
99.B13. Subscription Agreement.*
99.B14(a). Kemper Retirement Plan Prototype.*
99.B14(b). Model Individual Retirement Account.*
99.B15. See 6(a) above (Class B and Class C shares).
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.*
99.B24 Powers of Attorney.
</TABLE>
- ---------------
* To be filed before the effective date of the Registration Statement.
<PAGE> 1
EXHIBIT-99.B1(a)
KEMPER TRUST #23
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this
12th day of June, 1995, by the Trustees hereunder, and by the holders of shares
of beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS, the Trustees hereunder are desirous of forming a trust for the
purposes of carrying on the business of a management investment company; and
WHEREAS, in furtherance of such purposes, the Trustees are acquiring
and may hereafter acquire assets and properties, to hold and manage as trustees
of a Massachusetts voluntary association with transferable shares in accordance
with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets and properties which they may from time to
time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the pro rata benefit of
the holders from time to time of shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name and Registered Agent
Section 1. This Trust shall be known as Kemper Trust #23 and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine. The registered agent for the
Trust in Massachusetts shall be CT Corporation System whose address is 2 Oliver
Street, Boston, Massachusetts or such other person as the Trustees may from
time to time designate.
Definitions
Section 2. Whenever used herein, unless otherwise required by the
context or specifically provided:
<PAGE> 2
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Agreement and Declaration of Trust, as amended from time to
time, pursuant to Massachusetts General Laws, Chapter 182;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV and then in office;
(c) "Shares" mean the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided from
time to time or, if more than one series or class of shares is authorized under
or pursuant to Article III, the equal proportionate transferable units of
interest into which each such series or class shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as amended
from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "vote of a majority of the
outstanding voting securities" shall have the meanings given them in the 1940
Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(i) "Net asset value" shall have the meaning set forth in Section 6 of
Article VI hereof;
(j) The terms "series" or "series of Shares" refers to the one or more
separate investment portfolios of the Trust authorized under or pursuant to
Article III into which the assets and liabilities of the Trust may be divided
and the Shares of the Trust representing the beneficial interest of
Shareholders in such respective portfolios; and
(k) The terms "class" or "class of Shares" refers to the
division of Shares representing any series into two or more classes authorized
under or pursuant to Article III.
2
<PAGE> 3
ARTICLE II
Nature and Purpose
The Trust is a voluntary association (commonly known as a business trust) of
the type referred to in Chapter 182 of the General Laws of the
Commonwealth of Massachusetts. The Trust is not intended to be, shall not be
deemed to be, and shall not be treated as, a general or a limited partnership,
joint venture, corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or be treated in
any way whatsoever as though they were, liable or responsible hereunder as
partners or joint venturers. The purpose of the Trust is to engage in, operate
and carry on the business of an open-end management investment company and to
do any and all acts or things as are necessary, convenient, appropriate,
incidental or customary in connection therewith.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall be issued in one or
more series as the Trustees may, without Shareholder approval, authorize from
time to time. Each series shall be preferred over all other series in respect
of the assets allocated to that series as hereinafter provided. The beneficial
interest in each series shall at all times be divided into Shares (without par
value) of such series, each of which shall, except as provided in the following
sentence, represent an equal proportionate interest in such series with each
other Share of the same series, none having priority or preference over another
Share of the same series. The Trustees may, without Shareholder approval,
divide the Shares of any series into two or more classes, Shares of each such
class having such preferences and special or relative rights or privileges
(including conversion rights, if any) as the Trustees may determine. The
number of Shares authorized shall be unlimited, and the Shares so authorized
may be represented in part by fractional Shares. The Trustees may from time to
time divide or combine the shares of any series or class into a greater or
lesser number without thereby changing the proportionate beneficial interests
in the series or class. Without limiting the authority of the Trustees set
forth in this Section 1 to establish and designate any further series or class,
the Trustees hereby establish and designate one series of Shares to be known as
the "Initial Portfolio." The establishment and designation of any series or
class of Shares in addition to the foregoing shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth
such establishment and designation and the relative rights and preferences of
such series or class. As provided in Article IX,
3
<PAGE> 4
Section 1 hereof, any series or class of Shares (whether or not there
shall then be Shares outstanding of said series or class) may be terminated by
the Trustees by written notice to the Shareholders of such series or class or
by the vote of the Shareholders of such series or class entitled to vote more
than fifty percent (50%) of the votes entitled to be cast on the matter. In
the event of any such termination, a majority of the then Trustees shall
execute an instrument setting forth the termination of such series or class.
Ownership of Shares
Section 2. The ownership and transfer of Shares shall be recorded on
the books of the Trust or its transfer or similar agent. No certificates
certifying the ownership of Shares shall be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as
they consider appropriate for the issuance of Share certificates, the transfer
of Shares and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent of the Trust, as the case may be, shall
be conclusive as to who are the Shareholders of each series or class and as to
the number of Shares of each series or class held from time to time by each
Shareholder.
Investment in the Trust; Assets of a Series
Section 3. The Trustees may issue Shares of the Trust to such persons
and on such terms and, subject to any requirements of law, for such
consideration, which may consist of cash or tangible or intangible property or
a combination thereof, as they may from time to time authorize.
All consideration received by the Trust for the issue or sale of Shares
of a particular series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall, irrevocably belong to
such series of Shares for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Trust and
are herein referred to as "assets of" such series. Any allocation of the
assets of a series among any classes of Shares of such series shall be made in
a manner consistent with the preferences and special or relative rights or
privileges of such classes.
4
<PAGE> 5
Right to Refuse Orders
Section 4. The Trust by action of its Trustees shall have the right to
refuse to accept any subscription for its Shares at any time without any cause
or reason therefore whatsoever. Without limiting the foregoing, the Trust shall
have the right not to accept subscriptions under circumstances or in amounts as
the Trustees in their sole discretion consider to be disadvantageous to
existing Shareholders and the Trust may from time to time set minimum and/or
maximum amounts which may be invested in Shares by a subscriber.
Order in Proper Form
Section 5. The criteria for determining what constitutes an order
in proper form and the time of receipt of such an order by the Trust shall be
prescribed by resolution of the Trustees.
When Shares Become Outstanding
Section 6. Shares subscribed for and for which an order in proper form
has been received shall be deemed to be outstanding as of the time of
acceptance of the order therefor and the determination of the net price
thereof, which price shall be then deemed to be an asset of the Trust.
Merger or Consolidation
Section 7. In connection with the acquisition of all or substantially
all the assets or stock of another investment company, investment trust, or
of a company classified as a personal holding company under Federal Income
Tax laws, the Trustees may issue or cause to be issued Shares of a series or
class and accept in payment therefor, in lieu of cash, such assets at their
market value, or such stock at the market value of the assets held by such
investment company or investment trust, either with or without adjustment for
contingent costs or liabilities. No Preemptive Rights, Etc.
Section 8. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares or other
securities issued by the Trust. The Shareholders shall have no appraisal
rights with respect to their Shares and, except as otherwise determined by the
Trustees in their sole discretion, shall have no exchange or conversion rights
with respect to their Shares.
5
<PAGE> 6
Status of Shares and Limitation of Personal Liability
Section 9. Shares shall be deemed to be personal property giving only
the rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms of the Declaration of Trust and to have become a party thereto. The
death of a Shareholder during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Shareholder Inspection Rights
Section 10. Any Shareholder or his agent may inspect and
copy during normal business hours any of the following documents of the Trust:
By-Laws, minutes of the proceedings of the Shareholders and annual financial
statements of the Trust, including a balance sheet and financial statements of
operations. The foregoing rights of inspection of Shareholders of the Trust are
the exclusive and sole rights of the Shareholders with respect thereto and no
Shareholder of the Trust shall have, as a Shareholder, the right to inspect or
copy any of the books, records or other documents of the Trust except as
specifically provided in this Section 10 of this Article III or except as
otherwise determined by the Trustees.
ARTICLE IV
The Trustees
Number, Designation, Election, Term, Etc.
Section 1.
(a) Initial Trustee. Upon his execution of this Declaration of Trust
or a counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, Antonio DeSpirito III shall
become a Trustee hereof.
6
<PAGE> 7
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease the number of Trustees to
a number other than the number theretofore determined which number shall not be
less than three nor more than fifteen except during the period prior to any
sale of Shares pursuant to any public offering. No decrease in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to subsection (e) of this
Section 1.
(c) Term and Election. Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee until the next meeting of
Shareholders, if any, called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until the
election and qualification of his successor, if any, elected at such meeting,
or until such Trustee sooner dies, resigns, retires or is removed. Upon the
election and qualification of a new Trustee, the Trust estate shall vest in the
new Trustee (together with the continuing or other new Trustees) without any
further act or conveyance. Prior to any sale of Shares pursuant to any public
offering, the initial Trustee named above (and any individual appointed by such
initial Trustee to act as sole Trustee) shall have the right to appoint other
persons as Trustees each to serve as Trustees as aforesaid until the first
meeting of Shareholders called for the purpose of the election or re-election
of such Trustee or of a successor to such Trustee.
(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to the Chairman of the Board, if any, the President or the
Secretary of the Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in such instrument.
(e) Removal. Any Trustee may be removed for cause at any time by
written instrument, signed by at least a majority of the number of Trustees
prior to such removal, specifying the date upon which such removal shall become
effective. Any Trustee may be removed with or without cause (i) by the vote of
the Shareholders entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard to series or
class at any meeting called for such purpose, or (ii) by a written consent
filed with the custodian of the Trust's portfolio securities and executed by
the Shareholders entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard to series or
class.
7
<PAGE> 8
Whenever ten or more Shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate Shares constituting at least one percent of the outstanding Shares of
the Trust, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a meeting to consider removal of a Trustee and accompanied by a
form of communication and request that they wish to transmit, the Trustees
shall within five business days after receipt of such application inform such
applicants as to the approximate cost of mailing to the Shareholders of record
the proposed communication and form of request. Upon the written request of
such applicants, accompanied by a tender of the material to be mailed and of
the reasonable expenses of mailing, the Trustees shall, within reasonable
promptness, mail such material to all Shareholders of record at their addresses
as recorded on the books of the Trust. Notwithstanding the foregoing, the
Trustees may refuse to mail such material on the basis and in accordance with
the procedures set forth in the last two paragraphs of Section 16(c) of the
1940 Act.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees by the other Trustees may (but so long as there are at
least three remaining Trustees at all times subsequent to any sale of Shares
pursuant to any public offering, need not unless required by the 1940 Act) be
filled either by a majority of the remaining Trustees, even if less than a
quorum, through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine or, whenever deemed
appropriate by the remaining Trustees, by the election by the Shareholders, at
a meeting called for such purpose, of a person to fill such vacancy. Upon the
appointment or election and qualification of a new Trustee as aforesaid, the
Trust estate shall vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance, except that any such
appointment or election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to be effective at a
later date shall become effective only at or after the effective date of said
retirement, resignation, or increase in number of Trustees.
(g) Mandatory Election by Shareholders. Notwithstanding the foregoing
provisions of this Section 1, the Trustees shall call a meeting of the
Shareholders for the election of one or more Trustees at such time or times as
may be required in order that the provisions of the 1940 Act may be complied
with, and the authority hereinabove provided for the Trustees to appoint any
8
<PAGE> 9
successor Trustee or Trustees shall be restricted if such appointment
would result in failure of the Trust to comply with any provision of the 1940
Act.
(h) Effect of Death, Resignation, Etc. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall
not operate to annul or terminate the Trust or to revoke or terminate any
existing agency or contract created or entered into pursuant to the terms of
this Declaration of Trust.
(i) No Accounting. Except under circumstances which would justify his
removal for cause, no person ceasing to be a Trustee as a result of his death,
resignation, retirement, removal or incapacity (nor the estate of any such
person) shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
Powers
Section 2. The Trustees, subject only to the specific limitations
contained in this Declaration of Trust or otherwise imposed by the 1940 Act or
other applicable law, shall have, without further or other authorization and
free from any power or control of the Shareholders, full, absolute and
exclusive power, control and authority over the Trust assets and the business
and affairs of the Trust to the same extent as if the Trustees were the sole
and absolute owners thereof in their own right and to do all such acts and
things as in their sole judgment and discretion are necessary and incidental
to, or desirable for the carrying out of any of the purposes of the Trust or
conducting the business of the Trust. Any determination made in good faith by
the Trustees of the purposes of the Trust or the existence of any power or
authority hereunder shall be conclusive. In construing the provisions of this
Declaration of Trust, there shall be a presumption in favor of the grant of
power and authority to the Trustees. Without limiting the foregoing, the
Trustees may adopt By-Laws not inconsistent with this Declaration of Trust
containing provisions relating to the business of the Trust, the conduct of
its affairs, its rights or powers and the rights or powers of its Shareholders,
Trustees, officers, employees and other agents and may amend and repeal them to
the extent that such By-Laws do not reserve that right to the Shareholders;
fill vacancies in their number, including vacancies resulting from increases in
their number, unless a vote of the Trust's Shareholders is required to fill
such vacancies pursuant to the 1940 Act; elect and remove such officers and
appoint and terminate such agents as they consider appropriate; appoint from
their own number, and terminate, any one or more committees consisting of two
or more Trustees, including an executive committee which may, when the Trustees
are not in session, exercise some or all of the powers and authority of the
Trustees
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as the Trustees may determine; appoint an advisory board, the members
of which shall not be Trustees and need not be Shareholders; employ one or more
investment advisers or managers as provided in Section 6 of this Article IV;
employ one or more custodians of the assets of the Trust and authorize such
custodians to employ subcustodians and to deposit all or any part of such
assets in a system or systems for the central handling of securities; retain a
transfer agent or a Shareholder services agent, or both; provide for the
distribution of Shares by the Trust, through one or more principal underwriters
or otherwise; set record dates for the determination of Shareholders with
respect to various matters; and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such custodian or
underwriter.
In furtherance of and not in limitation of the foregoing, the Trustees
shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of, to lend or to
pledge, to trade in or deal in securities or interests of all kinds, however
evidenced, or obligations of all kinds, however evidenced, or rights, warrants,
or contracts to acquire such securities, interests, or obligations, of any
private or public company, corporation, association, general or limited
partnership, trust or other enterprise or organization, foreign or domestic,
or issued or guaranteed by any national or state government, foreign or
domestic, or their agencies, instrumentalities or subdivisions (including but
not limited to, bonds, debentures, bills, time notes and all other evidences of
indebtedness); negotiable or non-negotiable instruments; any and all futures
contracts; government securities and money market instruments (including but
not limited to, bank certificates of deposit, finance paper, commercial paper,
bankers acceptances, and all kinds of repurchase agreements);
(b) To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of foreign
currencies, and funds and exchanges, and make deposits in banks, savings banks,
trust companies, and savings and loan associations, foreign or domestic;
(c) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop, and dispose of (by sale or otherwise) any property, real or
personal, and any interest therein;
(d) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
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(e) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(f) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(g) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian, subcustodian or
other depositary or a nominee or nominees or otherwise;
(h) Subject to the provisions of Article III, to allocate assets,
liabilities, income and expenses of the Trust to a particular series of Shares
or to apportion the same among two or more series, provided that any
liabilities or expenses incurred by a particular series shall be payable solely
out of the assets of that series; and to the extent necessary or appropriate
to give effect to the preferences and special or relative rights or privileges
of any classes of Shares, to allocate assets, liabilities, income and expenses
of a series to a particular class of Shares of that series or to apportion the
same among two or more classes of Shares of that series;
(i) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or property
of which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer, and to
pay calls or subscriptions with respect to any security held in the Trust;
(j) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall
deem proper;
(k) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(l) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
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(m) To borrow funds;
(n) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(o) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability; and
(p) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and agents
of the Trust.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by trustees of common law trusts.
Except as otherwise provided herein or from time to time in the By-Laws, any
action to be taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (if a quorum by present), within or without
Massachusetts, including any meeting held by means of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can communicate with each other simultaneously and participation by
such means shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
Payment of Expenses, Allocation of Liabilities
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Section 3. The Trustees are authorized to pay or to cause to be
paid out of the principal or income of the Trust, or partly out of principal
and partly out of income, as they deem fair, all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust, or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser or manager, principal
underwriter, auditor, counsel, custodian, transfer agent, shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur.
The assets of a particular series of Shares shall be charged with the
liabilities (including, in the discretion of the Trustees or their delegate,
accrued expenses and reserves) incurred in respect of such series (but not with
liabilities incurred in respect of any other series) and such series shall also
be charged with its share of any other liabilities. Any allocation of the
liabilities of a series among classes of Shares of that series shall be done in
a manner consistent with the preferences and special or relative rights or
privileges of such classes. The determination of the Trustees shall be final
and conclusive as to the amount of liabilities to be charged to one or more
particular series or class. The Trustees may delegate from time to time the
power to make such allocation to one or more Trustees or to an agent of the
Trust appointed for such purpose. The liabilities with which a series is so
charged are herein referred to as the "liabilities of" such series.
Section 4. The Trustees shall have the power, as frequently as they
may determine, to cause each Shareholder to pay directly, in advance or
arrears, for charges for the Trust's custodian or transfer or shareholder
service or similar agent, an amount fixed from time to time by the Trustees, by
setting off such charges due from such Shareholder from declared but unpaid
dividends owed such Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or fractional Shares
which represents the outstanding amount of such charges due from such
Shareholder.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of each series of the Trust
and of the Trust shall at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable vote of a majority of the
outstanding voting securities of a series of the Trust, the Trustees may on
behalf of such series, at any time and from time to time, contract for
exclusive or nonexclusive advisory and/or
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management services for such series with a corporation, trust,
association or other organization, every such contract to comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
such series shall be held uninvested and to make changes in such series'
investments. The Trustees may also, at any time and from time to time,
contract with a corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal underwriter
for the Shares, every such contract to comply with such requirements and
restrictions as may be set forth in the By-Laws; and any such contract may
contain such other terms interpretive of or in addition to said requirements
and restrictions as the Trustees may determine.
The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, advisor,
principal underwriter, or distributor or agent of or for any corporation,
trust, association, or other organization, or of or for any parent or affiliate
of any organization, with which an advisory or management or principal
underwriter's or distributor's contract, or transfer, shareholder services or
other agency contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or has an
interest in the Trust, or that
(b) any corporation, trust, association or other organization with
which an advisory or management or principal underwriter's or distributor's
contract, or transfer, shareholder services or other agency contract may have
been or may hereafter be made also has an advisory or management contract, or
principal underwriter's or distributor's contract, or transfer, shareholder
services or other agency contract with one or more other corporations,
trusts, associations, or other organizations, or has other businesses or
interests shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting provisions of one or more classes
of Shares, the Shareholders shall have power to vote
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only: (a) for the election or removal of Trustees as provided in
Article IV, Section 1; (b) with respect to any investment adviser or manager as
provided in Article IV, Section 6; (c) with respect to any termination or
reorganization of the Trust or any series or class thereof to the extent and as
provided in Article IX, Section 1; (d) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX, Section 4;
and (e) with respect to such additional matters relating to the Trust as may be
required by law, the 1940 Act, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable.
Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. Notwithstanding any other provision of the
Declaration of Trust, on any matter submitted to a vote of Shareholders all
Shares of the Trust then entitled to vote shall, except to the extent otherwise
required or permitted by the preferences and special or relative rights or
privileges of any classes of Shares, be voted by individual series and not in
the aggregate or by class, except (a) when required by the 1940 Act, Shares
shall be voted in the aggregate and not by individual series; and (b) when the
Trustees have determined that the matter affects only the interests of one or
more series or classes, then only Shareholders of such series or class shall be
entitled to vote thereon. There shall be no cumulative voting in the election
of Trustees. Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to the
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares of any series or class are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by Shareholders of such
series or class.
Shareholder Meetings
Section 2. Meetings of Shareholders (including meetings involving
only one or more but less than all series or classes) may be called and held
from time to time for the purpose of taking action upon any matter requiring
the vote or authority of
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the Shareholders as herein provided or upon any other matter deemed by
the Trustees to be necessary or desirable. Such meetings shall be held at the
principal office of the Trust as set forth in the By-Laws of the Trust or at
any such other place within the United States as may be designated in the call
thereof, which call shall be made by the Trustees or the President of the
Trust. Meetings of Shareholders may be called by the Trustees or such other
person or persons as may be specified in the By-Laws upon written application
by Shareholders holding at least twenty-five percent (25%) (or ten percent
(10%) if the purpose of the meeting is to determine if a Trustee is to be
removed from office) of the Shares then outstanding of all series and classes
entitled to vote at such meeting requesting a meeting be called for a purpose
requiring action by the Shareholders as provided herein or in the By-Laws which
purpose shall be specified in any such written application.
Shareholders shall be entitled to at least seven days' written notice
of any meeting of the Shareholders.
Quorum and Required Vote
Section 3. The presence at a meeting of Shareholders in person or
by proxy of Shareholders entitled to vote at least thirty percent (30%) of all
votes entitled to be cast at the meeting of each series or class entitled to
vote as a series or class shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this
Declaration of Trust permits or requires that the holders of Shares shall vote
in the aggregate and not as a series or class, then the presence in person or
by proxy of Shareholders entitled to vote at least thirty percent (30%) of all
votes entitled to be cast at the meeting (without regard to series or class)
shall constitute a quorum. Any lesser number, however, shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice.
Except when a larger vote is required by any provisions of the 1940
Act, this Declaration of Trust or the By-Laws, a majority of the Shares of each
series or class voted on the matter shall decide that matter insofar as that
series or class is concerned, provided that where any provision of law, this
Declaration of Trust or the By-Laws permits or requires that the holders of
Shares vote in the aggregate and not as a series or class, then a majority of
the Shares voted on any matter (without regard to series or class) shall decide
such matter and a plurality shall elect a Trustee.
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Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without a
meeting if Shareholders entitled to vote more than fifty percent (50%) of the
votes entitled to be cast on the matter of each series or class or, where any
provision of law, this Declaration of Trust or the By-Laws permits or requires
that the holders of Shares vote in the aggregate and not as a series or class,
if Shareholders entitled to vote more than fifty percent (50%) of the votes
entitled to be cast thereon (without regard to series or class) (or in either
case such larger vote as shall be required by any provision of this Declaration
of Trust or the By-Laws) consent to the action in writing and such written
consents are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters not inconsistent with the
provisions hereof.
ARTICLE VI
Distributions, Redemptions and Repurchases,
and Determination of Net Asset Value
Distributions
Section 1. The Trustees may in their sole discretion from time to
time distribute to the Shareholders of any series such income and gains,
accrued or realized, as the Trustees may determine, after providing for actual
and accrued expenses and liabilities of such series (including such reserves as
the Trustees may establish) determined in accordance with this Declaration of
Trust and good accounting practices. The Trustees shall have full discretion
to determine which items shall be treated as income and which items as capital
and their determination shall be binding upon the Shareholders. Distributions
to any series, if any be made, shall be in Shares of such series, in cash or
otherwise and on a date or dates determined by the Trustees. At any time and
from time to time in their discretion, the Trustees may distribute to the
Shareholders of any series as of a record date or dates determined by the
Trustees, in Shares of such series, in cash or otherwise, all or part of any
gains realized on the sale or disposition of property of the series or
otherwise, or all or part of any other principal of the Trust attributable to
the series. Except to the extent otherwise required or permitted by the
preferences and special or relative rights or privileges of any classes of
Shares of that series, each distribution pursuant to this Section 1 shall be
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made ratably according to the number of Shares of the series held by
the several Shareholders on the applicable record date thereof, provided that
distributions from assets of a series may only be made to the holders of the
Shares of such series and provided that no distributions need be made on Shares
purchased pursuant to orders received, or for which payment is made, after such
time or times as the Trustees may determine. Any distribution to the
Shareholders of a particular class of Shares shall be made to such Shareholders
pro rata in proportion to the number of Shares of such class held by each of
them. Any distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with this Declaration of Trust. The
Trustees have the power, in their discretion, to distribute for any year
amounts sufficient to enable the Trust to qualify as a "regulated investment
company" under the Internal Revenue Code as amended (or any successor thereto)
to avoid any liability for federal income tax in respect of that year.
Redemptions and Repurchases
Section 2. Any holder of Shares of the Trust may, by presentation
of a request in proper form, together with his certificates, if any, for such
Shares, in proper form for transfer to the Trust or duly authorized agent of
the Trust, request redemption of his shares for the net asset value thereof
determined and computed in accordance with the provisions of this Section 2 and
the provisions of Section 6 of this Article VI.
Upon receipt by the Trust or its duly authorized agent, as the case may
be, of such a request for redemption of Shares in proper form, such Shares
shall be redeemed at the net asset value per share of the particular series or
class next determined after such request is received or determined as of such
other time fixed by the Trustees as may be permitted or required by the 1940
Act. The criteria for determining what constitutes a request for redemption in
proper form and the time of receipt of such request shall be fixed by the
Trustees.
The obligation of the Trust to redeem its Shares as set forth above in
this Section 2 shall be subject to the condition that such obligation may be
suspended by the Trust by or under authority of the Trustees during any period
or periods when and to the extent permissible under the 1940 Act. If there is
such a suspension, any Shareholder may withdraw any request for redemption
which has been received by the Trust during any such period and the applicable
net asset value with respect to which would but for such suspension be
calculated as of a time during such period. Upon such withdrawal, the Trust
shall return to the Shareholder the certificates therefor, if any.
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The Trust may also purchase, repurchase or redeem Shares in accordance
with such other methods, upon such other terms and subject to such other
conditions as the Trustee may from time to time authorize at a price not
exceeding the net asset value of such Shares in effect when the purchase or
repurchase or any contract to purchase or repurchase is made. Shares redeemed
or repurchased by the Trust hereunder shall be cancelled upon such redemption
or repurchase without further action by the Trust or the Trustees and the
number of issued and outstanding Shares of the relevant series and class shall
thereupon be reduced by such amount.
Payment for Shares Redeemed
Section 3. Payment of the redemption price for Shares redeemed
pursuant to this Article VI shall be made by the Trust or its duly authorized
agent after receipt by the Trust or its duly authorized agent of a request for
redemption in proper form (together with any certificates for such Shares as
provided in Section 2 above) in accordance with procedures and subject to
conditions prescribed by the Trustees; provided, however, that payment may be
postponed during the period in which the redemption of Shares is suspended
under Section 2 above. Subject to any generally applicable limitation imposed
by the Trustees, any payment on redemption, purchase or repurchase by the Trust
of Shares may, if authorized by the Trustees, be made wholly or partly in kind,
instead of in cash. Such payment in kind shall be made by distributing
securities or other property, constituting, in the opinion of the Trustees, a
fair representation of the various types of securities and other property then
held by the series of Shares being redeemed, purchased or repurchased (but not
necessarily involving a portion of each of the series' holdings) and taken at
their value used in determining the net asset value of the Shares in respect of
which payment is made.
Redemptions at the Option of the Trust
Section 4. The Trust shall have the right at its option and at any
time and from time to time to redeem Shares of any Shareholder at the net asset
value thereof as determined in accordance with Section 6 of this Article VI, if
at such time such Shareholder owns fewer shares of a series or class than, or
Shares of a series or class having an aggregate net asset value of less than,
an amount determined from time to time by the Trustees. Any such redemption at
the option of the Trust shall be made in accordance with such other criteria
and procedures for determining the Shares to be redeemed, the redemption date
and the means of effecting such redemption as the Trustees may from time to
time authorize.
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Additional Provisions Relating to Dividends, Redemptions and
Repurchases
Section 5. The completion of redemption, purchase or repurchase of
Shares shall constitute a full discharge of the Trust and the Trustees with
respect to such Shares. No dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
series or class) with respect to, nor any redemption or repurchase of, the
Shares of any series or class shall be effected by the Trust other than from
the assets of such series.
Determination of Net Asset Value
Section 6. The term "net asset value" of each Share of a series or
class as of any particular time shall be the quotient obtained by dividing the
value, as at such time, of the net assets of such series or class (i.e., the
value of the assets of such series or class less the liabilities of such series
or class, exclusive of liabilities represented by the Shares of such series or
class) by the total number of Shares of such series or class outstanding at
such time, all determined and computed in accordance with the Trust's current
prospectus.
The Trustees, or any officer, or officers or agent of the Trust
designated for the purpose by the Trustees shall determine the net asset value
of the Shares of each series or class, and the Trustees shall fix the time or
times as of which the net asset value of the Shares of each series or class
shall be determined and shall fix the periods during which any such net asset
value shall be effective as to sales, redemptions and repurchases of, and other
transactions in, the Shares of such series or class, except as such times and
periods for any such transaction may be fixed by other provisions of this
Declaration of Trust or by the By-Laws.
Determinations in accordance with this Section 6 made in good faith
shall be binding on all parties concerned.
How Long Shares are Outstanding
Section 7. Shares of the Trust surrendered to the Trust for
redemption by it pursuant to the provisions of Section 2 of this Article VI
shall be deemed to be outstanding until the redemption price thereof is
determined pursuant to this Article VI and, thereupon and until paid, the
redemption price thereof shall be deemed to be a liability of the Trust.
Shares of the Trust purchased by the Trust in the open market shall be deemed
to be outstanding until confirmation of purchase thereof by the Trust and,
thereupon and until paid, the purchase price thereof shall be deemed to be a
liability of the Trust. Shares of the Trust redeemed by the Trust pursuant to
Section 4 of this Article
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VI shall be deemed to be outstanding until said Shares are deemed to be
redeemed in accordance with procedures adopted by the Trustees pursuant to said
Section 4.
ARTICLE VII
Compensation and Limitation of Liability
of Trustees and Shareholders
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust if the rate thereof is prescribed by such
Trustees. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for the same by the Trust, it being recognized
that such employment may result in such Trustee being considered an
Affiliated Person or an Interested Person.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
investment adviser or manager, principal underwriter or custodian, nor
shall any Trustee be responsible for the act or omission of any other
Trustee. Nothing in this Declaration of Trust shall protect any Trustee
against any liability to which such Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or
on behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been executed or done only in or
with respect to their or his capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or officer shall
give notice that this Declaration of Trust is on file with the Secretary
of State of The Commonwealth of Massachusetts and shall recite that the
same was executed or made by or on behalf of the Trust by them as Trustees or
Trustee or as officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the Trust
or a particular series of Shares, and may contain such further recital as
he or they may deem appropriate, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or Shareholders
or Shareholder individually.
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All persons extending credit to, contracting with or having any claim
against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares, as
the case may be, for payment under such credit, contract or claim;
and neither the Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
Trustees' Good Faith Action, Expert Advice, No Bond or Surety
Section 3. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested. A
Trustee shall be liable only for his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of the office of Trustee, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed by them, any
independent public accountant and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of any other
party to any contract entered into pursuant to Section 2 of Article IV.
The Trustees shall not be required to give any bond as such, nor any surety if
a bond is required.
Liability of Third Persons Dealing with Trustees
Section 4. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made or to
be made by the Trustees or to see to the application of any payments made or
property transferred to the Trust or upon its order.
ARTICLE VIII
Indemnification
Subject to the exceptions and limitations contained in this Article,
every person who is, or has been, a Trustee or officer of the Trust
(including persons who serve at the request of the Trust as directors,
officers or trustees of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise) hereinafter referred to as a
"Covered Person", shall be indemnified by the Trust to the fullest extent
permitted by law against
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liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been such a Trustee, director or officer and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason
of a final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office;
(b) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust; or
(c) in the event of a settlement or other disposition not involving
a final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry) that he did not
engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel other than Covered Persons may
be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding subject to a claim for indemnification under this
Article shall be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf
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of the recipient to repay such amount if it is ultimately determined
that he is not entitled to indemnification under this Article, provided that
either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out
of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Article, a "Disinterested Trustee" is one (a) who is
not an "interested person" of the Trust, as defined in the 1940 Act (including
anyone who has been exempted from being an "interested person" by any rule,
regulation or order of the Commission), and (b) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Article, the words "claim", "action", "suit" or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include without limitation,
attorneys' fees, cost, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall
be entitled to be held harmless from and indemnified against all loss and
expense arising from such liability but only out of the assets of the
particular series of Shares of which he or she is or was a Shareholder;
provided, however, there shall be no liability or obligation of the
Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of Shares or for losses suffered
by reason of any changes in value of any Trust assets.
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ARTICLE IX
Miscellaneous
Duration, Termination and Reorganization of Trust
Section 1. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may be terminated at
any time by the Trustees by written notice to the Shareholders without a vote
of the Shareholders of the Trust or by the vote of the Shareholders entitled
to vote more than fifty percent (50%) of the votes of each series or class
entitled to be cast on the matter. Any series or class of Shares may be
terminated at any time by the Trustees by written notice to the Shareholders
of such series or class without a vote of the Shareholders of such
series or class or by the vote of the Shareholders of such series or
class entitled to vote more than fifty percent (50%) of the votes entitled
to be cast on the matter.
Upon termination of the Trust or of any one or more series or classes
of Shares, after paying or otherwise providing for all charges, taxes,
expenses and liabilities, whether due or accrued or anticipated, of the
particular series or class as may be determined by the Trustees, the
Trust shall in accordance with such procedures as the Trustees consider
appropriate reduce to the extent necessary the remaining assets of the
particular series to distributable form in cash or other securities, or any
combination thereof, and distribute the proceeds to the Shareholders
of the series or class involved, ratably according to the number of Shares
of such series or class held by the several Shareholders of such series
or class on the date of termination. Any such distributions with respect
to any series which has one or more classes of Shares outstanding shall be made
ratably to such classes in the same proportion as the number of Shares of
each class bears to the total number of Shares of the series, except to the
extent otherwise required or permitted by the preferences and special or
relative rights or privileges of any classes of Shares of any such series.
At any time by the affirmative vote of the Shareholders of the
affected series entitled to vote more than fifty percent (50%) of the
votes entitled to be cast on the matter, the Trustees may sell, convey
and transfer the assets of the Trust, or the assets belonging to any one or
more series, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the Trust to
be held as assets belonging to another series of the Trust, in exchange
for cash, shares or other securities (including, in the case of a transfer to
another series of the Trust, Shares of such other series) with such transfer
being made subject to or with the assumption by the transferee of, the
liabilities belonging to each series the assets of which are so distributed.
Following such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due
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effect to the assets and liabilities belonging to and any other
differences among the various series the assets belonging to which have so
been transferred) among the Shareholders of the series the assets belonging
to which have been so transferred; and if all the assets of the Trust have
been so distributed, the Trust shall be terminated.
Filing of Copies, References, Headings
Section 2. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each
amendment hereto shall be filed by the Trust with the Secretary of State
of The Commonwealth of Massachusetts and with the Boston City Clerk, as
well as any other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a certificate
by any officer of the Trust as to whether or not any such amendments have
been made and as to any matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of
any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein", "hereof",
and "hereunder", shall be deemed to refer to this instrument as amended
from time to time. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Applicable Law
Section 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
Amendments
Section 4. This Declaration of Trust may be amended at any time
by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of Shareholders holding more than fifty percent
(50%) of the Shares of each series entitled to vote, except that an
amendment which in the determination of the Trustees shall affect the holders
of one or more series or classes of Shares but not the holders of all
outstanding series and classes shall be authorized by vote of the Shareholders
holding more than fifty percent (50%) of the Shares entitled to vote of each
series
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or class affected and no vote of Shareholders of a series or class not
affected shall be required. Amendments having the purpose of changing the name
of the Trust or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision which is defective or inconsistent
with the 1940 Act or with the requirements of the Internal Revenue Code
and the regulations thereunder for the Trust's obtaining the most
favorable treatment thereunder available to regulated investment companies
shall not require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal for himself and his assigns, as of the day and year first above written.
/s/ Antonio DeSpirito III
------------------------------
(SEAL) Antonio DeSpirito III, Trustee
Residence Address:
145 Endicott St., Apt. 12
------------------------------
Boston, MA 02113
------------------------------
COMMONWEALTH OF MASSACHUSETTS
County of Suffolk, ss.
Then personally appeared the above-named Antonio DeSpirito III who
acknowledged the foregoing instrument to be his free act and deed, before me
this 12 day of June, 1995.
Michael F. DeFao
----------------
Notary Public
My Commission Expires: Aug 7, 1998
-----------
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<PAGE> 1
EXHIBIT-99.B1(b).
KEMPER TRUST #23
WRITTEN INSTRUMENT AMENDING THE
AGREEMENT AND DECLARATION OF TRUST
September 7, 1995
The undersigned, being the sole trustee of Kemper Trust #23 (the
"Trust"), a business trust organized pursuant to an Agreement and Declaration
of Trust dated June 12, 1995 (the "Declaration of Trust"), pursuant to Section
1 of Article I and Section 4 of Article IX of the Declaration of Trust, does
hereby change the name of the Trust to "Kemper Horizon Fund." This instrument
shall constitute an amendment to the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has this 7th day of September,
1995, signed these presents.
/s/ Philip J. Collora
-------------------------------------
Philip J. Collora, Sole Trustee
2734 Lawndale Avenue
Evanston, Illinois 60201
The address of the Trust is:
120 South LaSalle Street
Chicago, Illinois 60603
<PAGE> 1
EXHIBIT-99.B24.
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Trustee September 16, 1995
---------------------------
<PAGE> 2
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ James E. Akins Trustee September 16, 1995
---------------------------
<PAGE> 3
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ Arthur R. Gottschalk Trustee September 16, 1995
--------------------------
<PAGE> 4
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ Frederick T. Kelsey Trustee September 16, 1995
--------------------------
<PAGE> 5
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ David B. Mathis Trustee September 16, 1995
--------------------------
<PAGE> 6
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as such person's attorney-in-fact to
sign and file on such person's behalf individually and in the capacity stated
below such registration statements, amendments, post-effective amendments,
exhibits, applications and other documents with the Securities and Exchange
Commission or any other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ Fred B. Renwick Trustee September 16, 1995
---------------------------
<PAGE> 7
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any of whom
may act without the joinder of the others, as his attorney-in-fact to sign and
file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ John B. Tingleff Trustee September 16, 1995
--------------------------
<PAGE> 8
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Charles F.
Custer, Stephen B. Timbers and Philip J. Collora and each of them, any
of whom may act without the joinder of the others, as his attorney-in-fact to
sign and file on his behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
Signature Title Date
--------- ----- ----
/s/ John G. Weithers Trustee September 16, 1995
--------------------------
