<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1995.
1933 ACT REGISTRATION NO. 33-63467
1940 ACT REGISTRATION NO. 811-7365
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
<S> <C>
Pre-Effective Amendment No. 2 /X/
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 2 /X/
</TABLE>
(Check appropriate box or boxes)
------------------
KEMPER HORIZON FUND
(Exact name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
120 South LaSalle Street, Chicago, Illinois 60603
<S> <C>
(Address of Principal Executive Office) (Zip Code)
</TABLE>
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 was paid with the filing of the initial Registration Statement.
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
SUBJECT TO COMPLETION -- DATED DECEMBER 14, 1995
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------------------------------
<S> <C>
Summary 1
- ----------------------------------------------
Summary of Expenses 3
- ----------------------------------------------
Investment Objectives, Policies and Risk 4
Factors
- ----------------------------------------------
Investment Manager and Underwriter 16
- ----------------------------------------------
Dividends and Taxes 19
- ----------------------------------------------
Net Asset Value 20
- ----------------------------------------------
Purchase of Shares 21
- ----------------------------------------------
Redemption or Repurchase of Shares 26
- ----------------------------------------------
Special Features 30
- ----------------------------------------------
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 MUTUAL FUNDS 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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
<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>
CLASS A SHARES HORIZON 20+ HORIZON 10+ HORIZON 5
- ---------------------------------------------------------------- ----------- ----------- ---------
<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>
CLASS B SHARES HORIZON 20+ HORIZON 10+ HORIZON 5
- ---------------------------------------------------------------- ----------- ----------- ---------
<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>
CLASS C SHARES HORIZON 20+ HORIZON 10+ HORIZON 5
- ---------------------------------------------------------------- ----------- ----------- ---------
<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>
PORTFOLIO 1 YEAR 3 YEARS
--------- ------ -------
<S> <C> <C> <C>
CLASS A SHARES
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 "Other 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 (including other preferred stocks,
warrants and rights, but not including convertible debt securities), 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 dollar-weighted credit
quality (i.e., within the top two rating categories of an NRSRO or comparable as
determined by the investment manager). Average dollar-weighted credit quality is
calculated by averaging the ratings of each fixed income security held by a
Portfolio with each rating "weighted" according to the percentage of assets that
it represents. Average dollar-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 that at
which it was purchased (i.e., downgraded). 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 dollar-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. A security will be treated as having
a maturity earlier than its stated maturity date if the security has technical
features (such as puts or demand features) or a variable rate of interest that,
in the judgment of the investment manager, will result in the security being
valued in the market as though it has the earlier maturity. Average
dollar-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
dollar-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%.
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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 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
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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 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
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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 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
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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
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 may invest in securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers, such as the Portfolios.
Such securities may be illiquid and subject to the Portfolio's limitation on
illiquid securities. A "Rule 144A" security may be treated as liquid, however,
if so determined pursuant to procedures adopted by the Board of Trustees.
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
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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.
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
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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.
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
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<PAGE> 20
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 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.
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<PAGE> 21
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 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 (such as credit card or automobile loan receivables). 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.
15
<PAGE> 22
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.
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. 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, James R. Neel, 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
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<PAGE> 23
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, Frank E. Collecchia, George Klein, Michael A. McNamara,
Christopher J. Mier, Frank J. Rachwalski, Jr., Harry E. Resis, Jr., Robert H.
Schumacher, John E. Silvia, 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.
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.
17
<PAGE> 24
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 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
18
<PAGE> 25
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.
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
19
<PAGE> 26
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 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
20
<PAGE> 27
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. 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
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<PAGE> 28
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 March 29,
1996 ("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.
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
22
<PAGE> 29
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 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
23
<PAGE> 30
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."
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
24
<PAGE> 31
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 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
25
<PAGE> 32
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
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
26
<PAGE> 33
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 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
27
<PAGE> 34
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 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
28
<PAGE> 35
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 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" (other than shares of the Kemper Cash Reserves Fund
purchased directly at net asset value) 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.
29
<PAGE> 36
SPECIAL FEATURES
CLASS A SHARES--COMBINED PURCHASES. Class A shares (or the equivalent) 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.
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
30
<PAGE> 37
net asset values. Shares of Money Market Funds and the Kemper Cash Reserves Fund
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.
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 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 of such shares. 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. 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. 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
31
<PAGE> 38
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 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
32
<PAGE> 39
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.
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
33
<PAGE> 40
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 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
34
<PAGE> 41
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.
35
<PAGE> 42
PROSPECTUS
KEMPER
HORIZON FUND
, 1995
-----------------
KEMPER HORIZON
20+ PORTFOLIO
KEMPER HORIZON
10+ PORTFOLIO
KEMPER HORIZON
5 PORTFOLIO
----------------
KEMPER
[KEMPER MUTUAL FUNDS LOGO]
[KEMPER MUTUAL FUNDS LOGO]
Investment Manager:
Kemper Financial Services, Inc.
Principal Underwriter:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, IL 60603
1-800-621-1048
[RECYCLE LOGO]
KHF-1(12/95)
<PAGE> 43
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> 44
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED DECEMBER 14, 1995
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
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<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-18
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-13 12/95 (LOGO)printed on recycled paper
<PAGE> 45
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.
- ---------------
* For purposes of investment restrictions (1) and (8), to the extent a Portfolio
invests in loan participations, the Portfolio, as a non-fundamental policy,
considers both the lender and the borrower to be an issuer of such loan
participation.
B-1
<PAGE> 46
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 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 investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, or by purchase in
the open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than (i) 3%
of the total outstanding voting stock of such company is owned by it, (ii) 5% of
its total assets would be invested in any one such company, and (iii) 10% of
total assets would be invested in such securities.
(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
B-2
<PAGE> 47
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 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
B-3
<PAGE> 48
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.
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
B-4
<PAGE> 49
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 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
B-5
<PAGE> 50
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 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.
B-6
<PAGE> 51
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
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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<PAGE> 52
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
(i.e., junk bonds) or are non-rated. No Portfolio currently intends to invest
more than 5% of its net assets in junk bonds. 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> 53
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 net 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 net 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 net 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 the Fund, 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 created as
collateralized obligations through various proprietary custodial, trust or other
relationships. The effect of
B-9
<PAGE> 54
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.
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
B-10
<PAGE> 55
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> 56
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> 57
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> 58
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 as a result of which (i) disposal of a Portfolio's investments
is not reasonably practicable, or (ii) it is not reasonably
B-14
<PAGE> 59
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.
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
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<PAGE> 60
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 expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Portfolio
B-16
<PAGE> 61
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 ("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 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.
B-17
<PAGE> 62
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 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.
*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.
B-18
<PAGE> 63
*THOMAS M. REGNER (7/1/52), Vice President (1), 120 South LaSalle Street,
Chicago, Illinois; Senior Vice President, KFS.
*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.
- ---------------
* "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 December 13, 1995, KFS owned all the shares of each class of each
Portfolio of the Fund, except the Class I shares for which there were no holders
of record.
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, the Declaration of Trust, the
By-laws of the Fund, or any registration of the Fund with the Securities and
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<PAGE> 64
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.
B-20
<PAGE> 65
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 20+
Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 5 Portfolio,
comprising Kemper Horizon Fund as of December 11, 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 each of the Portfolios of
Kemper Horizon Fund at December 11, 1995 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
December 11, 1995
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<PAGE> 66
KEMPER HORIZON FUND
STATEMENT OF NET ASSETS--DECEMBER 11, 1995
<TABLE>
<CAPTION>
HORIZON HORIZON HORIZON
20+ PORTFOLIO 10+ PORTFOLIO 5 PORTFOLIO
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS
Cash.......................................................... $ 100,000 $ 100,000 $ 100,000
========== ========== ========
NET ASSETS
Net assets, applicable to shares of beneficial interest
(unlimited number of shares authorized, no par value)
outstanding for each Portfolio as follows:
Class A 3,473.684
Class B 3,473.684
Class C 3,578.947 $ 100,000 $ 100,000 $ 100,000
========== ========== ========
THE PRICING OF SHARES
Net asset value and redemption price per share, applicable to
all Portfolios..............................................
Class A ($33,000 / 3,473.684 shares outstanding)............ $ 9.50
Class B* ($33,000 / 3,473.684 shares outstanding)........... $ 9.50
Class C ($34,000 / 3,578.947 shares outstanding)............ $ 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)................................. $ 10.08
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
December 11, 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.
B-22
<PAGE> 67
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.
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<PAGE> 68
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.
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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.
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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 and V 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). Foreign Custody Agreement (Form 2).
99.B9(a). Agency Agreement.
99.B9(b). 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.*
27 Inapplicable.
</TABLE>
- ---------------
* Incorporated by reference to Registrant's Registration Statement on Form N-1A
which was filed on October 17, 1995.
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 December 13, 1995, there was one holder of record of each class of
shares of Registrant, except the Class I Shares for which there were no holders
of record.
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.
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ITEM 28.(a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment 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:
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 Quantitative Equity 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
Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund
and Kemper International Bond 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
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
Chairman of the Board, 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, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, President and Chief Operating Officer, Kemper Financial Services,
Inc.,
Senior Vice President, Kemper Corporation
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
Vice President, Kemper Europe 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.
Vice President, Kemper Europe Fund
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
Vice President, Kemper Target Equity Fund
Vice President, Kemper Sterling Funds
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe 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.
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
C-14
<PAGE> 84
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.
C-15
<PAGE> 85
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
Vice President, Kemper Europe Fund
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> 86
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.
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> 87
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> 88
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
Assistant Secretary, Kemper Europe Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-19
<PAGE> 89
Item 28(b)(ii) Business and Other Connections of Officers and Directors
of Dreman Value Advisors, Inc., the Investment Sub-Advisor
DREMAN, DAVID N.
Director, Chairman of the Board, Dreman Value Advisors, Inc.
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper-Dreman Fund, Inc.
NEAL, JOHN E.
Director, Dreman Value Advisors, Inc.
Director, President and Chief Operating Officer, Kemper Financial
Services, Inc., Senior Vice President, Kemper Corporation
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Kemper Asset Management Company
Director, Ardenwood Financial Corporation
Director, Avondale Redmond, Inc.
Director, Bedford Holding Company
Director, Black Mountain, Inc.
Director, Brannan Resources, Inc.
Director, Butterfield Financial Corporation
Director, Camelot Financial Corporation
Director, Clay Capital, Inc.
Director, Concord Aviation, Inc.
Director, Coast Broadcasting Company
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, Kemper/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
Director, Lafayette Hills, Inc.
Director, Margarita Village Retirement Community
Director, Mesa Homes
Director, Mesa Homes Brokerage Company
C - 20
<PAGE> 90
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Business Centre
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, Inc.
Director, Two Corporate Center
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice Presidnet, 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.
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.
C - 21
<PAGE> 91
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, Dreman Value Advisors, Inc.
Director, Senior Executive Vice President, Kemper Financial Services,
Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Kemper Asset Management Company
Vice President, Kemper Funds
Director, Kemper Service Company
TIMBERS, STEPHEN B.
Director, Dreman Value Advisors, Inc.
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, 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.
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
C - 22
<PAGE> 92
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
NEEL, JAMES R.
Director, President and Chief Executive Officer, Dreman Value Advisors, Inc.
Vice President, Kemper-Dreman Fund, Inc.
DUDASIK, PATRICK H.
Executive Vice President, Chief Financial Officer and Treasurer, Dreman
Value Advisors, Inc.
Senior Vice President, Kemper Financial Services, 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
BERRY, MICHAEL A.
Managing Director, Dreman Value Advisors, Inc.
COUGHLIN, WILLIAM
Managing Director, Dreman Value Advisors, Inc.
DIERENFELDT, DAVID F.
Secretary, Dreman Value Advisors, Inc.
Senior Vice President, Associate General Counsel and
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services Insurance Agency, Inc.
Secretary, Kemper Asset Management Company
C - 23
<PAGE> 93
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
FITZSIMONS, EILEEN M.
Managing Director, Dreman Value Advisors, Inc.
HOLMES, JAMES P.
Managing Director, Dreman Value Advisors, Inc.
MASTAIN, JR., RICHARD K.
Managing Director, Dreman Value Advisors, Inc.
SHIPMAN, STEPHEN
Managing Director, Dreman Value Advisors, Inc.
KAY, JONATHAN
Vice President, Dreman Value Advisors, Inc.
McRAE, SUSAN
Vice President, Dreman Value Advisors, Inc.
MORRISSEY, JOSYANE
Vice President, Dreman Value Advisors, Inc.
RIDER, JOSEPH
Vice President, Dreman Value Advisors, Inc.
C - 24
<PAGE> 94
ITEM 29. PRINCIPAL UNDERWRITER
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Mutual
Funds, Kemper Investors Fund, Kemper International Bond
Fund and Kemper-Dreman Fund, Inc.
(b) Information on the officers and directors of Kemper Distributors,
Inc., principal underwriter for the Registrant is set forth below. The
principal business address is 120 South LaSalle Street, Chicago, Illinois
60603.
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------
<S> <C> <C>
John E. Peters Principal Director, President Vice President
William E. Chapman, II Director, Executive Vice President None
James L. Greenawalt 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
Thomas V. Bruns 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
Carlene D. Merold 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.
C-25
<PAGE> 95
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,
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-26
<PAGE> 96
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 13th day of
December, 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 December 13, 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
with the Registration Statement on Form N-1A of Registrant on or about October
17, 1995.
/s/ PHILIP J. COLLORA
--------------------------------------
Philip J. Collora
<PAGE> 97
KEMPER HORIZON FUND
INDEX TO EXHIBITS
<TABLE>
<S> <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). Foreign Custody Agreement (Form 2).
99.B9(a). Agency Agreement.
99.B9(b). 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.*
27 Inapplicable.
</TABLE>
- ---------------
* Incorporated by reference to Registrant's Registration Statement on Form
N-1A which was filed on October 17, 1995.
<PAGE> 1
EXHIBIT 99.B2
BY-LAWS OF
KEMPER HORIZON FUND
Section 1. Agreement and Declaration of
Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Kemper Horizon Fund, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust; Resident Agent. The principal office of
the Trust shall be located in Chicago, Illinois. Its resident agent in
Massachusetts shall be CT Corporation System, 2 Oliver Street, Boston,
Massachusetts or such other person as the Trustees may from time to time
select.
Section 2. Shareholders
2.1 Shareholder Meetings. Meetings of the shareholders may be called at
any time by the Trustees, by the President or, if the Trustees and the
President shall fail to call any meeting of shareholders for a period of 30
days after written application of one or more shareholders who hold at least
25% of all shares issued and outstanding and entitled to vote at the meeting
(or 10% if the purpose of the meeting is to determine if a Trustee shall be
removed from office), then such shareholders may call such meeting. Each call
of a meeting shall state the place, date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as
shall be designated by the Trustees or the President of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each shareholder entitled to
vote thereat by leaving such notice with him or at his residence or usual place
of business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the Trust. Such
notice shall be given by the Secretary or an Assistant Secretary or by an
officer designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed before
or
<PAGE> 2
after the meeting by such shareholder or his attorney thereunto duly
authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election unless
requested by a shareholder present or represented at the meeting and entitled
to vote in the election.
2.5 Proxies and Voting. Shareholders entitled to vote may vote either in
person or by proxy in writing dated not more than six months before the meeting
named therein, which proxies shall be filed with the Secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting but
shall not be valid after the final adjournment of such meeting. At all
meetings of shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters, the validity of proxies and
the acceptance or rejection of votes shall be decided by the chairman of the
meeting.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Any such committee may
be abolished and reconstituted at any time and from time to time by the
Trustees. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more than five members. The
members of the advisory board shall be compensated in such manner as the
Trustees may determine and shall confer with and advise the Trustees regarding
the investments and other affairs of the Trust. Each member of the advisory
board shall hold office until the first meeting of the Trustees following the
meeting of the shareholders, if any, next following his appointment and until
his successor is appointed and qualified, or until he sooner dies, resigns, is
removed, or becomes disqualified, or until the advisory board is sooner
abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time
to time determine, provided that notice of the first regular meeting following
any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after
and at the same place as any meeting of the shareholders.
2
<PAGE> 3
3.3 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when called by the
Chairman of the Board or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by
the officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by
mail at least three days or by telegram at least twenty-four hours before the
meeting addressed to the Trustee at his or her usual or last known business
or residence address or to give notice to him or her in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him or her
before or after the meeting, is filed with the records of the meeting, or to
any Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a meeting nor
a waiver of a notice need specify the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees, one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum (unless the
Board of Trustees consists of two or fewer persons) shall not be less than two.
Any meeting may be adjourned from time to time by a majority of the votes cast
upon the question, whether or not a quorum is present, and the meeting may be
held as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, if any, as
the Trustees from time to time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the Trustees from time to time may
in their discretion appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in
the Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
4.3 Election. The President, the Treasurer and the Secretary shall
be elected annually by the Trustees at their first meeting
3
<PAGE> 4
in each calendar year or at such later meeting in such year as the Trustees
shall determine. Other officers or agents, if any, may be elected or appointed
by the Trustees at said meeting or at any other time.
4.4 Tenure. The President, Treasurer and Secretary shall hold office until
the first meeting of Trustees in each calendar year and until their respective
successors are chosen and qualified, or in each case until he or she sooner
dies, resigns, is removed or becomes disqualified. Each other officer shall
hold office and each agent shall retain his or her authority at the pleasure of
the Trustees.
4.5 Chairman of the Board. The Chairman of the Board of Trustees, if one
is so appointed, shall be chosen from among the Trustees and may hold office
only so long as he continues to be a Trustee. The Chairman of the Board, if
any is so appointed, shall preside at all meetings of the shareholders and of
the Trustees at which he is present; and shall have such other duties and
powers as specified herein and as may be assigned to him by the Trustee.
4.6 President and Vice Presidents. The President shall be the chief
executive officer of the Trust. The President shall, subject to the control
of the Trustees, have general charge and supervision of the Trust and shall
perform such other duties and have such other powers as the Trustees shall
prescribe from time to time. Any Vice President shall at the request or in the
absence or disability of the President exercise the powers of the President and
perform such other duties and have such other powers as shall be designated
from time to time by the Trustees.
4.7 Treasurer and Controller. The Treasurer shall be the chief financial
officer of the Trust and, subject to any arrangement made by the Trustees with
a bank or trust company or other organization as custodian or transfer or
shareholder services agent, shall be in charge of its valuable papers and
shall have such other duties and powers as may be designated from time to time
by the Trustees or by the President. If at any time there shall be no
Controller, the Treasurer shall also be the chief accounting officer of the
Trust and shall have the duties and power prescribed herein for the Controller.
Any Assistant Treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The Controller, if any be elected, shall be the chief accounting officer of the
Trust and shall be in charge of its books of account and accounting records.
The Controller shall be responsible for preparation of financial statements of
the Trust and shall have such other duties and powers as may be designated from
time to time by the Trustees or the President.
4
<PAGE> 5
4.8 Secretary and Assistant Secretaries. The Secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of shareholders or Trustees, an
Assistant Secretary, or if there be none or if he or she is absent, a temporary
clerk chosen at the meeting shall record the proceedings thereof in the
aforesaid books.
Section 5. Resignations and Removals
Any Trustee may resign his trust or retire as a Trustee in accordance with
procedures set forth in the Declaration of Trust. Any officer or advisory board
member may resign at any time by delivering his or her resignation in
writing to the Chairman of the Board, the President or the Secretary or to a
meeting of the Trustees. The Trustees may remove any officer or advisory board
member elected or appointed by them with or without cause by the vote of a
majority of the Trustees then in office. Except to the extent expressly
provided in a written agreement with the Trust, no Trustee, officer, or
advisory board member resigning, and no officer or advisory board member
removed, shall have any right to any compensation for any period following his
or her resignation or removal, or any right to damages on account of such
removal.
Section 6. Vacancies
A vacancy in the office of Trustee shall be filed in accordance with the
Declaration of Trust. Vacancies resulting from the death, resignation,
incapacity or removal of any officer may be filled by the Trustees. Each
successor of any such officer shall hold office for the unexpired term, and in
the case of the President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or she sooner dies,
resigns, is removed or becomes disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the ownership of shares
shall be issued except as the Trustees may otherwise authorize. In the event
that the Trustees authorize the issuance of share certificates, subject to
the provisions of Section 7.3, each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall
be signed by the President or a Vice President and by the Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary. Such signatures may be facsimiles
if the certificate is signed by a transfer or shareholder services agent or by
a
5
<PAGE> 6
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders
of certificates for such shares as if they had accepted such certificates and
shall be held to have expressly assented and agreed to the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees may at
any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
Section 8. Record Date
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the
payment of any dividend or making of any other distribution to shareholders, as
the record date for determining the shareholders having the right to notice and
to vote at such meeting and any adjournment thereof or the right to receive
such dividend or distribution, and in such case only shareholders of record on
such record date shall have such right, notwithstanding any transfer of shares
on the books of the Trust after the record date.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of
a flat-faced circular die with the word "Massachusetts" together with the name
of the Trust, cut or engraved thereon; but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument, or other paper
executed and delivered by or on behalf of the Trust.
6
<PAGE> 7
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the Trust shall be signed, and any transfers of
securities standing in the name of the Trust shall be executed, by the
President or by one of the Vice Presidents or by the Treasurer or by whomsoever
else shall be designated for that purpose by the vote of the Trustees and need
not bear the seal of the Trust.
Section 11. Fiscal Year
The fiscal year of the Trust shall end on such date in each year as the
Trustees shall from time to time determine.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such majority.
7
<PAGE> 1
EXHIBIT 99.B4(a)
[Name]
is the owner of [number] shares of beneficial
interest in the above noted Fund (the "FUND"), of the series and class, if any,
specified, fully paid and nonassessable, the said shares being issued and held
subject to the provisions of the Agreement and Declaration of Trust of the
Fund, and all amendments thereto, copies of which are on file with the
Secretary of The Commonwealth of Massachusetts. The said owner by accepting
this certificate agrees to and is bound by all of the said provisions. The
shares represented hereby are transferable in writing by the owner thereof in
person or by attorney upon surrender of this certificate to the Fund properly
endorsed for transfer. This certificate is executed on behalf of the Trustees
of the Fund as Trustees and not individually and the obligations hereof are not
binding upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund or, if applicable, the
specified series of the Fund. The shares may be subject to a contingent
deferred sales charge. This certificate is not valid unless countersigned by
the Transfer Agent.
<PAGE> 1
EXHIBIT 99.B4(b)
KEMPER HORIZON FUND
WRITTEN INSTRUMENT ESTABLISHING
AND DESIGNATING SEPARATE CLASSES OF SHARES
September 16, 1995
The undersigned constitute all the Trustees of Kemper Horizon Fund (the
"Fund"), a Massachusetts business trust governed by an Agreement and
Declaration of Trust dated June 12, 1995 (the "Declaration of Trust"). This
instrument is executed pursuant to Section 1 of Article III of the Declaration
of Trust in order to establish and designate separate classes of shares of any
series of the Fund, and it is based in part upon resolutions of the Board of
Trustees of the Fund adopted at a meeting on September 16, 1995.
WHEREAS, Under the Declaration of Trust the Board of Trustees has the
authority, in its discretion and without shareholder approval, to divide the
shares of any series of the Fund into separate classes of shares;
WHEREAS, This Board of Trustees has previously approved, subject to
various conditions, the division of the shares of each series of the Fund into
four classes of shares, to be named "Class A Shares," "Class B Shares," "Class
C Shares" and "Class I Shares;"
WHEREAS, This Board of Trustees deems it desirable and in the best
interests of the Fund to divide the shares of each series of the Fund, whether
now existing or hereafter created (the "series"), into four separate classes of
shares to be named, as previously indicated, "Class A Shares," "Class B
Shares," "Class C Shares" and "Class I Shares" and to provide investors with a
conversion feature from Class B Shares to the Class A Shares, which conversion
feature would thereby eliminate any distribution services fee then in effect
under any plan adopted pursuant to Rule 12b-1 of the Investment Company Act of
1940 ("1940 Act") for such Class B Shares; and
WHEREAS, This Board of Trustees believes that the creation of four
separate classes of shares as provided herein will be in the best interests of
and will have no negative effects upon the current shareholders of the Fund;
NOW, THEREFORE, the establishment and designation of separate classes
of shares of any series of the Fund is approved in accordance with the
following provisions:
<PAGE> 2
1. Subject to the conditions hereinafter set forth, the shares of any
series shall be divided into four classes to be known respectively as the
"Class A Shares," the "Class B Shares," the "Class C Shares" and the "Class I
Shares," which classes shall have such preferences and special or relative
rights and privileges as may be determined from time to time by this Board of
Trustees subject always to the Declaration of Trust and the 1940 Act and the
rules and regulations thereunder.
2. Subject to the terms of the Declaration of Trust, the Class A
Shares, Class B Shares, Class C Shares and Class I Shares will have the same
rights and privileges except that:
(A) The Class A Shares
(1) shall be sold subject to an initial sales charge as
described in the prospectus for the Fund as from time to time in effect
or shall be issued to shareholders in connection with the conversion
feature as hereinafter described;
(2) shall have an administrative service fee;
(3) shall not have a plan of distribution adopted under Rule
12b-1 of the 1940 Act ("Rule 12b-1 plan") and no fees payable under the
Rule 12b-1 plans for the Class B Shares or Class C Shares shall be
allocated or charged to the Class A Shares; and
(4) shall have such dividend reinvestment, exchange and
redemption rights and privileges as may be described in the prospectus
for the Fund as from time to time in effect; and
(B) the Class B Shares
(1) shall be sold without an initial sales charge but subject
to a contingent deferred sales charge imposed upon the redemption of
the Class B shares as described in the prospectus of the Fund as from
time to time in effect;
(2) shall have an administrative service fee;
(3) shall have a Rule 12b-1 plan and any fees payable from
time to time under such plan shall be allocated and charged to, and any
voting rights with respect to such plan shall be exercisable by, the
Class B Shares only;
(4) shall convert to Class A Shares within a specified number
of years as hereinafter described; and
2
<PAGE> 3
(5) shall have such purchase, dividend reinvestment, exchange
and redemption rights and privileges associated therewith as may be
described in the prospectus for the Fund as from time to time in
effect; and
(C) the Class C Shares
(1) shall be sold without any initial sales charge or any
contingent deferred sales charge;
(2) shall have an administrative service fee;
(3) shall have a Rule 12b-1 plan and any fees payable from
time to time under such plan shall be allocated and charged to, and any
voting rights with respect to such plan shall be exercisable by, the
Class C Shares only; and
(4) shall have such purchase, dividend reinvestment, exchange
and redemption rights and privileges associated therewith as may be
described in the prospectus for the Fund as from time to time in
effect; and
(D) the Class I Shares
(1) shall be sold without any initial sales charge or any
contingent deferred sales charge;
(2) shall not have an administrative service fee;
(3) shall not have a Rule 12b-1 plan and no fees payable under
the plans for the Class B Shares or Class C Shares shall be allocated
or charged to the Class I Shares; and
(4) shall have such dividend reinvestment, exchange and
redemption rights and privileges as may be described in the prospectus
for the Fund as from time to time in effect.
3. Any shares of the Fund that are issued and outstanding at the time
when shares of the Fund are effectively divided into separate classes of shares
as set forth above shall be classified as Class A Shares.
4. Class A Shares of a series shall be issued to holders of Class B
Shares of the same series pursuant to the following described conversion
feature:
(A) Class B Shares will convert to Class A Shares six years
after issuance of such Class B Shares; provided, however, that
any Class B Shares issued in exchange for shares originally classified
as Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios
3
<PAGE> 4
(KP), whether in connection with a reorganization with a series
of KP or otherwise, shall convert to Class A Shares seven years after
issuance of such Initial Shares if such Initial Shares were issued
prior to February 1, 1991;
(B) Class B Shares issued upon reinvestment of income and
capital gain dividends and other distributions will convert to Class A
Shares on a pro rata basis with other Class B Shares; and
(C) Conversion to Class A Shares shall be based upon the
relative net asset values of the Class A Shares and the Class B Shares
at the time of conversion.
IN WITNESS WHEREOF, the undersigned have this 16th day of September,
1995 signed these presents.
/s/ Stephen B. Timbers
-------------------------
Stephen B. Timbers
210 South Green Bay Road
Lake Forest, IL 60045
(signatures continue)
4
<PAGE> 5
/s/ James E. Akins
-------------------------------
James E. Akins
2904 Garfield Terrace, N.W.
Washington, D.C. 20008-3507
/s/ Arthur R. Gottschalk
-------------------------------
Arthur R. Gottschalk
10642 Brookridge Drive
Frankfort, Illinois 60423
/s/ Frederick T. Kelsey
-------------------------------
Frederick T. Kelsey, Trustee
3133 Laughing Gull Court
Johns Island, South Carolina 29455
/s/ David B. Mathis
-------------------------------
David B. Mathis, Trustee
529 Briar Lane
Lake Forest, IL 60045
/s/ Fred B. Renwick
-------------------------------
Fred B. Renwick
3 Hanover Square
New York, New York 10004
------------------------------------
Stephen B. Timbers, Trustee
210 South Green Bay Road
Lake Forest, Illinois 60045
/s/ John B. Tingleff
-------------------------------
John B. Tingleff, Trustee
2015 South Lake Shore Drive
Harbor Springs, Michigan 49740
/s/ John G. Weithers
-------------------------------
John G. Weithers, Trustee
311 Springlake
Hinsdale, Illinois 60521
<PAGE> 1
EXHIBIT 99.B4(c)
KEMPER HORIZON FUND
WRITTEN INSTRUMENT CHANGING THE NAME
OF THE EXISTING SERIES AND ESTABLISHING
AND DESIGNATING TWO ADDITIONAL SERIES
September 8, 1995
The undersigned, being the sole trustee of Kemper Horizon Fund (the
"Trust"), a business trust organized pursuant to an Agreement and Declaration
of Trust dated June 12, 1995, as amended (the "Declaration of Trust"), pursuant
to Section 1 of Article III of the Declaration of Trust: (a) does hereby
change the name of the sole series of the Trust from the "Initial Portfolio" to
the "Horizon 20+ Portfolio" and (b) does hereby establish and designate a
second and third series of Shares of the Trust to be known as the "Horizon 10+
Portfolio" and the "Horizon 5 Portfolio," respectively. The relative
rights and preferences of each such series shall be as set forth in the
Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has this 8th day 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.B4(d)
KEMPER HORIZON FUND
WRITTEN INSTRUMENT CHANGING THE NAME
OF THE EXISTING SERIES
November 10, 1995
The undersigned, constitute all the Trustees of Kemper Horizon Fund
(the "Trust"), a Massachusetts business trust organized pursuant to an
Agreement and Declaration of Trust dated June 12, 1995, as amended (the
"Declaration of Trust"), pursuant to Section 1 of Article III of the
Declaration of Trust do hereby change the name of the series of the Trust from
"Horizon 20+ Portfolio," "Horizon 10+ Portfolio" and "Horizon 5 Portfolio"
to "Kemper Horizon 20+ Portfolio," "Kemper Horizon 10+ Portfolio" and "Kemper
Horizon 5 Portfolio."
IN WITNESS WHEREOF, the undersigned has this 10th day November, 1995,
signed these presents.
/s/ Stephen B. Timbers
-----------------------------
Stephen B. Timbers
210 South Green Bay Road
Lake Forest, IL 60045
(signatures continue)
<PAGE> 2
/s/ James E. Akins
-------------------------------
James E. Akins
2904 Garfield Terrace, N.W.
Washington, D.C. 20008-3507
/s/ Arthur R. Gottschalk
-------------------------------
Arthur R. Gottschalk
10642 Brookridge Drive
Frankfort, Illinois 60423
/s/ Frederick T. Kelsey
-------------------------------
Frederick T. Kelsey, Trustee
3133 Laughing Gull Court
Johns Island, South Carolina 29455
/s/ David B. Mathis
-------------------------------
David B. Mathis, Trustee
529 Briar Lane
Lake Forest, IL 60045
/s/ Fred B. Renwick
-------------------------------
Fred B. Renwick
3 Hanover Square
New York, New York 10004
------------------------------------
Stephen B. Timbers, Trustee
210 South Green Bay Road
Lake Forest, Illinois 60045
/s/ John B. Tingleff
-------------------------------
John B. Tingleff, Trustee
2015 South Lake Shore Drive
Harbor Springs, Michigan 49740
/s/ John G. Weithers
-------------------------------
John G. Weithers, Trustee
311 Springlake
Hinsdale, Illinois 60521
<PAGE> 1
EXHIBIT 99.B5(a)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this _____ day of December, 1995, by and
between KEMPER HORIZON FUND, a Massachusetts business trust
(the "Fund"), and KEMPER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Adviser").
WHEREAS, the Fund is an open-end management investment
company registered under the Investment Company Act of 1940,
the shares of beneficial interest ("Shares") of which are
registered under the Securities Act of 1933;
WHEREAS, the Fund is authorized to issue Shares in
separate series or portfolios with each representing the
interests in a separate portfolio of securities and other
assets;
WHEREAS, the Fund currently offers or intends to offer
Shares in three portfolios, the Kemper Horizon 20+ Portfolio,
the Kemper 10+ Portfolio and the Kemper Horizon 5 Portfolio
(the "Initial Portfolios"), together with any other Fund
portfolios which may be established later and served by the
Adviser hereunder, being herein referred to collectively as
the "Portfolios" and individually referred to as a
"Portfolio"; and
WHEREAS, the Fund desires at this time to retain the
Adviser to render investment advisory and management services
to the Initial Portfolios, and the Adviser is willing to
render such services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the
investment adviser for the Initial Portfolios and other
Portfolios hereunder and to manage the investment and
reinvestment of the assets of each such Portfolio in
accordance with the applicable investment objectives and
policies and limitations, and to administer the affairs of
each such Portfolio to the extent requested by and subject to
the supervision of the Board of Trustees of the Fund for the
period and upon the terms herein set forth, and to place
orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by it;
and, in connection therewith, the Adviser is authorized as
the agent of the Fund to give instructions to the Custodian
of the Fund as to the deliveries of securities and payments
<PAGE> 2
of cash for the account of the Fund. In connection with the
selection of such brokers or dealers and the placing of such
orders, the Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board
of Trustees of the Fund determines, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty,
created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction
in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if
the Adviser determined in good faith that such amount of
commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to the
clients of the Adviser as to which the Adviser exercises
investment discretion. The Fund recognizes that all research
services and research that the Adviser receives or generates
are available for all clients, and that the Fund and other
clients may benefit thereby. The investment of funds shall
be subject to all applicable restrictions of the Agreement
and Declaration of Trust and By-Laws of the Fund as may from
time to time be in force.
The Adviser accepts such employment and agrees during
such period to render such services, to furnish office
facilities and equipment and clerical, bookkeeping and
administrative services for the Fund, to permit any of its
officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions
and to assume the obligations herein set forth for the
compensation herein provided. The Adviser shall for all
purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the
Fund. It is understood and agreed that the Adviser, by
separate agreements with the Fund, may also serve the Fund in
other capacities.
2. In the event that the Fund establishes one or more
portfolios other than the Initial Portfolios with respect to
which it desires to retain the Adviser to render investment
advisory and management services hereunder, it shall notify
the Adviser in writing. If the Adviser is willing to render
such services, it shall notify the Fund in writing whereupon
such portfolio or portfolios shall become a Portfolio or
Portfolios hereunder.
3. For the services and facilities described in Section 1,
the Fund will pay to the Adviser at the end of each calendar
2
<PAGE> 3
month, an investment management fee for each Portfolio
computed by applying the following annual rates to the
applicable average daily net assets of the Portfolio:
<TABLE>
<CAPTION>
Applicable Average
Daily Net Assets
(Thousands) Annual Rate
------------------ -----------
<S> <C>
$0 - $ 250,000 .58 of 1%
$ 250,000 - $ 1,000,000 .55 of 1%
$ 1,000,000 - $ 2,500,000 .53 of 1%
$ 2,500,000 - $ 5,000,000 .51 of 1%
$ 5,000,000 - $ 7,500,000 .48 of 1%
$ 7,500,000 - $10,000,000 .46 of 1%
$10,000,000 - $12,500,000 .44 of 1%
Over $12,500,000 .42 of 1%
</TABLE>
The fee as computed above shall be computed separately
for, and charged as an expense of, each Portfolio based upon
the average daily net assets of such Portfolio. For the
month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the
basis of the number of days that the Agreement is in effect
during the month and year, respectively.
4. The services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services or other services to
others so long as its services hereunder are not impaired
thereby.
5. In addition to the fee of the Adviser, the Fund shall
assume and pay any expenses for services rendered by a
custodian for the safekeeping of the Fund's securities or
other property, for keeping its books of account, for any
other charges of the custodian, and for calculating the net
asset value of the Fund as provided in the prospectus of the
Fund. The Adviser shall not be required to pay and the Fund
shall assume and pay the charges and expenses of its
operations, including compensation of the trustees (other
than those affiliated with the Adviser), charges and expenses
of independent auditors, of legal counsel, of any transfer or
dividend disbursing agent, and of any registrar of the Fund,
costs of acquiring and disposing of portfolio securities,
interest, if any, on obligations incurred by the Fund, costs
of share certificates and of reports, membership dues in the
Investment Company Institute or any similar organization,
3
<PAGE> 4
costs of reports and notices to shareholders, other like
miscellaneous expenses and all taxes and fees payable to
federal, state or other governmental agencies on account of
the registration of securities issued by the Fund, filing of
trust documents or otherwise. The Fund shall not pay or
incur any obligation for any expenses for which the Fund
intends to seek reimbursement from the Adviser as herein
provided without first obtaining the written approval of the
Adviser. The Adviser shall arrange, if desired by the Fund,
for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents
of the Fund if duly elected or appointed to such positions
and subject to their individual consent and to any
limitations imposed by law.
If expenses borne by the Fund for those Portfolios which
the Adviser manages in any fiscal year (including the
Adviser's fee, but excluding interest, taxes, fees incurred
in acquiring and disposing of portfolio securities,
distribution services fees, extraordinary expenses and any
other expenses excludable under state securities law
limitations) exceed any applicable limitation arising under
state securities laws, the Adviser will reduce its fee or
reimburse the Fund for any excess to the extent required by
such state securities laws. If for any month the expenses of
the Fund properly chargeable to the income account shall
exceed 1/12 of the percentage of average net assets allowable
as expenses, the payment to the Adviser for that month shall
be reduced and if necessary the Adviser shall make a refund
payment to the Fund so that the total net expense will not
exceed such percentage. As of the end of the Fund's fiscal
year, however, the foregoing computations and payments shall
be readjusted so that the aggregate compensation payable to
the Adviser for the year is equal to the percentage
calculated in accordance with Section 3 hereof of the average
net asset value as determined as described herein throughout
the fiscal year, diminished to the extent necessary so that
the total of the aforementioned expense items of the Fund
shall not exceed the expense limitation. The aggregate of
repayments, if any, by the Adviser to the Fund for the year
shall be the amount necessary to limit the said net expense
to said percentage in accordance with the foregoing.
The net asset value for each Portfolio shall be
calculated in accordance with the provisions of the Fund's
prospectus or as the trustees may determine in accordance
with the provisions of the Investment Company Act of 1940.
On each day when net asset value is not calculated, the net
asset value of a Portfolio shall be deemed to be the net
asset value of such Portfolio as of the close of business on
the last day on which such calculation was made for the
purpose of the foregoing computations.
4
<PAGE> 5
6. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are
or may be interested in the Adviser as officers, directors,
agents, shareholders or otherwise, and that the officers,
directors, shareholders and agents of the Adviser may be
interested in the Fund otherwise than as a trustee, officer
or agent.
7. The Adviser 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 this Agreement relates,
except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the
performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this
Agreement.
8. This Agreement shall become effective with respect to
the Initial Portfolios on the date hereof and shall remain in
full force until April 1, 1997, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each Portfolio,
but only as long as such continuance is specifically approved
for each Portfolio at least annually in the manner required
by the Investment Company Act of 1940 and the rules and
regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a
Portfolio, the Adviser may continue to serve in such capacity
for such Portfolio in the manner and to the extent permitted
by the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the
event of its assignment and may be terminated at any time
without the payment of any penalty by the Fund or by the
Adviser on sixty (60) days written notice to the other party.
The Fund may effect termination with respect to any Portfolio
by action of the Board of Trustees or by vote of a majority
of the outstanding voting securities of such Portfolio.
This Agreement may be terminated with respect to any
Portfolio at any time without the payment of any penalty by
the Board of Trustees or by vote of a majority of the
outstanding voting securities of such Portfolio in the event
that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of
the Adviser has taken any action which results in a breach of
the covenants of the Adviser set forth herein.
The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set
5
<PAGE> 6
forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right
of the Adviser to receive payments on any unpaid balance of
the compensation described in Section 3 earned prior to such
termination.
9. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
10. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the
other party at such address as such other party may designate
for the receipt of such notice.
11. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by
its representatives as such representatives and not
individually, and the obligations of the Fund hereunder are
not binding upon any of the trustees, officers, or
shareholders of the Fund individually but are binding upon
only the assets and property of the Fund. With respect to
any claim by the Adviser for recovery of that portion of the
investment management fee (or any other liability of the Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, the Adviser shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall have
no recourse against the assets of any other Portfolio for
such purpose.
12. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 11 hereof
which shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of
Illinois.
6
<PAGE> 7
13. This Agreement is the entire contract between the
parties relating to the subject matter hereof and supersedes
all prior agreements between the parties relating to the
subject matter hereof.
IN WITNESS WHEREOF, the Fund and the Adviser have caused
this Agreement to be executed as of the day and year first
above written.
KEMPER HORIZON FUND
By:____________________________
Title:_________________________
ATTEST:
_________________________________
Title:___________________________
KEMPER FINANCIAL SERVICES, INC.
By:____________________________
Title:_________________________
ATTEST:
__________________________________
Title:____________________________
7
<PAGE> 1
EXHIBIT 99.B5(b)
SUB-ADVISORY AGREEMENT
AGREEMENT made this ____ day of December, 1995, by and
between KEMPER FINANCIAL SERVICES, INC., a Delaware corporation
(the "Adviser") and DREMAN VALUE ADVISORS, INC., a Delaware
corporation (the "Sub-Adviser").
WHEREAS, KEMPER HORIZON FUND, a Massachusetts business trust
(the "Fund") is an open-end management investment company
registered under the Investment Company Act of 1940, the shares
of beneficial interest ("Shares") of each series of which are
registered under the Securities Act of 1933;
WHEREAS, the Fund has retained the Adviser to render to it
investment advisory and management services pursuant to an
Investment Management Agreement, dated December __, 1995 (the
"Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the
Sub-Adviser to render investment advisory and management services
with respect to that portion of the portfolio of each series of
the Fund allocated to the Sub-Adviser by the Adviser for
management and the Sub-Adviser is willing to render such
services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage the
investment and reinvestment of the assets of the Fund allocated
by the Adviser in its sole discretion to the Sub-Adviser for
management in accordance with the applicable investment
objectives and policies and limitations and subject to the
supervision of the Adviser and the Board of Trustees of the Fund
for the period and upon the terms herein set forth, and to place
orders for the purchase or sale of portfolio securities for the
Fund's account with brokers or dealers selected by the
Sub-Adviser; and, in connection therewith, the Sub-Adviser is
authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board of
Trustees of the Fund determines, the Sub-Adviser shall not be
deemed to have acted unlawfully or to have breached any duty,
created by this Agreement or otherwise, solely by reason of its
having caused the Fund to pay a broker or dealer an amount of
<PAGE> 2
commission for effecting a securities transaction in excess of
the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Sub-Adviser
determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of
either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-Adviser
as to which the Sub-Adviser exercises investment discretion. The
Adviser recognizes that all research services and research that
the Sub-Adviser receives or generates are available for all
clients of the Sub-Adviser, and that the Fund and other clients
of the Sub-Adviser may benefit thereby. The investment of funds
shall be subject to all applicable restrictions of the Agreement
and Declaration of Trust and By-Laws of the Fund as may from time
to time be in force.
The Sub-Adviser accepts such employment and agrees during
such period to render such investment management services, to
furnish related office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit
any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and
to assume the obligations herein set forth for the compensation
herein provided. The Sub-Adviser shall for all purposes herein
provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed that the Sub-Adviser, by separate
agreements with the Fund, may also serve the Fund in other
capacities.
2. In the event that the Fund establishes one or more
additional series with respect to which the Adviser desires to
retain the Sub-Adviser to render investment advisory and
management services hereunder, the Adviser shall notify the
Sub-Adviser in writing. If the Sub-Adviser is willing to render
such services, it shall notify the Adviser in writing whereupon
such series shall become subject to this agreement.
3. For the services and facilities described in Section 1, the
Adviser will pay to the Sub-Adviser at the end of each calendar
month, a sub-advisory fee computed at an annual rate of .25 of 1%
of the portion of the average daily net assets of each series
allocated by the Adviser to the Sub-Adviser for management.
The fee as computed above shall be computed separately for,
and charged as an expense of, each series of the Fund based upon
the average daily net assets of such series. For the month and
year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the
-2-
<PAGE> 3
number of days that the Agreement is in effect during the month
and year, respectively.
4. The services of the Sub-Adviser under this Agreement are not
to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services or other services to others so long as
its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for
officers or employees of the Sub-Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and
subject to their individual consent and to any limitations
imposed by law.
6. The net asset value for each series of the Fund shall be
calculated in accordance with the provisions of the Fund's
prospectus or as the trustees may determine in accordance with
the provisions of the Investment Company Act of 1940. On each
day when net asset value is not calculated, the net asset value
of a series shall be deemed to be the net asset value of such
series as of the close of business on the last day on which such
calculation was made for the purpose of the foregoing
computations.
7. Subject to applicable statutes and regulations, it is
understood that certain trustees, officers or agents of the Fund
are or may be interested in the Sub-Adviser as officers,
directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Sub-Adviser
may be interested in the Fund otherwise than as a trustee,
officer or agent.
8. The Sub-Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund or the
Adviser in connection with the matters to which this Agreement
relates, except loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the
performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this
Agreement.
9. This Agreement shall become effective with respect to the
initial series of the Fund on the date hereof and shall remain in
full force until April 1, 1997, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each series, but
only as long as such continuance is specifically approved for
each series at least annually in the manner required by the
Investment Company Act of 1940 and the rules and regulations
thereunder; provided, however, that if the continuation of this
Agreement is not approved for a series, the Sub-Adviser may
-3-
<PAGE> 4
continue to serve in such capacity for such Portfolio in the
manner and to the extent permitted by the Investment Company Act
of 1940 and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of
its assignment or in the event of the termination of the
Management Agreement and may be terminated at any time with
respect to any series without the payment of any penalty by the
Adviser or by the Sub-Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination with respect
to any series without payment of any penalty by action of the
Board of Trustees or by vote of a majority of the outstanding
voting securities of such series on sixty (60) days written
notice to the Adviser and the Sub-Adviser.
This Agreement may be terminated with respect to any series
at any time without the payment of any penalty by the Board of
Trustees of the Fund, by vote of a majority of the outstanding
voting securities of such series or by the Adviser in the event
that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of
the Sub-Adviser has taken any action which results in a breach of
the covenants of the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth
in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of
the Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Section 3 earned prior to such
termination.
10. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
11. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
12. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
-4-
<PAGE> 5
13. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the day and year first
above written.
KEMPER FINANCIAL SERVICES, INC.
By:_____________________________
Title:__________________________
ATTEST:
____________________________
Title:______________________
DREMAN VALUE ADVISORS, INC.
By:_____________________________
Title:__________________________
ATTEST:
____________________________
Title:______________________
-5-
<PAGE> 1
EXHIBIT 99.B6(a)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this _______ day of December, 1995, between
KEMPER HORIZON FUND, a Massachusetts business trust (the "Fund"),
and KEMPER DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:
1. The Fund hereby appoints KDI to act as agent for the
distribution of shares of beneficial interest (hereinafter called
"shares") of the Fund in jurisdictions wherein shares of the Fund
may legally be offered for sale; provided, however, that the Fund
in its absolute discretion may (a) issue or sell shares directly
to holders of shares of the Fund upon such terms and conditions
and for such consideration, if any, as it may determine, whether
in connection with the distribution of subscription or purchase
rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net
asset value to the shareholders of any other investment company,
for which KDI shall act as exclusive distributor, who wish to
exchange all or a portion of their investment in shares of such
other investment company for shares of the Fund. KDI shall
appoint various financial service firms ("Firms") to provide
distribution services to investors. The Firms shall provide such
office space and equipment, telephone facilities, personnel,
literature distribution, advertising and promotion as is
necessary or beneficial for providing information and
distribution services to existing and potential clients of the
Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal
underwriter and agrees to render such services and to assume the
obligations herein set forth for the compensation herein
provided. KDI shall for all purposes herein provided be deemed
to be an independent contractor and, unless expressly provided
herein or otherwise authorized, shall have no authority to act
for or represent the Fund in any way. KDI, by separate agreement
with the Fund, may also serve the Fund in other capacities. The
services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar
services or other services to others so long as its services
hereunder are not impaired thereby.
In carrying out its duties and responsibilities hereunder,
KDI will, pursuant to separate written contracts, appoint various
Firms to provide advertising, promotion and other distribution
<PAGE> 2
services contemplated hereunder directly to or for the benefit of
existing and potential shareholders who may be clients of such
Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to
sell such part of the authorized shares of the Fund remaining
unissued as from time to time shall be effectively registered
under the Securities Act of 1933 ("Securities Act"), at prices
determined as hereinafter provided and on terms hereinafter set
forth, all subject to applicable federal and state laws and
regulations and to the Agreement and Declaration of Trust of the
Fund.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof
and the then effective registration statement (and related
prospectus) of the Fund under the Securities Act, as KDI may
determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the
Fund without the prior consent of the Fund. In addition to sales
made by it as agent of the Fund, KDI may, in its discretion, also
sell shares of the Fund as principal to persons with whom it does
not have selling group agreements.
Shares of any class of any series of the Fund offered for
sale or sold by KDI shall be so offered or sold at a price per
share determined in accordance with the then current prospectus.
The price the Fund shall receive for all shares purchased from it
shall be the net asset value used in determining the public
offering price applicable to the sale of such shares. Any excess
of the sales price over the net asset value of the shares of the
Fund sold by KDI as agent shall be retained by KDI as a
commission for its services hereunder. KDI may compensate Firms
for sales of shares at the commission levels provided in the
Fund's prospectus from time to time. KDI may pay other
commissions, fees or concessions to Firms, and may pay them to
others in its discretion, in such amounts as KDI shall determine
from time to time. KDI shall be entitled to receive and retain
any applicable contingent deferred sales charge as described in
the Fund's prospectus. KDI shall also receive any distribution
services fee payable by the Fund as provided in Section 8 hereof.
KDI will require each Firm to conform to the provisions
hereof and the Registration Statement (and related prospectus) at
the time in effect under the Securities Act with respect to the
public offering price or net asset value, as applicable, of the
Fund's shares, and neither KDI nor any such Firms shall withhold
the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein
2
<PAGE> 3
contemplated such shares as KDI shall reasonably request and as
the Securities and Exchange Commission shall permit to be so
registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares
whenever, in its sole discretion, it deems such action to be
desirable.
4. The Fund will execute any and all documents and furnish any
and all information that may be reasonably necessary in
connection with the qualification of its shares for sale
(including the qualification of the Fund as a dealer where
necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its
opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its
shares as KDI may reasonably request for use in connection with
the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various
Firms to issue and deliver on behalf of the Fund such
confirmations of sales made by it pursuant to this agreement as
may be required. At or prior to the time of issuance of shares,
KDI will pay or cause to be paid to the Fund the amount due the
Fund for the sale of such shares. Certificates shall be issued
or shares registered on the transfer books of the Fund in such
names and denominations as KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the
extent that it shall have received purchase orders therefor. KDI
will not make, or authorize Firms or others to make (a) any short
sales of shares of the Fund; or (b) any sales of such shares to
any trustee or officer of the Fund or to any officer or director
of KDI or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Fund, or to
any corporation or association, unless such sales are made in
accordance with the then current prospectus relating to the sale
of such shares. KDI, as agent of and for the account of the
Fund, may repurchase the shares of the Fund at such prices and
upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares
of the Fund for the account of the Fund, KDI will in all respects
conform to the requirements of all state and federal laws and the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., relating to such sale or reacquisition, as the
case may be, and will indemnify and save harmless the Fund from
any damage or expense on account of any wrongful act by KDI or
any employee, representative or agent of KDI. KDI will observe
and be bound by all the provisions of the Agreement and
Declaration of Trust of the Fund (and of any fundamental policies
adopted by the Fund pursuant to the Investment Company Act of
1940, notice of which shall have been given to KDI) which at the
3
<PAGE> 4
time in any way require, limit, restrict, prohibit or otherwise
regulate any action of the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KDI under this Agreement. The Fund will pay or cause
to be paid expenses (including the fees and disbursements of its
own counsel) of any registration of the Fund and its shares under
the United States securities laws and expenses incident to the
issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent.
KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to
the sale and distribution of the shares issued or sold hereunder,
including, without limiting the generality of the foregoing, all
(a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other
literature, advertising and selling aids in connection with the
offering of the shares for sale (except that such expenses need
not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any
registration statement or prospectus, report or other
communication to shareholders in their capacity as such), (b)
expenses of advertising in connection with such offering and (c)
expenses (other than the Fund's auditing expenses) of qualifying
or continuing the qualification of the shares for sale and, in
connection therewith, of qualifying or continuing the
qualification of the Fund as a dealer or broker under the laws of
such states as may be designated by KDI under the conditions
herein specified. No transfer taxes, if any, which may be
payable in connection with the issue or delivery of shares sold
as herein contemplated or of the certificates for such shares
shall be borne by the Fund, and KDI will indemnify and hold
harmless the Fund against liability for all such transfer taxes.
8. For the services and facilities described herein in
connection with Class B shares and Class C shares of each series
of the Fund, the Fund will pay to KDI at the end of each calendar
month a distribution services fee computed at the annual rate of
.75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and
year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month
and year, respectively. The foregoing fee shall be in addition
to and shall not be reduced or offset by the amount of any
contingent deferred sales charge received by KDI under Section 2
hereof.
The net asset value shall be calculated in accordance with
the provisions of the Fund's current prospectus. On each day
when net asset value is not calculated, the net asset value of a
4
<PAGE> 5
share of any class of any series of the Fund shall be deemed to
be the net asset value of such a share as of the close of
business on the last previous day on which such calculation was
made. The distribution services fee for any class of a series of
the Fund shall be based upon average daily net assets of the
series attributable to the class and such fee shall be charged
only to such class.
9. KDI shall prepare reports for the Board of Trustees of the
Fund on a quarterly basis in connection with the Fund's
distribution plan for Class B shares and Class C shares showing
amounts paid to the various Firms and such other information as
from time to time shall be reasonably requested by the Board of
Trustees.
10. To the extent applicable, this Agreement constitutes the
plan for the Class B shares and Class C shares of each series of
the Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940; and this Agreement and plan shall be approved and
renewed in accordance with Rule 12b-1 for such Class B shares and
Class C shares separately.
This Agreement shall become effective on the date hereof and
shall continue for one year thereafter; and shall continue from
year to year thereafter only so long as such continuance is
approved in the manner required by the Investment Company Act of
1940.
This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the
payment of any penalty by the Fund or by KDI on sixty (60) days
written notice to the other party. The Fund may effect
termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board of Trustees, (ii) a
majority of the trustees who are not interested persons of the
Fund and who have no direct or indirect financial interest in
this Agreement or in any agreement related to this Agreement, or
(iii) a majority of the outstanding voting securities of the
class. Without prejudice to any other remedies of the Fund, the
Fund may terminate this Agreement at any time immediately upon
KDI's failure to fulfill any of its obligations hereunder.
This Agreement may not be amended to increase the amount to
be paid to KDI by the Fund for services hereunder with respect to
a class of any series of the Fund without the vote of a majority
of the outstanding voting securities of such class. All material
amendments to this Agreement must in any event be approved 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 this Agreement or in any
agreement related to this Agreement, cast in person at a meeting
called for such purpose.
5
<PAGE> 6
The terms "assignment", "interested" and "vote of a majority
of the outstanding voting securities" shall have the meanings set
forth in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of
KDI to receive payments on any unpaid balance of the compensation
described in Section 8 earned prior to such termination.
11. KDI will not use or distribute, or authorize the use,
distribution or dissemination by Firms or others in connection
with the sale of Fund shares any statements other than those
contained in the Fund's current prospectus, except such
supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will
furnish the Fund with copies of all such material.
12. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
13. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
14. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust, and all amendments thereto,
all of which are on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of shareholder and trustee
liability contained therein. This Agreement has been executed by
and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the
Fund hereunder are not binding upon any of the Trustees, officers
or shareholders of the Fund individually but are binding upon
only the assets and property of the Fund. With respect to any
claim by KDI for recovery of any liability of the Fund arising
hereunder allocated to a particular series or class, whether in
accordance with the express terms hereof or otherwise, KDI shall
have recourse solely against the assets of that series or class
to satisfy such claim and shall have no recourse against the
assets of any other series or class for such purpose.
15. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 14 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
6
<PAGE> 7
16. This Agreement is the entire contract between the parties
relating to the subject matter hereof and supersedes all prior
agreements between the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this
Agreement to be executed as of the day and year first above
written.
KEMPER HORIZON FUND
By:________________________________
Title:_____________________________
ATTEST:
_____________________________
Title:_______________________
KEMPER DISTRIBUTORS, INC.
By:________________________________
Title:_____________________________
ATTEST:
______________________________
Title:________________________
7
<PAGE> 1
EXHIBIT 99.B6(b)
SELLING GROUP AGREEMENT KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street, Chicago, Illinois 60603
Dear Financial Services Firm:
As principal underwriter and distributor, we invite you to
join a Selling Group for the distribution of shares of the Kemper
Mutual Funds (herein called "Funds"), but only in those states in
which the shares of the respective Funds may legally be offered
for sale. As exclusive agent of each of the Funds, we offer to
sell to you shares of the Funds on the following terms:
1. In all sales of these shares to the public you shall act
as dealer for your own account, and in no transaction shall you
have any authority to act as agent for the issuer, for us, or
for any other member of the Selling Group.
2. Orders received from you will be accepted by us only at
the public offering price applicable to each order, as
established by the Prospectus of each Fund, subject to the
discount, commission or other concession, if any, as provided in
such Prospectus. Upon receipt from you of any order to purchase
shares of a Fund, we shall confirm to you in writing or by wire
to be followed by a confirmation in writing. Additional
instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole
discretion.
3. You may offer and sell shares to your customers only at
the public offering price determined in the manner described in
the applicable Prospectus. The public offering price is the net
asset value per share as provided in the applicable Prospectus
plus, with respect to certain Funds, a sales charge from which
you shall receive a discount equal to a percentage of the
applicable offering price as provided in the applicable
Prospectus. You shall receive a sales commission, with respect to
certain Funds, equal to a percentage of the amount invested as
provided in the applicable Prospectus. You shall receive a
distribution service fee, for certain Funds for which such fees
are available, as provided in the applicable Prospectus which fee
shall be payable with respect to such assets, for such periods
and at such intervals as are from time to time specified by us.
The discounts or other concessions to which you may be entitled
in connection with sales to your customers pursuant to any
special features of a Fund (such as cumulative discounts, letters
of intent, etc., the terms of which shall be as described in the
applicable Prospectus and related forms) shall be in accordance
with the terms of such features. You may receive an
administrative service fee, with respect to certain Funds for
which such fees are available, as provided in the applicable
Prospectus, which fee shall be payable with respect to such
<PAGE> 2
assets, for such periods and at such intervals as are from time
to time specified by us.
4. By accepting this agreement, you agree:
(a) To purchase shares only from us or from your
customers.
(b) That you will purchase shares from us only to cover
purchase orders already received from your customers, or for your
own bona fide investments.
(c) That you will not purchase shares from your
customers at a price lower than the bid price then quoted by or
for the Fund involved. You may, however, sell shares for the
account of your customer to the Fund, or to us as agent for the
Fund, at the bid price currently quoted by or for the Fund and
charge your customer a fair commission for handling the
transaction.
(d) That you will not withhold placing with us orders
received from your customers so as to profit yourself as a result
of such withholding.
5. We will not accept from you any conditional orders for
shares.
6. If any shares confirmed to you under the terms of this
agreement are repurchased by the issuing Fund or by us as agent
for the Fund, or are tendered for repurchase, within seven
business days after the date of our confirmation of the original
purchase order, you shall forthwith refund to us the full
discount, commission, finder's fee or other concession, if any,
allowed or paid to you on such shares.
7. Payment for shares ordered from us shall be in New York
clearing house funds and must be received by the appropriate
Fund's shareholder service agent within seven days after our
acceptance of your order (or such shorter time period as may be
required by applicable regulations). If such payment is not
received, we reserve the right, without notice, forthwith to
cancel the sale or, at our option, to sell the shares ordered
back to the Fund, in which case we may hold you responsible for
any loss, including loss of profit suffered by us as a result of
your failure to make such payment.
8. Shares sold to you hereunder shall be available in
negotiable form for delivery at the appropriate Fund's
shareholder services agent, against payment, unless other
instructions have been given.
9. All sales will be made subject to our receipt of shares
from the Fund. We reserve the right, in our discretion, without
notice, to suspend sales or withdraw the offering of shares
entirely. We reserve the right to modify, cancel or change the
terms of this agreement, upon 15 days prior written notice to
you. Also, the sales charges, discounts, commissions or other
concessions, service fees of any kind provided for hereunder are
subject to change at any time by the Funds and us.
10. All communications to us should be sent to the address
in the heading above. Any notice to you shall be duly given if
mailed or telegraphed to you at the address specified by you
below.
<PAGE> 3
11. This agreement shall be construed in accordance with the
laws of Illinois. This agreement is subject to the Prospectuses
of the Funds from time to time in effect, and, in the event of a
conflict, the terms of the Prospectuses shall control. References
herein to the "Prospectus" of a Fund shall mean the prospectus
and statement of additional information of such Fund as from time
to time in effect. Any changes, modifications or additions
reflected in any such Prospectus shall be effective on the date
of such Prospectus (or supplement thereto) unless specified
otherwise.
12. This agreement is subject to the Additional Stipulations
and Conditions on the reverse side hereof, all of which are a
part of this agreement.
Kemper Distributors, Inc.
By
---------------------------
Authorized Signature
Title
------------------------
We have read the foregoing agreement and accept and agree to the
terms and conditions thereof.
Firm
-------------------------
Witness
------------------------ By
----------------------------
Authorized Representative
Dated Title
------------------------- -------------------------
<PAGE> 4
ADDITIONAL STIPULATIONS AND CONDITIONS
13. No person is authorized to make any representations
concerning shares of any Fund except those contained in the
Prospectus of such Fund and in printed information subsequently
issued by the Fund or by us as information supplemental to such
Prospectus. If you wish to use your own advertising with respect
to a Fund, all such advertising must be approved by us or by the
Fund prior to use. You shall be responsible for any required
filing of such advertising.
14. Your acceptance of this agreement constitutes a
representation (i) that you are a registered security dealer and
a member in good standing of the National Association of
Securities Dealers, Inc. and that you agree to comply with all
state and federal laws, rules and regulations applicable to
transactions hereunder and to the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., including
specifically Section 26, Article III thereof, or (ii) if you are
offering and selling shares of the Funds only in jurisdictions
outside of the several states, territories and possessions of the
United States and are not otherwise required to be a member of
the National Association of Securities Dealers, Inc., that you
nevertheless agree to conduct your business in accordance with
the spirit of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and to observe the laws
and regulations of the applicable jurisdiction. You likewise
agree that you will not offer to sell shares of any Fund in any
state or other jurisdiction in which they may not lawfully be
offered for sale.
15. You shall make available an investment management
account for your customers through the Funds and shall provide
such office space and equipment, telephone facilities, personnel
and literature distribution as is necessary or appropriate for
providing information and services to your customer. Such
services and assistance may include, but not be limited to,
establishment and maintenance of shareholder accounts and
records, processing purchase and redemption transactions,
answering routine inquiries regarding the Funds, and such other
services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule, or regulation. You agree
to release, indemnify and hold harmless the Funds, us and our
respective representatives and agents from any and all direct or
indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you, your officers,
employees or agents regarding the purchase, redemption or
transfer of registration of shares of the Funds for accounts of
you, your customers and other shareholders or from any
unauthorized or improper use of any on-line computer facilities.
You shall prepare such periodic reports for us as shall
reasonably be requested by us. You shall immediately inform the
Funds or us of all written complaints received by you from Fund
shareholders relating to the maintenance of their accounts and
shall promptly answer all such complaints and other similar
correspondence. You shall provide the Funds and us on a timely
<PAGE> 5
basis with such information as may be required to complete
various regulatory forms.
16. As a result of the necessity to compute the amount of
any contingent deferred sales charge due with respect to the
redemption of shares, you may not hold shares of a Fund imposing
such a charge in an account registered in your name or in the
name of your nominee for the benefit of certain of your customers
except with our prior written consent. Except as otherwise
permitted by us, shares of such a Fund owned by a shareholder
must be in a separate identifiable account for such shareholder.
17. Shares of certain Funds have been divided into separate
classes: Class A Shares, Class B Shares and Class C Shares.
Class A shares are offered at net asset value plus an initial
sales charge. Class B Shares are offered at net asset value
without an initial sales charge but are subject to a contingent
deferred sales charge and a Rule 12b-1 fee and have a conversion
feature. Class C Shares are offered at net asset value without an
initial sales charge or contingent deferred sales charge but are
subject to a Rule 12b-1 fee and have no conversion feature.
Please see the appropriate Prospectuses for a more complete
description of the distinctions between the classes of shares.
It is important to investors not only to choose Funds
appropriate for their investment objectives, but also to choose
the appropriate distribution arrangement, based on the amount
invested and the expected duration of the investment. To assist
investors in these decisions, we have instituted the following
policies with respect to orders for shares of the Funds. The
following policies and procedures with respect to sales of
classes of shares of the Funds apply to each broker/dealer that
distributes shares of the Funds.
1. All purchase orders for $500,000 or more (not including
street name or omnibus accounts) should be for class A Shares.
2. Any purchase order of less than $500,000 may be for
either Class A, Class B or Class C Shares in light of the
relevant facts and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold the
shares; and
c. any other relevant circumstances such as the
availability of purchases under a Letter of Intent, Combined
Purchases or Cumulative Discount Privilege.
There are instances when one pricing structure may be more
appropriate than another. For example, investors who would
qualify for a reduced sales charge on Class A Shares may
determine that payment of a reduced front-end sales charge is
preferable to payment of an ongoing Rule 12b-1 fee. On the other
hand, investors whose orders would not qualify for such a
discount and who plan to hold their investment for more than six
years may wish to defer the sales charge and would consider Class
B Shares. Investors who prefer not to pay an initial sales charge
and who plan to redeem their shares within six years might
consider Class C Shares.
Appropriate supervisory personnel within your organization
must ensure that all employees receiving investor inquiries about
<PAGE> 6
the purchase of shares of the Funds advise the investor of the
available pricing structures offered by the Funds and the impact
of choosing one method over another, including breakpoints and
the availability of Letters of Intent, Combined Purchases and
Cumulative Discounts. In some instances it may be appropriate
for a supervisory person to discuss a purchase with the investor.
18. This agreement shall be in substitution of any prior
selling group agreement between you and us regarding these
shares. This agreement shall not be applicable to the provision
of services for Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Tax Exempt New York Money Market Fund, Investors
Cash Trust and similar wholesale money market funds. The payment
of related distribution and services fees, shall be subject to
separate services agreements.
<PAGE> 1
EXHIBIT 99.B8(a)
CUSTODY AGREEMENT
AGREEMENT, made the 11th day of December, 1995 by and
between Kemper Horizon Fund, a Massachusetts business trust
having its principal place of business at 120 South LaSalle
Street, Chicago, Illinois 60603 ("Fund") and Investors Fiduciary
Trust Company, a trust company organized and existing under the
laws of Missouri, having its principal place of business at
Kansas City, Missouri ("Custodian").
WHEREAS, Fund wants to appoint Investors Fiduciary Trust
Company as Custodian to have custody of a portion of Fund's
portfolio securities and monies pursuant to this Agreement; and,
for purposes related to its foreign investments held outside the
United States, Fund wants another custodian to have custody of
the remainder of Fund's portfolio securities and monies pursuant
to a separate agreement; and
WHEREAS, Investors Fiduciary Trust Company wants to accept
such appointment;
NOW, THEREFORE, for and in consideration of the mutual
promises contained herein, the parties hereto, intending to be
legally bound, mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Investors Fiduciary
Trust Company as Custodian of Fund which is to include:
A. Custody of the securities and monies at any time
owned by Fund and received by Custodian; and
B. Performing certain accounting and record keeping
functions relating to its function as Custodian for Fund and
each of its Portfolios.
2. DELIVERY OF CORPORATE DOCUMENTS.
Fund has delivered or will deliver to Custodian prior to the
effective date of this Agreement, copies of the following
documents and all amendments or supplements thereto,
properly certified or authenticated:
A. Resolutions of the Board of Trustees of Fund
appointing Investors Fiduciary Trust Company as Custodian
hereunder and approving the form of this Agreement; and
<PAGE> 2
B. Resolutions of the Board of Trustees of Fund
authorizing certain persons to give instructions on behalf
of Fund to Custodian and authorizing Custodian to rely upon
written instructions over their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
All Fund's securities and monies, except as permitted by the
Investment Company Act of 1940 ("1940 Act"), will be
delivered either to Custodian or to The Chase Manhattan
Bank, N.A., pursuant to a separate custody agreement. Fund
will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, portfolio
securities acquired by it and monies then owned by it except
as permitted by the 1940 Act or from time to time coming
into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility
or liability whatsoever for or on account of securities or
monies not so delivered. All securities so delivered to
Custodian (other than bearer securities) shall be registered
in the name of Fund or its nominee, or of a nominee of
Custodian, or shall be properly endorsed and in form for
transfer satisfactory to Custodian.
B. Safekeeping
Custodian will receive delivery of and keep safely the
assets of Fund delivered to it from time to time. Custodian
will not deliver any such assets to any person except as
permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of this
Agreement. Custodian shall be responsible only for the
monies and securities of Fund held directly by it or its
nominees or sub-custodian under this Agreement; provided
that Custodian's responsibility for any sub-custodian
appointed at the Fund's direction for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a
common custodian or sub-custodian; or (ii) providing
depository and clearing agency services with respect to
certain variable rate demand note securities ("special sub-
custodian") shall be further limited as set forth in this
Agreement. Custodian may participate directly or
indirectly through a sub-custodian in the Depository Trust
Company, the Treasury/Federal Reserve Book Entry System,
the Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund,
subject to compliance with the provisions of Rule 17f-4
under the 1940 Act including, without limitation, the
2
<PAGE> 3
specific provisions of subsections (a) (1) through (d) (4)
thereof.
C. Registration of Securities
Custodian will hold stocks and other registerable portfolio
securities of Fund registered in the name of Fund or in the
name of any nominee of Custodian for whose fidelity and
liabilities Custodian shall be fully responsible, or in
street certificate form, so-called, with or without any
indication of fiduciary capacity. Unless otherwise
instructed, Custodian will register all such portfolio
securities in the name of its authorized nominee.
D. Exchange of Securities
Upon receipt of instructions, Custodian will exchange,
or cause to be exchanged, portfolio securities held by it
for the account of Fund for other securities or cash issued
or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares,
change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without
instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive
form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefore,
to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
E. Purchases or Sales of Investments of Fund
Fund shall, on each business day on which a purchase or
sale of a portfolio security shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such transaction:
(1) The name of the issuer and description of the security;
(2) The number of shares or the principal amount purchased
or sold, and accrued interest, if any;
(3) The trade date;
(4) The settlement date;
(5) The date when the securities sold were purchased by
Fund or other information identifying the securities
sold and to be delivered;
3
<PAGE> 4
(6) The price per unit and the brokerage commission, taxes
and other expenses in connection with the transaction;
(7) The total amount payable or receivable upon such
transaction; and
(8) The name of the person from whom or the broker or
dealer through whom the transaction was made.
In accordance with such purchase instructions, Custodian
shall pay for out of monies held for the account of Fund,
but only insofar as monies are available therein for such
purpose, and receive the portfolio securities so purchased
by or for the account of Fund. Such payment shall be made
only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.
In accordance with such sales instructions, Custodian will
deliver or cause to be delivered the securities thus
designated as sold for the account of Fund to the broker or
other person specified in the instructions relating to such
sale, such delivery to be made only upon receipt of payment
therefor in such form as shall be satisfactory to Custodian,
with the understanding that Custodian may deliver or cause
to be delivered securities for payment in accordance with
the customs prevailing among dealers in securities.
F. Purchases or Sales of Options and Futures
Transactions
Fund will, on each business day on which a purchase or
sale of the following options and/or futures shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase or sale:
(1) Securities Options
(a) The underlying security;
(b) The price at which purchased or sold;
(c) The expiration date;
(d) The number of contracts;
(e) The exercise price;
(f) Whether opening, exercising, expiring or closing
the transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased;
(i) Market on which option traded; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
4
<PAGE> 5
(2) Options on Indices
(a) The index;
(b) The price at which purchased or sold;
(c) The exercise price;
(d) The premium;
(e) The multiple;
(f) The expiration date;
(g) Whether the transaction is an opening, exercising,
expiring or closing transaction;
(h) Whether the transaction involves a put or call;
(i) Whether the option is written or purchased; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
(3) Securities Index Futures Transactions
(a) The last trading date specified in the contract
and, when available, the closing level, thereof;
(b) The index level on the date the contract is
entered into;
(c) The multiple;
(d) Any margin requirements;
(e) The need for a segregated margin account (in
addition to instructions; and, if not already in
the possession of Custodian, Fund shall deliver a
substantially complete and executed custodial
safekeeping account and procedural agreement
which shall be incorporated into this Custody
Agreement); and
(f) The name and address of the futures commission
merchant through whom the sale or purchase was
made.
(4) Options on Index Futures Contracts
(a) The underlying index futures contract;
(b) The premium;
(c) The expiration date;
(d) The number of options;
(e) The exercise price;
(f) Whether the transaction involves an opening,
exercising, expiring or closing transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased; and
(i) The market on which the option is traded.
G. Securities Pledged to Secure Loans
(1) Upon receipt of instructions, Custodian will
release or cause to be released securities held in custody
to the pledgee designated in such instructions by way of
5
<PAGE> 6
pledge or hypothecation to cure any loan incurred by Fund;
provided, however, that the securities shall be released
only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is required
to secure a borrowing already made, further securities may
be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions,
Custodian will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
(2) Upon receipt of instructions, Custodian will
release securities held in custody to the borrower
designated in such instructions; provided, however, that the
securities shall be released only upon deposit with
Custodian of full cash collateral as specified in such
instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned
securities. Upon receipt of instructions and the loaned
securities, Custodian will release the cash collateral to
the borrower.
H. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time
to time by the Board of Trustees of Fund.
I. Demand Deposit Account
Custodian will open and maintain a demand deposit
account or accounts in the name of Custodian, subject only
to draft or order by Custodian upon receipt of instructions.
All monies received by Custodian from or for the account of
Fund shall be deposited in said account or accounts.
When properly authorized by a resolution of the Board
of Trustees of Fund, Custodian may open and maintain an
additional demand deposit account or accounts in such other
banks or trust companies as may be designated in such
resolution, such accounts, however, to be in the name of
Custodian and subject only to its draft or order.
6
<PAGE> 7
J. Income and Other Payments to Fund
Custodian will:
(1) collect, claim and receive and deposit for the
account of Fund all income and other payments which become
due and payable on or after the effective date of this
Agreement with respect to the securities deposited under
this Agreement, and credit the account of Fund with such
income on the payable date;
(2) execute ownership and other certificates and
affidavits for all federal, state and local tax purposes in
connection with the collection of bond and note coupons; and
(3) take such other action as may be necessary or
proper in connection with:
(a) the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of:
(1) all coupons and other income items requiring
presentation;
(2) all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or notice of which is contained
in publications of the type to which it normally
subscribes for such purpose; and
(b) the endorsement for collection, in the name of
Fund, of all checks, drafts or other negotiable
instruments.
Custodian, however, shall not be required to institute
suit or take other extraordinary action to enforce
collection except upon receipt of instructions and upon
being indemnified to its satisfaction against the costs and
expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and
other similar items and deal with the same pursuant to
instructions. Unless prior instructions have been received
to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund
on the last trade date prior to the date of expiration of
such rights.
7
<PAGE> 8
K. Payment of Dividends and Other Distributions
On the declaration of any dividend or other
distribution on the shares of beneficial interest of any
Portfolio ("Portfolio Shares") by the Board of Trustees of
Fund, Fund shall deliver to Custodian instructions with
respect thereto, including a copy of the Resolution of said
Board of Trustees certified by the Secretary or an Assistant
Secretary of Fund wherein there shall be set forth the
record date as of which shareholders are entitled to receive
such dividend or distribution, and the amount payable per
share on such dividend or distribution.
On the date specified in such Resolution for the
payment of such dividend or other distribution, Custodian
shall pay out of the monies held for the account of Fund,
insofar as the same shall be available for such purposes,
and credit to the account of the Dividend Disbursing Agent
for Fund, such amount as may be necessary to pay the amount
per share payable in cash on Portfolio Shares issued and
outstanding on the record date established by such
Resolution.
L. Portfolio Shares Purchased by Fund
Whenever any Portfolio Shares are purchased by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice,
Custodian shall charge such aggregate dollar amount to the
custody account of Fund and either deposit the same in the
account maintained for the purpose of paying for the
purchase of Portfolio Shares or deliver the same in
accordance with such advice.
M. Portfolio Shares Purchased from Fund
Whenever Portfolio Shares are purchased from Fund, Fund
will deposit or cause to be deposited with Custodian the
amount received for such shares. Custodian shall not have
any duty or responsibility to determine that Fund Shares
purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
N. Proxies and Notices
Custodian will promptly deliver or mail to Fund all
proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for
Fund and will, upon receipt of instructions, execute and
8
<PAGE> 9
deliver or cause its nominee to execute and deliver such
proxies or other authorizations as may be required. Except
as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee
shall exercise any power inherent in any such securities,
including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver
with respect thereto, or take any other similar action.
O. Disbursements
Custodian will pay or cause to be paid insofar as funds
are available for the purpose, bills, statements and other
obligations of Fund (including but not limited to
obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges,
variation margin, dividend disbursements, taxes, management
fees, administration-distribution fees, custodian fees,
legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
P. Books, Records and Accounts
Custodian acknowledges that all the records it shall
prepare and maintain pursuant to this Agreement shall be the
property of Fund and that upon request of Fund it shall make
Fund's records available to it, along with such other
information and data as are reasonably requested by Fund,
for inspection, audit or copying, or turn said records over
to Fund.
Custodian shall, within a reasonable time, render to
Fund as of the close of business on each day, a detailed
statement of the amounts received or paid and of securities
received or delivered for the account of Fund during said
day. Custodian shall, from time to time, upon request by
Fund, render a detailed statement of the securities and
monies held for Fund under this Agreement, and Custodian
shall maintain such books and records as are necessary to
enable it do so and shall permit such persons as are
authorized by Fund, including Fund's independent public
accountants, to examine such records or to confirm the
contents of such records; and, if demanded, shall permit
federal and state regulatory agencies to examine said
securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state
regulatory agencies, Custodian shall instruct any sub-
custodian to permit such persons as are authorized by Fund
9
<PAGE> 10
to examine the books, records and securities held by such
sub-custodian which relate to Fund.
Q. Appointment of Sub-Custodian
Notwithstanding any other provisions of this Agreement,
all or any of the monies or securities of Fund may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as sub-custodians as
may be approved by resolutions of Fund's Board of Trustees,
evidenced by a copy thereof certified by the Secretary or
Assistant Secretary of Fund. Any sub-custodian must have
the qualifications required for custodians under the 1940
Act unless exempted therefrom. Any sub-custodian may
participate directly or indirectly in the Depository Trust
Company, the Treasury/Reserve Book Entry System, the
Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund to
the same extent and subject to the same conditions as
provided hereunder. Neither Custodian nor sub-custodian
shall be entitled to reimbursement by Fund for any fees or
expenses of any sub-custodian; provided that Custodian shall
not be liable for, and Fund shall hold Custodian harmless
from, the expenses of any special sub-custodian. The
appointment of a sub-custodian shall not relieve Custodian
of any of its obligations hereunder; provided that Custodian
shall be responsible to Fund for any loss, damage, or
expense suffered or incurred by Fund resulting from the
actions or omissions of a special sub-custodian only to the
extent the special sub-custodian is liable to Custodian.
R. Multiple Portfolios
If Fund shall issue shares of more than one Portfolio
during the term hereof, Custodian agrees that all securities
and other assets of Fund shall be segregated by Portfolio
and all books and records, account values or actions shall
be maintained, held, made or taken, as the case may be,
separately for each Portfolio.
S. Other Custodian
Pursuant to instructions, Custodian will transmit
securities and moneys of Fund to The Chase Manhattan Bank,
N.A., as custodian for Fund.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means
written or oral instructions to Custodian from an authorized
person of Fund. Certified copies of resolutions of the
Board of Trustees of Fund naming one or more persons
10
<PAGE> 11
authorized to give instructions in the name and on behalf of
Fund may be received and accepted by Custodian as conclusive
evidence of the authority of any person so to act and may be
considered to be in full force and effect (and Custodian
shall be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary.
Unless the resolution authorizing any person to give
instructions specifically requires that the approval of
anyone else shall first have been obtained, Custodian shall
be under no obligation to inquire into the right of the
person giving such instructions to do so. Notwithstanding
any of the foregoing provisions of this Section 4, no
authorizations or instructions received by Custodian from
Fund shall be deemed to authorize or permit any trustee,
officer, employee, or agent of Fund to withdraw any of the
securities or monies of Fund upon the mere receipt of
instructions from such trustee, officer, employee or agent.
B. No later than the next business day immediately
following each oral instruction referred to herein, Fund
shall give Custodian written confirmation of each such oral
instruction. Either party may electronically record any
oral instruction whether given in person or via telephone.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall hold harmless and indemnify Fund
from and against any loss or liability arising out of
Custodian's failure to comply with the terms of this
Agreement or arising out of Custodian's negligence, willful
misconduct, or bad faith. Custodian may request and obtain
the advice and opinion of counsel for Fund or of its own
counsel with respect to questions or matters of law, and it
shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice
or opinion.
B. If Fund requires Custodian in any capacity to
take, with respect to any securities, any action which
involves the payment of money by it, or which in Custodian's
opinion might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be and be kept
indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.
C. Custodian shall be entitled to receive, and Fund
agrees to pay to Custodian, on demand, reimbursement for
such cash disbursements, costs and expenses as may be agreed
upon from time to time by Custodian and Fund.
D. Custodian shall be protected in acting as
custodian hereunder upon any instructions, advice, notice,
11
<PAGE> 12
request, consent, certificate or other instrument or paper
reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof
of any fact or matter required to be ascertained from Fund
hereunder, a certificate signed by Fund's President, or
other officer specifically authorized for such purpose.
E. Without limiting the generality of the foregoing,
Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
(1) The validity of the issue of any securities
purchased by or for Fund, the legality of the purchase
thereof or evidence of ownership required by Fund to be
received by Custodian, or the propriety of the decision
to purchase or amount paid therefor;
(2) The legality of the sales of any securities
by or for Fund, or the propriety of the amount paid
therefor;
(3) The legality of the issue or sale of any
shares of Fund, or the sufficiency of the amount to be
received therefor;
(4) The legality of the purchase of any shares of
Fund, or the propriety of the amount to be paid
therefor; or
(5) The legality of the declaration of any
dividend by Fund, or the legality of the issue of any
shares of Fund in payment of any share dividend.
F. Custodian shall not be liable for, or considered
to be the custodian of, any money represented by any check,
draft, wire transfer, clearing house funds, uncollected
funds, or instrument for the payment of money received by it
on behalf of Fund, until Custodian actually receives such
money, provided only that it shall advise Fund promptly if
it fails to receive any such money in the ordinary course of
business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
G. Subject to the obligations of Custodian under
Section 3.B. hereof, Custodian shall not be responsible for
loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom Custodian may deal in the absence of negli-
gence, misconduct or bad faith on the part of Custodian.
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<PAGE> 13
H. Custodian or any sub-custodian shall provide Fund
for its approval by its Board of Trustees agreements with
banks or trust companies which will act as sub-custodian for
Fund pursuant to this Agreement; and, as set forth in
Section 3.B hereof, Custodian shall be responsible for the
monies and securities of the Fund held by it or its nominees
or sub-custodians under this Agreement, but not for monies
and securities of the Fund held by any special sub-custodian
except to the extent the special sub-custodian is liable to
Custodian.
6. COMPENSATION.
Fund shall pay to Custodian such compensation at such times
as may from time to time be agreed upon in writing by Custodian
and Fund. Custodian may charge such compensation against monies
held by it for the account of Fund. Custodian shall also be
entitled, notwithstanding the provisions of Sections 5B or 5C
hereof, to charge against any monies held by it for the account
of Fund the amount of any loss, damage, liability or expense for
which it shall be entitled to reimbursement under the provisions
of this Agreement. Custodian shall not be entitled to
reimbursement by Fund for any loss or expenses of any sub-
custodian; provided that Custodian shall not be liable for, and
Fund shall hold Custodian harmless from, the expenses of any
special sub-custodian.
7. TERMINATION.
Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than sixty (60) days
prior to the date upon which such termination shall take effect.
Upon termination of this Agreement, Fund shall pay to Custodian
such compensation for its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall use its
best efforts to obtain a successor custodian. Unless the holders
of a majority of the outstanding shares of Fund vote to have the
securities, funds and other properties held under this Agreement
delivered and paid over to some other person, firm or corporation
specified in the vote, having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund,
the Board of Trustees of Fund shall, forthwith upon giving or
receiving notice of termination of this Agreement, appoint as
successor custodian a bank or trust company having such
qualifications. Custodian shall, upon termination of this
Agreement, deliver to the successor custodian so specified or
appointed, at custodian's office, all securities then held by
Custodian hereunder, duly endorsed and in form for transfer, and
all funds and other properties of Fund deposited with or held by
13
<PAGE> 14
Custodian hereunder, and shall cooperate in effecting changes in
book-entries at the Depository Trust Company, the
Treasury/Federal Reserve Book-Entry System, the Participants
Trust Company and any other securities depository holding assets
of the Fund. In the event no such vote has been adopted by the
shareholders of Fund and no written order designating a successor
custodian shall have been delivered to Custodian on or before the
date when such termination shall become effective, then Custodian
shall deliver the securities, funds and properties of Fund to a
bank or trust company at the selection of Custodian and meeting
the qualifications for custodian, if any, set forth in the Bylaws
of Fund and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its
last published report. Upon either such delivery to a successor
custodian, Custodian shall have no further obligations or
liabilities under this Agreement. Thereafter such bank or trust
company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services.
In the event that no such successor custodian can be found, Fund
will submit to its shareholders, before permitting delivery of
the cash and securities owned by Fund to anyone other than a
successor custodian, the question of whether Fund shall be
liquidated or shall function without a custodian. Not-
withstanding the foregoing requirement as to delivery upon
termination of this Agreement, Custodian may make any other
delivery of the securities, funds and property of Fund which
shall be permitted by the 1940 Act and Fund's Agreement and
Declaration of Trust and Bylaws then in effect. Except as
otherwise provided herein, neither this Agreement nor any portion
thereof may be assigned by Custodian without the consent of Fund,
authorized or approved by a resolution of its Board of Trustees.
8. NOTICES.
Notices, requests, instructions and other writings received
by Fund at 120 South LaSalle Street, Chicago, Illinois 60603 or
at such other address as Fund may have designated by certified
resolution of the Board of Trustees to Custodian and notices,
requests, instructions and other writings received by Custodian
at its offices at 21 West 10th Street, Kansas City, Missouri
64105, or to such other address as it may have designated to Fund
in writing, shall be deemed to have been properly given
hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of the
State of Missouri (except as to Section 9.H. hereof which
shall be governed in accordance with the laws of The
Commonwealth of Massachusetts).
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<PAGE> 15
B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and assigns of the
parties hereto.
C. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties hereto.
D. The captions in this Agreement are included for
convenience of reference only, and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
E. This Agreement shall become effective at the close
of business on the date hereof.
F. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and
the same instrument.
G. If any part, term or provision of this Agreement
is by the courts held to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
H. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust, which is on file
with the Secretary of The Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and
on behalf of Fund by its representatives as such
representatives and not individually, and the obligations of
Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of Fund individually but are
binding upon only the assets and property of Fund. With
respect to any claim by Custodian for recovery of that
portion of the compensation (or any other liability of Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, Custodian shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall
have no recourse against the assets of any other Portfolio
for such purpose.
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<PAGE> 16
I. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective authorized officers.
KEMPER HORIZON FUND
By:______________________________
Title:___________________________
Attest:______________________
Title:_______________________
INVESTORS FIDUCIARY TRUST COMPANY
By:______________________________
Title:___________________________
Attest:______________________
Title:_______________________
16
<PAGE> 1
EXHIBIT 99.B8(b)
FOREIGN CUSTODY AGREEMENT
AGREEMENT dated December 11, 1995 between THE CHASE MANHATTAN BANK, N.A
("Bank") and KEMPER HORIZON FUND ("Fund").
1. Custody Account. The Bank agrees to establish and maintain (a) a
custody account in the name of the Fund ("Custody Account") for any and all
stocks, shares, bonds, debentures, notes, mortgages or other obligations for
the payment of money and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for the same
or evidencing or representing any other rights or interests therein and other
similar property (hereinafter called "Securities") and from time to time
received by the Bank or its subcustodian (as defined in the last sentence of
Section 3) for the account of the Fund, and (b) a deposit account in the name
of the Fund ("Deposit Account") for any and all cash in any currency received
by the Bank or its subcustodian for the account of the Fund, which cash shall
not be subject to withdrawal by draft or check.
2. Maintenance of Securities Abroad. Securities in the Custody
Account shall be held in the country or other jurisdiction as shall be
specified from time to time in Instructions, provided that such country or
other jurisdiction shall be one in which the principal trading market for such
Securities is located or the country or other jurisdiction in
<PAGE> 2
which such Securities are to be presented for payment or are acquired for
the Custody Account and cash in the Deposit Account shall be credited to an
account in such amounts and in the country or other jurisdiction as shall be
specified from time to time in Instructions, provided that such country or
other jurisdiction shall be one in which such cash is the legal currency for
the payment of public or private debts.
3. Eligible Foreign Custodians and Securities Depositories. The
Fund's Board of Trustees authorizes the Bank to hold the Securities in the
Custody Account and the cash in the Deposit Account in custody and deposit
accounts, respectively, which have been established by the Bank with one of its
branches, a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository; provided, however, that the Bank has
recommended and the Board has approved the use of, and the Bank's contract
with, such eligible foreign custodian or eligible foreign securities depository
by resolution, and a certified copy of such resolution has been provided to the
Bank. Furthermore, if one of its branches, a branch of a qualified U.S. bank or
an eligible foreign custodian is selected to act as the Bank's subcustodian to
hold any of the Securities or cash, such entity is authorized to hold such
Securities or cash in its account with any eligible foreign securities
depository in which it participates. For purposes of this Agreement (a)
"qualified U.S. bank" shall mean a qualified U.S. bank as defined in Rule 17f-5
under the Investment Company Act of 1940 ("Investment
2
<PAGE> 3
Company Act"); (b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders'
equity in excess of $100 million in U.S. currency (or a foreign currency
equivalent thereof) or (iii) a banking institution or trust company
incorporated or organized under the laws of a country other than the United
States or a majority owned direct or indirect subsidiary of a qualified U.S.
bank or bank holding company that is incorporated or organized under the laws
of a country other than the United States which has such other qualifications
as shall be authorized or permitted by a rule, regulation, interpretation or
exemptive order promulgated by or under the authority of the Securities and
Exchange Commission, specified in Instructions and approved by the Bank; and
(c) "eligible foreign securities depository" shall mean a securities depository
or clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system for handling of
securities or equivalent
3
<PAGE> 4
book-entries in that country or (ii) a transnational system for the central
handling of securities or equivalent book-entries.
Hereinafter the term "subcustodian" will refer to any branch of a
qualified U.S. bank, any eligible foreign custodian or any eligible foreign
securities depository with which the Bank has entered an agreement of the type
contemplated hereunder regarding Securities and/or cash held in or to be
acquired for the Custody Account or the Deposit Account.
4. Use of Subcustodian. With respect to Securities and other assets
which are maintained by the Bank in the physical custody of a subcustodian
pursuant to Section 3 (as used in this Section 4, the term "Securities" means
such Securities and other assets),
(a) The Bank will identify on its books as belonging to the
Fund any Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of the
Securities placed in its care to be held in an eligible foreign
securities depository, such subcustodian will be required by its
agreement with the Bank to identify on its books such Securities as
being held for the account of the Bank as a custodian for its
customers.
(c) Any Securities in the Custody Account held by a
subcustodian of the Bank will be subject only to the instructions of
the Bank or its agents; and any Securities held in an eligible foreign
securities depository for the
4
<PAGE> 5
account of a subcustodian will be subject only to the instructions of
such subcustodian.
(d) The Bank will only deposit Securities in an account with a
subcustodian which includes exclusively the assets held by the Bank for
its customers, and the Bank will cause such account to be designated by
such subcustodian as a special custody account for the exclusive
benefit of customers of the Bank.
(e) Any agreement the Bank shall enter into with a
subcustodian with respect to the holding of Securities shall require
that (i) the Securities are not subject to any right, charge, security
interest, lien or claim of any kind in favor of such subcustodian
except for their safe custody or administration and (ii) beneficial
ownership of such Securities is freely transferable without the payment
of money or value other than for safe custody or administration;
provided, however, that the foregoing shall not apply to the extent
that any of the above-mentioned rights, charges, etc. result from any
compensation or other expenses arising with respect to the safekeeping
of Securities pursuant to such agreement or from any arrangements made
by the Fund with any such subcustodian.
(f) The Bank shall allow independent public accountants of the
Fund such reasonable access to the records of the Bank relating to the
Securities held in the Custody Account as is required by such
accountants in
5
<PAGE> 6
connection with their examination of the books and records pertaining
to the affairs of the Fund. The Bank shall, subject to restrictions
under applicable law, also obtain from any subcustodian with which the
Bank maintains the physical possession of any Securities in the Custody
Account an undertaking to permit independent public accountants of the
Fund such reasonable access to the records of such subcustodian as may
be required in connection with their examination of the books and
records pertaining to the affairs of the Fund. The Bank shall
furnish to the Fund such reports (or portions thereof) of the Bank's
external auditors as relate directly to the Bank's system of internal
accounting controls applicable to the Bank's duties under this
Agreement. The Bank shall use its best efforts to obtain and furnish
the Fund with similar reports with respect to each eligible foreign
custodian and eligible foreign securities depository holding Securities
of the Fund.
(g) The Bank will supply to the Fund from time to time as
mutually agreed upon a statement in respect to any Securities in the
Custody Account held by a subcustodian, including an identification of
the entity having possession of the Securities, and the Bank will send
to the Fund an advice or notification of any transfers of Securities to
or from the Custody Account, indicating, as to Securities acquired for
the Fund, the identity of the entity having
6
<PAGE> 7
physical possession of such Securities. In the absence of the filing
in writing with the Bank by the Fund of exceptions or objections to any
such statement within sixty (60) days following receipt of the
statement, the Fund shall be deemed to have approved such statement;
and in such case or upon written approval of the Fund of any such
statement the Bank shall, to the extent permitted by law, be released,
relieved and discharged with respect to all matters and things set
forth in such statement as though such statement had been settled by
the decree of a court of competent jurisdiction in an action in which
the Fund and all persons having any equity interest in the Fund were
parties.
(h) The Bank hereby warrants to the Fund that in its opinion,
after due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, each eligible
foreign custodian and each eligible foreign securities depository
holding the Fund's Securities pursuant to this Agreement afford
protection for such Securities at least equal to that afforded by the
Bank's established procedures with respect to similar securities held
by the Bank (and its securities depositories) in New York.
5. Deposit Account Payments. Subject to the provisions of Section 7,
the Bank shall make, or cause its subcustodians to make, payments of cash
credited to the Deposit Account only
7
<PAGE> 8
(a) in connection with the purchase of Securities for the Fund
and the delivery of such Securities to, or the crediting of such
Securities to the account of, the Bank or its subcustodian, each such
payment to be made at prices as confirmed by Instructions (as defined
in Section 9 hereof) from Authorized persons (as defined in Section 10
hereof);
(b) for the purchase or redemption of shares of the capital
stock of the Fund and the delivery to, or crediting to the account of,
the Bank or its subcustodian of such shares to be so purchased or
redeemed;
(c) for the payment for the account of the Fund of dividends,
interest, taxes, management or supervisory fees, capital distributions
or operating expenses;
(d) for the payments to be made in connection with the
conversion, exchange or surrender of Securities held in the Custody
Account;
(e) for transmittal either to State Street Bank and Trust
Company, sub-custodian of the Fund, or to Investors Fiduciary Trust
Company, Custodian for the Fund;
(f) for other proper corporate purposes of the Fund; or
(g) upon the termination of this Custody Agreement as
hereinafter set forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c), (d)
or (e) of this Section 5 will be made only upon receipt by the Bank of
Instructions from Authorized Persons which
8
<PAGE> 9
shall specify the purpose for which the payment is to be made and the
applicable subsection of this Section 5. In the case of any payment to be made
for the purpose permitted by subsection (f) of this Section 5, the Bank must
first receive a certified copy of a resolution of the Board adequately
describing such payment, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made. Any payment
pursuant to subsection (g) of this Section 5 will be made in accordance with
Section 17.
In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank may, in its discretion,
advance the Fund an amount equal to such excess and such advance shall be
deemed a loan from the Bank to the Fund, payable on demand, bearing interest at
the rate of interest customarily charged by the Bank on similar loans.
If the Bank causes the Deposit Account to be credited on the payable
date for interest, dividends or redemptions, the Fund will promptly return to
the Bank any such amount or property so credited upon oral or written
notification that neither the Bank nor its subcustodian can collect such amount
or property in the ordinary course of business. The Bank or its subcustodian,
as the case may be, shall have no duty or obligation to institute legal
proceedings, file a claim or proof of claim in any insolvency proceeding to
take any other action with respect to the collection of such amount or property
beyond its ordinary collection procedures.
9
<PAGE> 10
6. Custody Account Transactions. Subject to the provisions of
Section 7, Securities in the Custody Account will be transferred, exchanged or
delivered by the Bank or its subcustodians only
(a) upon sale of such Securities for the Fund and receipt by
the Bank or its subcustodian only of payment therefor, each such
payment to be in the amount confirmed by Instructions from Authorized
persons;
(b) when such Securities are called, redeemed or retired, or
otherwise become payable;
(c) in exchange for or upon conversion into other Securities
along or other Securities and cash pursuant to any plan or merger,
consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their
terms into other Securities;
(e) upon exercise of subscription, purchase or other similar
rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or
temporary Securities for definitive Securities;
(g) for the purpose of delivery either to State Street Bank
and Trust Company, sub-custodian of the Fund, or to Investors Fiduciary
Trust Company, as Custodian for the Fund;
10
<PAGE> 11
(h) for the purpose of redeeming in kind shares of the Fund
against delivery to the Bank or its subcustodian of such shares to be
so redeemed;
(i) for other proper trust purposes of the Fund;
(j) upon the termination of this Custody Agreement as
hereinafter set forth.
All transfers, exchanges or deliveries of Securities in the Custody Account for
a purpose permitted by either subsection (a), (b), (c), (d), (e), (f) or (g)
of this Section 6 will be made, except as provided in Section 8, only upon
receipt by the Bank of Instructions from Authorized Persons which shall specify
the purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer or delivery to be
made for the purpose permitted by subsection (h) of this Section 6, the Bank
must first receive Instructions from Authorized Persons specifying the shares
held by the Bank or its subcustodian to be so transferred or delivered and
naming the person or persons to whom transfers or delivery of such shares shall
be made. In the case of any transfer, exchange or delivery to be made for the
purpose permitted by subsection (i) of this Section 6, the Bank must first
receive a certified copy of a resolution of the Board adequately describing
such transfer, exchange or delivery, declaring such purpose to be a proper
trust purpose, and naming the person or person to whom delivery of such
Securities shall be made. Any transfer or
11
<PAGE> 12
delivery pursuant to subsection (j) of this Section 6 will be made in
accordance with Section 17.
7. Custody Account Procedures. With respect to any transaction
involving Securities held in or to be acquired for the Custody Account, the
Bank in its discretion may cause the Deposit Account to be credited on the
contractual settlement date with the proceeds of any sale or exchange of
Securities from the Custody Account and to be debited on the contractual
settlement date for the cost of Securities purchased or acquired for the
Custody Account. The Bank may reverse any such credit or debit if the
transaction with respect to which such credit or debit were made fails to
settle within a reasonable period, determined by the Bank in its discretion,
after the contractual settlement date, except that if any Securities delivered
pursuant to this Section 7 are returned by the recipient thereof, the Bank may
cause any such credits and debits to be reversed at any time. With respect to
any transactions as to which the Bank does not determine so to credit or debit
the Deposit Account, the proceeds from the sale or exchange of Securities will
be credited and the cost of such Securities purchased or acquired will be
debited to the Deposit Account on the date such proceeds or Securities are
received by the Bank.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, the Custody Account
may be effected in accordance with the customary or established securities
trading or securities
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<PAGE> 13
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
Securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
subcustodian to,
(a) present for payment any Securities in the Custody Account
which are called, redeemed or retired or otherwise become payable and
all coupons and other income items which call for payment upon
presentation to the extent that the Bank or subcustodian is aware of
such opportunities for payment, and hold cash received upon
presentation of such Securities in accordance with the provisions of
Sections 2, 3 and 4 of this Agreement;
(b) in respect of Securities in the Custody Account, execute
in the name of the Fund such ownership and other certificates as may be
required to obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities in the
Custody Account for definitive Securities;
(d) convert moneys received with respect to Securities of
foreign issue into United States dollars or any other currency
necessary to effect any transaction involving the
13
<PAGE> 14
Securities whenever it is practicable to do so through customary
banking channels, using any method or agency available, including, but
not limited to, the facilities of the Bank, its subsidiaries,
affiliates or subcustodians; and
(e) in the event of any loss of Securities or Cash, use its
best efforts to ascertain the circumstances relating to such loss and
promptly report the same to the Fund.
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of the Fund received by the Bank, via telephone, telex, TWX,
facsimile transmission, bank wire or other teleprocess or electronic
instruction system acceptable to the Bank which the Bank reasonably believes in
good faith to have been given by Authorized Persons or which are transmitted
with proper testing or authentication pursuant to terms and conditions which
the Bank may specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Fund will hold the
Bank harmless for its failure to send such confirmation in writing, the failure
of such confirmation to conform to the telephone instructions received or the
Bank's failure to produce such confirmation at any subsequent time provided
that the Bank has timely advised the Fund of its failure to send such
confirmation in writing or the failure of such confirmation to conform to the
telephone instructions received. Unless otherwise expressly provided, all
Instructions
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<PAGE> 15
shall continue in full force and effect until cancelled or superseded. If the
Bank requires test arrangements, authentication methods or other security
devices to be used with respect to instructions, any Instructions given by the
Fund thereafter shall be given and processed in accordance with such terms and
conditions for the use of such arrangements, methods or devices as the Bank may
put into effect and modify from time to time. The Fund shall safeguard any
testkeys, identification codes or other security devices which the Bank shall
make available to it. The Bank may electronically record any Instructions
given by telephone, and any other telephone discussions, with respect to the
Custody Account.
10. Authorized Persons. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of the Fund as have
been designated by a resolution of the Board, a certified copy of which has
been provided to the Bank, to act on behalf of the Fund in the performance of
any acts which Authorized Persons may do under this Agreement. Such persons
shall continue to be Authorized Persons until such time as the Bank receives
instructions from Authorized Persons that any such officer or agent is no
longer an Authorized Person.
11. Nominees. Securities in the Custody Account which are ordinarily
held in registered form may be registered in the name of the Bank's nominee or,
as to any Securities in the possession of an entity other than the Bank, in the
name of such entity's nominee. The Fund agrees to hold any such nominee
harmless from
15
<PAGE> 16
any liability as a holder of record of such Securities. The Bank may without
notice to the Fund cause any such Securities to cease to be registered in the
name of any such nominee and to be registered in the name of the Fund. In the
event that any Securities registered in the name of the Bank's nominee or held
by one of its subcustodians and registered in the name of such subcustodian's
nominee are called for partial redemption by the issuer of such Security, the
Bank may allot, or cause to be allotted, the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to be
fair and equitable.
12. Standard of Care. The Bank shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Bank by Authorized Persons which are not contrary to
the provisions of this Agreement. The Bank will use reasonable care with
respect to the safekeeping of Securities in the Custody Account. The Bank
shall be liable to the Fund for any loss which shall occur as the result of the
failure of a subcustodian or an eligible foreign securities depository engaged
by such subcustodian to exercise reasonable care with respect to the
safekeeping of such Securities and other assets to the same extent that the
Bank would be liable to the Fund if the Bank were holding such Securities and
other assets in New York. In the event of any loss to the Fund by reason of
the failure of the Bank or its subcustodian or an eligible foreign securities
depository engaged by such subcustodian to utilize
16
<PAGE> 17
reasonable care, the Bank shall be liable to the Fund to the extent of the
Fund's damages, to be determined based on the market value of the property
which is the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances. The Bank shall
be held to the exercise of reasonable care in carrying out this Agreement but
shall be indemnified by, and shall be without liability to, the Fund for any
action taken or omitted by the Bank in good faith without negligence. The
Bank shall be entitled to rely, and may act, on advice of counsel (who may be
counsel for the Fund) on all matters and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
The Bank need not maintain any insurance for the benefit of the Fund.
However, the Bank represents and warrants that it presently maintains a
bankers' blanket bond ("Bond") which provides standard fidelity and
non-negligent loss coverage with respect to securities which may be held by the
Bank and securities which may be held in the offices of foreign banks and
foreign securities depositories which may be utilized by the Bank pursuant to
this Agreement. The Bank agrees that if at any time the Bank for any reason
discontinues such coverage, it shall immediately notify the Fund in writing.
The Bank represents that only the named insured on the Bond, which includes the
Bank but not any of the Bank's customers, is directly protected against loss.
The Bank represents that while it might resist a claim of one of its customers
to recover for a loss not covered by the
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<PAGE> 18
Bond, as a practical matter, where a claim is brought and loss is possibly
covered by the Bond, the Bank would give notice of the claim to its insurer,
and the insurer would normally determine whether to defend the claim against
the Bank or to pay the claim on behalf of the Bank.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Fund. The Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by the Bank or by its subcustodian of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take action as provided in Section 8
hereof. The Bank shall not be liable for any action taken in good faith upon
Instructions or upon any certified copy of any resolution of the Board and may
rely on the genuineness of any such documents which it may in good faith
believe to be validly executed. The Bank shall not be liable for any loss
resulting from, or caused by, the direction of the Fund to maintain custody of
any Securities or cash in a foreign country including, but not limited to,
losses resulting from nationalization, expropriation, currency restrictions,
acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
13. Compliance with Securities and Exchange Commission Rules and
Orders. To the extent that a condition of a rule, regulation, interpretation
or exemptive order promulgated by or
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<PAGE> 19
under the authority of the Securities and Exchange Commission applies to the
Bank or the Fund each shall be solely responsible to assure that this
Agreement and the maintenance of Securities and cash under this Agreement
complies with any such rule, regulation, interpretation or exemptive order.
14. Corporate Action. The Bank or its subcustodian is to forward
promptly to the Fund all communications relative to the Securities in the
Custody Account. Such communications as call for voting or the exercise of
rights or other specific action (including material relative to legal
proceedings intended to be transmitted to security holders) shall be
transmitted to the Fund by means which will permit the Fund to take timely
action. The Bank or its subcustodian will cause its nominee to execute and
deliver to the Fund proxies relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner in
which such proxies are to be voted. Proxies relating to bearer Securities will
be delivered in accordance with written instructions from Authorized Persons.
Bank hereby agrees that Bank shall create, maintain, and retain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the Investment Company
Act, particularly Section 31 thereof and Rules 31a-1, 31a-2, and 31a-3
thereunder, and applicable Federal, state and foreign tax laws and other laws
or administrative rules or procedures, in each case as currently in effect,
which may be applicable to the Fund. All records so
19
<PAGE> 20
maintained in connection with the performance of its duties under this
Agreement shall be preserved and maintained as required by regulation and, in
the event of termination of the Agreement, shall be available to the Fund or
its agent upon request.
15. Fees and Expenses. The Fund agrees to pay to the Bank from time
to time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time including reimbursement of
the Bank's reasonable out-of-pocket or incidental expenses, including legal
fees. The Fund hereby agrees to hold the Bank harmless from any liability or
loss resulting from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed, or assessed with respect to the Custody
Account or any Securities in the Custody Account and also agrees to hold the
Bank, its subcustodians, and their respective nominees harmless from any
liability as a record holder of Securities in the Custody Account. The Bank is
authorized to charge any account of the Fund for such items and the Bank shall
have a lien on Securities in the Custody Account and on cash in the Deposit
Account for any amount owing to the Bank from time to time under this
Agreement.
16. Effectiveness. This Agreement shall be effective on the date
first noted above; provided, however, that the Board has provided the Bank a
certified copy of a resolution that (i) approves each of the subcustodians
listed in Appendix A hereto and the terms of the custody agreement between the
Bank and each such subcustodian attached as Exhibits I through
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<PAGE> 21
hereof, and (ii) states that the Board has determined that the use of each such
subcustodian and the terms of each such subcustody agreement are consistent
with the best interests of the Fund and its shareholders.
17. Termination. This Agreement may be terminated by the Fund or the
Bank by 60 days written notice to the other, sent by registered mail, provided
that any termination by the Fund shall be authorized by a resolution of its
Board, a certified copy of which shall accompany such notice of termination,
and provided further, that such resolution shall specify the names of the
persons to whom the Bank shall deliver the Securities in the Custody Account
and to whom the cash in the Deposit Account shall be paid. If notice of
termination is given by the Bank, the Fund shall, within 60 days following the
giving of such notice, deliver to the Bank a certified copy of a resolution of
its Board specifying the names of the persons to whom the Bank shall deliver
the Securities in the Custody Account and to whom the cash in the Deposit
Account shall be paid. In either case the Bank will deliver such Securities
and cash to the persons so specified, after deducting therefrom any amounts
which the Bank determines to be owed to it under Section 15. If within 60 days
following the giving of a notice of termination by the Bank, the Bank does not
receive from the Fund a certified copy of a resolution of the Board specifying
the names of the persons to whom the Bank shall deliver the Securities in the
Custody Account and to whom the cash in the Deposit Account shall be paid, the
21
<PAGE> 22
Bank, at its election, may deliver such Securities and pay such cash to a bank
or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold such Securities and cash until a certified
copy of one or more resolutions as aforesaid is delivered to the Bank.
Concurrently with the delivery of such Securities, the Bank shall deliver to
the Company, or such other person as the Company shall instruct, the records
referred to in Section 14 hereof which are in the possession or control of the
Bank. The obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the
termination of this Agreement.
18. Notices. Any notice or other communication from the Fund to the
Bank is to be sent to the office of the Bank at 1211 Avenue of the Americas
(33rd Floor), New York, New York 10036, Attention Global Custody Division, or
such other address as may hereafter be given to the Company in accordance with
the notice provisions hereunder, and any notice from the Bank to the Fund is to
be mailed postage prepaid, addressed to the Fund at the address appearing
below, or as it may hereafter be changed on the Bank's records in accordance
with notice hereunder from the Fund.
19. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors and assigns of the Fund and the
Bank.
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<PAGE> 23
20. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
21. Additional Portfolios. If the Fund shall issue shares of more
than one portfolio during the term hereof, the Bank agrees that all securities
and other assets of the Fund shall be segregated by portfolio and all books and
records, account values or actions shall be maintained, held, made or taken, as
the case may be, separately for each portfolio. Other than as encompassed by
the preceding sentence, references in this Agreement to "the Fund" are
applicable either to the entire trust or to a particular portfolio or
portfolios, as the context may make reasonable and appropriate. If the Fund
has more than one portfolio, instructions shall designate the portfolio or
portfolios to which they apply.
22. Disclaimer. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments thereto, all of
which are on file with the Secretary of The Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Fund individually but are binding upon only the assets and property of the
Fund. With respect to any claim by Bank for recovery of that portion of
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<PAGE> 24
the compensation (or any other liability of the Fund arising hereunder)
allocated to a particular portfolio, whether in accordance with the express
terms hereof or otherwise, the Bank shall have recourse solely against the
assets of that portfolio to satisfy such claim and shall have no recourse
against the assets of any other portfolio for such purpose.
KEMPER HORIZON FUND
By:
---------------------------
Title(s)
Address for Record 120 South LaSalle Street
------------------------------
Chicago, Illinois 60603
------------------------------
THE CHASE MANHATTAN BANK, N.A.
By:
---------------------------
Title
24
<PAGE> 1
EXHIBIT 99.B9(a)
AGENCY AGREEMENT
AGREEMENT dated the ___ day of December, 1995, by and between
KEMPER HORIZON FUND, a Massachusetts business trust having its
principal place of business at 120 South LaSalle Street, Chicago,
IL 60603 ("Fund"), and INVESTORS FIDUCIARY TRUST COMPANY, a state
chartered trust company organized and existing under the laws of
the State of Missouri having its principal place of business at
127 West 10th Street, Kansas City, Missouri 64105 ("IFTC").
WHEREAS, Fund wants to appoint IFTC as Transfer Agent and
Dividend Disbursing Agent, and IFTC wants to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of IFTC as Transfer
Agent and Dividend Disbursing Agent for Fund, there will
be filed with IFTC the following documents:
A. A certified copy of the resolutions of the Board of
Trustees of Fund appointing IFTC as Transfer Agent and
Dividend Disbursing Agent, approving the form of this
Agreement, and designating certain persons to give
written instructions and requests on behalf of Fund.
B. A certified copy of the Agreement and Declaration of
Trust of Fund and any amendments thereto.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the
Securities and Exchange Commission.
E. Specimens of all forms of outstanding share
certificates as approved by the Board of Trustees of
Fund, with a certificate of the Secretary of Fund as
to such approval.
F. Specimens of the signatures of the officers of the
Fund authorized to sign share certificates and
individuals authorized to sign written instructions
and requests on behalf of the Fund.
<PAGE> 2
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and existence
under the laws of The Commonwealth of
Massachusetts.
(2) With respect to the status of all shares of Fund
covered by this appointment under the Securities
Act of 1933, and any other applicable federal or
state statute.
(3) To the effect that all issued shares are, and all
unissued shares will be when issued, validly
issued, fully paid and non-assessable.
2. Certain Representations and Warranties of IFTC. IFTC
represents and warrants to Fund that:
A. It is a trust company duly organized and existing and
in good standing under the laws of the State of
Missouri.
B. It is duly qualified to carry on its business in the
State of Missouri.
C. It is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter into and
perform the services contemplated in this Agreement.
D. All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
E. It has and will continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
F. It is, and will continue to be, registered as a
transfer agent under the Securities Exchange Act of
1934.
3. Certain Representations and Warranties of Fund. Fund
represents and warrants to IFTC that:
A. It is a business trust duly organized and existing and
in good standing under the laws of The Commonwealth of
Massachusetts.
B. It is an investment company registered under the
Investment Company Act of 1940.
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<PAGE> 3
C. A registration statement under the Securities Act of
1933 has been filed and will be effective with respect
to all shares of Fund being offered for sale at any
time and from time to time.
D. All requisite steps have been or will be taken to
register Fund's shares for sale in all applicable
states, including the District of Columbia.
E. Fund and its Trustees are empowered under applicable
laws and by the Fund's Agreement and Declaration of
Trust and Bylaws to enter into and perform this
Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement,
Fund hereby employs and appoints IFTC as Transfer
Agent and Dividend Disbursing Agent effective the date
hereof.
B. IFTC hereby accepts such employment and appointment
and agrees that it will act as Fund's Transfer Agent
and Dividend Disbursing Agent. IFTC agrees that it
will also act as agent in connection with Fund's
periodic withdrawal payment accounts and other open-
account or similar plans for shareholders, if any.
C. IFTC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and
obligations hereunder in accordance with industry
practice.
D. Fund agrees to use all reasonable efforts to deliver
to IFTC in Kansas City, Missouri, as soon as they are
available, all its shareholder account records.
E. Subject to the provisions of Sections 20 and 21
hereof, IFTC agrees that it will perform all the usual
and ordinary services of Transfer Agent and Dividend
Disbursing Agent and as agent for the various
shareholder accounts, including, without limitation,
the following: issuing, transferring and cancelling
share certificates, maintaining all shareholder
accounts, preparing shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses, withholding
federal income taxes, preparing and mailing checks for
disbursement of income and capital gains dividends,
preparing and filing all required U.S. Treasury
Department information returns for all shareholders,
preparing and mailing confirmation forms to
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<PAGE> 4
shareholders and dealers with respect to all purchases
and liquidations of Fund shares and other transactions
in shareholder accounts for which confirmations are
required, recording reinvestments of dividends and
distributions in Fund shares, recording redemptions of
Fund shares and preparing and mailing checks for
payments upon redemption and for disbursements to
systematic withdrawal plan shareholders.
5. Compensation and Expenses.
A. In consideration for the services provided hereunder
by IFTC as Transfer Agent and Dividend Disbursing
Agent, Fund will pay to IFTC from time to time
compensation as agreed upon for all services rendered
as Agent, and also, all its reasonable out-of-pocket
expenses and other disbursements incurred in
connection with the agency. Such compensation will be
set forth in a separate schedule to be agreed to by
Fund and IFTC. The initial agreement regarding
compensation is attached as Exhibit A.
B. Fund agrees to promptly reimburse IFTC for all
reasonable out-of-pocket expenses or advances incurred
by IFTC in connection with the performance of services
under this Agreement including, but not limited to,
postage (and first class mail insurance in connection
with mailing share certificates), envelopes, check
forms, continuous forms, forms for reports and
statements, stationery, and other similar items,
telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used
each year to record the previous year's transactions
in shareholder accounts and computer tapes used for
permanent storage of records and cost of insertion of
materials in mailing envelopes by outside firms. IFTC
may, at its option, arrange to have various service
providers submit invoices directly to the Fund for
payment of out-of-pocket expenses reimbursable
hereunder.
6. Efficient Operation of IFTC System.
A. In connection with the performance of its services
under this Agreement, IFTC is responsible for the
accurate and efficient functioning of its system at
all times, including:
(1) The accuracy of the entries in IFTC's records
reflecting purchase and redemption orders and
other instructions received by IFTC from dealers,
shareholders, Fund or its principal underwriter.
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<PAGE> 5
(2) The timely availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmations and other shareholder
account information to be produced from IFTC's
records or data.
(3) The accurate and timely issuance of dividend and
distribution checks in accordance with
instructions received from Fund.
(4) The accuracy of redemption transactions and
payments in accordance with redemption
instructions received from dealers, shareholders
or Fund or other authorized persons.
(5) The deposit daily in Fund's appropriate special
bank account of all checks and payments received
from dealers or shareholders for investment in
shares.
(6) The requiring of proper forms of instructions,
signatures and signature guarantees and any
necessary documents supporting the rightfulness of
transfers, redemptions and other shareholder
account transactions, all in conformance with
IFTC's present procedures with such changes as may
be deemed reasonably appropriate by IFTC or as may
be reasonably approved by or on behalf of Fund.
(7) The maintenance of a current duplicate set of
Fund's essential or required records, as agreed
upon from time to time by Fund and IFTC, at a
secure distant location, in form available and
usable forthwith in the event of any breakdown or
disaster disrupting its main operation.
7. Indemnification.
A. Fund shall indemnify and hold IFTC harmless from and
against any and all claims, actions, suits, losses,
damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or
attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with the
agency relationship created by this Agreement,
provided that IFTC has acted in good faith, without
negligence and without willful misconduct.
B. IFTC shall indemnify and hold Fund harmless from and
against any and all claims, actions, suits, losses,
damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or
5
<PAGE> 6
attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with the
agency relationship created by this Agreement,
provided that IFTC has not acted in good faith,
without negligence and without willful misconduct.
C. In order that the indemnification provisions contained
in this Section 7 shall apply, upon the assertion of a
claim for which either party (the "Indemnifying
Party") may be required to provide indemnification
hereunder, the party seeking indemnification (the
"Indemnitee") shall promptly notify the Indemnifying
Party of such assertion, and shall keep such party
advised with respect to all developments concerning
such claim. The Indemnifying Party shall be entitled
to assume control of the defense and the negotiations,
if any, regarding settlement of the claim. If the
Indemnifying Party assumes control, the Indemnitee
shall have the option to participate in the defense
and negotiations of such claim at its own expense.
The Indemnitee shall in no event confess, admit to,
compromise, or settle any claim for which the
Indemnifying Party may be required to indemnify it
except with the prior written consent of the
Indemnifying Party, which shall not be unreasonably
withheld.
8. Certain Covenants of IFTC and Fund.
A. All requisite steps will be taken by Fund from time to
time when and as necessary to register the Fund's
shares for sale in all states in which Fund's shares
shall at the time be offered for sale and require
registration. If at any time Fund receives notice of
any stop order or other proceeding in any such state
affecting such registration or the sale of Fund's
shares, or of any stop order or other proceeding under
the Federal securities laws affecting the sale of
Fund's shares, Fund will give prompt notice thereof to
IFTC.
B. IFTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to
Fund for safekeeping of share certificates, check
forms, and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
Further, IFTC agrees to carry insurance, as specified
in Exhibit B hereto, with insurers reasonably
acceptable to Fund and in minimum amounts that are
reasonably acceptable to Fund, which will not be
changed without the consent of Fund, which consent
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<PAGE> 7
shall not be unreasonably withheld, and which will be
expanded in coverage or increased in amounts from time
to time if and when reasonably requested by Fund. If
IFTC determines that it is unable to obtain any such
insurance upon commercially reasonable terms, it shall
promptly so advise Fund in writing. In such event,
Fund shall have the right to terminate this Agreement
upon 30 days notice.
C. To the extent required by Section 31 of the Investment
Company Act of 1940 and Rules thereunder, IFTC agrees
that all records maintained by IFTC relating to the
services to be performed by IFTC under this Agreement
are the property of Fund and will be preserved and
will be surrendered promptly to Fund on request.
D. IFTC agrees to furnish Fund semi-annual reports of its
financial condition, consisting of a balance sheet,
earnings statement and any other reasonably available
financial information reasonably requested by Fund.
The annual financial statements will be certified by
IFTC's certified public accountants.
E. IFTC represents and agrees that it will use all
reasonable efforts to keep current on the trends of
the investment company industry relating to
shareholder services and will use all reasonable
efforts to continue to modernize and improve its
system without additional cost to Fund.
F. IFTC will permit Fund and its authorized
representatives to make periodic inspections of its
operations at reasonable times during business hours.
G. If IFTC is prevented from complying, either totally or
in part, with any of the terms or provisions of this
Agreement, by reason of fire, flood, storm, strike,
lockout or other labor trouble, riot, war, rebellion,
accidents, acts of God, equipment, utility or
transmission failure or damage, and/or any other cause
or casualty beyond the reasonable control of IFTC,
whether similar to the foregoing matters or not, then
upon written notice to Fund, the requirements of this
Agreement that are affected by such disability, to the
extent so affected, shall be suspended during the
period of such disability; provided, however, that
IFTC shall make reasonable effort to remove such
disability as soon as possible. During such period,
Fund may seek alternate sources of service without
liability hereunder; and IFTC will use all reasonable
efforts to assist Fund to obtain alternate sources of
service. IFTC shall have no liability to Fund for
7
<PAGE> 8
nonperformance because of the reasons set forth in
this Section 8.G; but if a disability that, in Fund's
reasonable belief, materially affects IFTC's ability
to perform its obligations under this Agreement
continues for a period of 30 days, then Fund shall
have the right to terminate this Agreement upon 10
days written notice to IFTC.
9. Adjustment.
In case of any recapitalization, readjustment or other
change in the structure of Fund requiring a change in the
form of share certificates, IFTC will issue or register
certificates in the new form in exchange for, or in
transfer of, the outstanding certificates in the old form,
upon receiving the following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Agreement and
Declaration of Trust or other document effecting the
change.
C. Certified copy of any order or consent of each
governmental or regulatory authority required by law
for the issuance of the shares in the new form, and an
opinion of counsel that no order or consent of any
other government or regulatory authority is required.
D. Specimens of the new certificates in the form approved
by the Board of Trustees of Fund, with a certificate
of the Secretary of Fund as to such approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of Fund
in the new form under the Securities Act of 1933,
and any other applicable federal or state laws.
(2) To the effect that the issued shares in the new
form are, and all unissued shares will be when
issued, validly issued, fully paid and non-
assessable.
10. Share Certificates.
Fund will furnish IFTC with a sufficient supply of blank
share certificates and from time to time will renew such
supply upon the request of IFTC. Such certificates will
be signed manually or by facsimile signatures of the
officers of Fund authorized by law and Fund's Bylaws to
8
<PAGE> 9
sign share certificates and, if required, will bear the
trust seal or facsimile thereof.
11. Death, Resignation or Removal of Signing Officer.
Fund will file promptly with IFTC written notice of any
change in the officers authorized to sign share
certificates, written instructions or requests, together
with two signature cards bearing the specimen signature of
each newly authorized officer, all as certified by an
appropriate officer of the Fund. In case any officer of
Fund who will have signed manually or whose facsimile
signature will have been affixed to blank share
certificates will die, resign, or be removed prior to the
issuance of such certificates, IFTC may issue or register
such share certificates as the share certificates of Fund
notwithstanding such death, resignation, or removal, until
specifically directed to the contrary by Fund in writing.
In the absence of such direction, Fund will file promptly
with IFTC such approval, adoption, or ratification as may
be required by law.
12. Future Amendments of Agreement and Declaration of Trust
and Bylaws.
Fund will promptly file with IFTC copies of all material
amendments to its Agreement and Declaration of Trust and
Bylaws and Registration Statement made after the date of
this Agreement.
13. Instructions, Opinion of Counsel and Signatures.
At any time IFTC may apply to any officer of Fund for
instructions, and may consult with legal counsel for Fund
at the expense of Fund, or with its own legal counsel at
its own expense, with respect to any matter arising in
connection with the agency; and it will not be liable for
any action taken or omitted by it in good faith in
reliance upon such instructions or upon the opinion of
such counsel. IFTC is authorized to act on the orders,
directions or instructions of such persons as the Board of
Trustees of Fund shall from time to time designate by
resolution. IFTC will be protected in acting upon any
paper or document, including any orders, directions or
instructions, reasonably believed by it to be genuine and
to have been signed by the proper person or persons; and
IFTC will not be held to have notice of any change of
authority of any person so authorized by Fund until
receipt of written notice thereof from Fund. IFTC will
also be protected in recognizing share certificates that
it reasonably believes to bear the proper manual or
facsimile signatures of the officers of Fund, and the
9
<PAGE> 10
proper countersignature of any former Transfer Agent or
Registrar, or of a Co-Transfer Agent or Co-Registrar.
14. Papers Subject to Approval of Counsel.
The acceptance by IFTC of its appointment as Transfer
Agent and Dividend Disbursing Agent, and all documents
filed in connection with such appointment and thereafter
in connection with the agencies, will be subject to the
approval of legal counsel for IFTC, which approval will
not be unreasonably withheld.
15. Certification of Documents.
The required copy of the Agreement and Declaration of
Trust of Fund and copies of all amendments thereto will be
certified by the appropriate official of The Commonwealth
of Massachusetts; and if such Agreement and Declaration of
Trust and amendments are required by law to be also filed
with a county, city or other officer or official body, a
certificate of such filing will appear on the certified
copy submitted to IFTC. A copy of the order or consent of
each governmental or regulatory authority required by law
for the issuance of Fund shares will be certified by the
Secretary or Clerk of such governmental or regulatory
authority, under proper seal of such authority. The copy
of the Bylaws and copies of all amendments thereto and
copies of resolutions of the Board of Trustees of Fund
will be certified by the Secretary or an Assistant
Secretary of Fund.
16. Records.
IFTC will maintain customary records in connection with
its agency, and particularly will maintain those records
required to be maintained pursuant to sub-paragraph
(2)(iv) of paragraph (b) of Rule 31a-1 under the
Investment Company Act of 1940, if any.
17. Disposition of Books, Records and Cancelled Certificates.
IFTC will send periodically to Fund, or to where
designated by the Secretary or an Assistant Secretary of
Fund, all books, documents, and all records no longer
deemed needed for current purposes and share certificates
which have been cancelled in transfer or in exchange, upon
the understanding that such books, documents, records, and
share certificates will not be destroyed by Fund without
the consent of IFTC (which consent will not be
unreasonably withheld), but will be safely stored for
possible future reference.
10
<PAGE> 11
18. Provisions Relating to IFTC as Transfer Agent.
A. IFTC will make original issues of share certificates
upon written request of an officer of Fund and upon
being furnished with a certified copy of a resolution
of the Board of Trustees authorizing such original
issue, an opinion of counsel as outlined in Section
1.G or 9.E of this Agreement, the certificates
required by Section 10 of this Agreement and any other
documents required by Section 1 or 9 of this
Agreement.
B. Before making any original issue of certificates, Fund
will furnish IFTC with sufficient funds to pay any
taxes required on the original issue of the shares.
Fund will furnish IFTC such evidence as may be
required by IFTC to show the actual value of the
shares. If no taxes are payable, IFTC will upon
request be furnished with an opinion of outside
counsel to that effect.
C. Shares will be transferred and new certificates issued
in transfer, or shares accepted for redemption and
funds remitted therefor, upon surrender of the old
certificates in form deemed by IFTC properly endorsed
for transfer or redemption accompanied by such
documents as IFTC may deem necessary to evidence the
authority of the person making the transfer or
redemption, and bearing satisfactory evidence of the
payment of any applicable share transfer taxes. IFTC
reserves the right to refuse to transfer or redeem
shares until it is satisfied that the endorsement or
signature on the certificate or any other document is
valid and genuine, and for that purpose it may require
a guarantee of signature by such persons as may from
time to time be specified in the prospectus related to
such shares or otherwise authorized by Fund. IFTC
also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it
will incur no liability for the refusal in good faith
to make transfers or redemptions which, in its
judgment, are improper, unauthorized, or otherwise not
rightful. IFTC may, in effecting transfers or
redemptions, rely upon Simplification Acts or other
statutes which protect it and Fund in not requiring
complete fiduciary documentation.
D. When mail is used for delivery of share certificates,
IFTC will forward share certificates in
"nonnegotiable" form as provided by Fund by first
class mail, all such mail deliveries to be covered
11
<PAGE> 12
while in transit to the addressee by insurance
arranged for by IFTC.
E. IFTC will issue and mail subscription warrants and
certificates provided by Fund and representing share
dividends, exchanges or split-ups, or act as
Conversion Agent upon receiving written instructions
from any officer of Fund and such other documents as
IFTC deems necessary.
F. IFTC will issue, transfer, and split-up certificates
upon receiving written instructions from an officer of
Fund and such other documents as IFTC may deem
necessary.
G. IFTC may issue new certificates in place of
certificates represented to have been lost, destroyed,
stolen or otherwise wrongfully taken, upon receiving
indemnity satisfactory to IFTC, and may issue new
certificates in exchange for, and upon surrender of,
mutilated certificates. Any such issuance shall be in
accordance with the provisions of law governing such
matter and any procedures adopted by the Board of
Trustees of the Fund of which IFTC has notice.
H. IFTC will supply a shareholder's list to Fund properly
certified by an officer of IFTC for any shareholder
meeting upon receiving a request from an officer of
Fund. It will also supply lists at such other times
as may be reasonably requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of
Fund, IFTC will address and mail notices to
shareholders.
J. In case of any request or demand for the inspection of
the share books of Fund or any other books of Fund in
the possession of IFTC, IFTC will endeavor to notify
Fund and to secure instructions as to permitting or
refusing such inspection. IFTC reserves the right,
however, to exhibit the share books or other books to
any person in case it is advised by its counsel that
it may be held responsible for the failure to exhibit
the share books or other books to such person.
19. Provisions Relating to Dividend Disbursing Agency.
A. IFTC will, at the expense of Fund, provide a special
form of check containing the imprint of any device or
other matter desired by Fund. Said checks must,
however, be of a form and size convenient for use by
IFTC.
12
<PAGE> 13
B. If Fund wants to include additional printed matter,
financial statements, etc., with the dividend checks,
the same will be furnished to IFTC within a reasonable
time prior to the date of mailing of the dividend
checks, at the expense of Fund.
C. If Fund wants its distributions mailed in any special
form of envelopes, sufficient supply of the same will
be furnished to IFTC but the size and form of said
envelopes will be subject to the approval of IFTC. If
stamped envelopes are used, they must be furnished by
Fund; or, if postage stamps are to be affixed to the
envelopes, the stamps or the cash necessary for such
stamps must be furnished by Fund.
D. IFTC will maintain one or more deposit accounts as
Agent for Fund, into which the funds for payment of
dividends, distributions, redemptions or other
disbursements provided for hereunder will be
deposited, and against which checks will be drawn.
20. Termination of Agreement.
A. This Agreement may be terminated by either party upon
sixty (60) days prior written notice to the other
party.
B. Fund, in addition to any other rights and remedies,
shall have the right to terminate this Agreement
forthwith upon the occurrence at any time of any of
the following events:
(1) Any interruption or cessation of operations by
IFTC or its assigns which materially interferes
with the business operation of Fund.
(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its assigns.
(3) Any merger, consolidation or sale of substantially
all the assets of IFTC or its assigns.
(4) The acquisition of a controlling interest in IFTC
or its assigns, by any broker, dealer, investment
adviser or investment company except as may
presently exist.
(5) Failure by IFTC or its assigns to perform its
duties in accordance with this Agreement, which
failure materially adversely affects the business
operations of Fund and which failure continues for
thirty (30) days after written notice from Fund.
13
<PAGE> 14
(6) The registration of IFTC or its assigns as a
transfer agent under the Securities Exchange Act
of 1934 is revoked, terminated or suspended for
any reason.
C. In the event of termination, Fund will promptly pay
IFTC all amounts due to IFTC hereunder. Upon
termination of this Agreement, IFTC shall deliver all
shareholder and account records pertaining to Fund
either to Fund or as directed in writing by Fund.
21. Assignment.
A. Except for the assignment of responsibilities pursuant
to the Services Agreement ("Services Agreement")
between IFTC and Kemper Service Company ("KSVC"),
which Fund has approved, neither this Agreement nor
any rights or obligations hereunder may be assigned by
IFTC without the written consent of Fund; provided,
however, no assignment will relieve IFTC of any of its
obligations hereunder.
B. This Agreement including, without limitation, the
provisions of Section 7 will inure to the benefit of
and be binding upon the parties and their respective
successors and assigns including KSVC pursuant to the
aforesaid Services Agreement.
C. KSVC is authorized by Fund to use the system services
of DST Systems, Inc.
22. Confidentiality.
A. Except as provided in the last sentence of Section
18.J hereof, or as otherwise required by law, IFTC
will keep confidential all records of and information
in its possession relating to Fund or its shareholders
or shareholder accounts and will not disclose the same
to any person except at the request or with the
consent of Fund.
B. Except as otherwise required by law, Fund will keep
confidential all financial statements and other
financial records (other than statements and records
relating solely to Fund's business dealings with IFTC)
and all manuals, systems and other technical
information and data, not publicly disclosed, relating
to IFTC's operations and programs furnished to it by
IFTC pursuant to this Agreement and will not disclose
the same to any person except at the request or with
the consent of IFTC. Notwithstanding anything to the
contrary in this Section 22.B, if an attempt is made
14
<PAGE> 15
pursuant to subpoena or other legal process to require
Fund to disclose or produce any of the aforementioned
manuals, systems or other technical information and
data, Fund shall give IFTC prompt notice thereof prior
to disclosure or production so that IFTC may, at its
expense, resist such attempt.
23. Survival of Representations and Warranties.
All representations and warranties by either party herein
contained will survive the execution and delivery of this
Agreement.
24. Miscellaneous.
A. This Agreement is executed and delivered in the State
of Illinois and shall be governed by the laws of said
state (except as to Section 24.G hereof which shall be
governed by the laws of The Commonwealth of
Massachusetts).
B. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties
hereto.
C. The captions in this Agreement are included for
convenience of reference only, and in no way define or
limit any of the provisions hereof or otherwise affect
their construction or effect.
D. This Agreement shall become effective as of the date
hereof.
E. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an
original but all of which together shall constitute
one and the same instrument.
F. If any part, term or provision of this Agreement is
held by the courts to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be
affected, and the rights and obligations of the
parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or
provision held to be illegal or invalid.
G. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust which is on
file with the Secretary of The Commonwealth of
Massachusetts, and the limitation of shareholder and
15
<PAGE> 16
trustee liability contained therein. This Agreement
has been executed by and on behalf of Fund by its
representatives as such representatives and not
individually, and the obligations of Fund hereunder
are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding
upon only the assets and property of Fund. With
respect to any claim by IFTC for recovery of that
portion of the compensation and expenses (or any other
liability of Fund arising hereunder) allocated to a
particular Portfolio, whether in accordance with the
express terms hereof or otherwise, IFTC shall have
recourse solely against the assets of that Portfolio
to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such
purpose.
H. This Agreement, together with the Fee Schedule, is the
entire contract between the parties relating to the
subject matter hereof and supersedes all prior
agreements between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officer as of the
day and year first set forth above.
KEMPER HORIZON FUND
By______________________________
Title:__________________________
ATTEST:
______________________________
Title:________________________
INVESTORS FIDUCIARY TRUST COMPANY
By_______________________________
Title:___________________________
ATTEST:
______________________________
Title:________________________
16
<PAGE> 17
EXHIBIT A
FEE SCHEDULE (MULTIPLE CLASSES OF SHARES)
<TABLE>
<CAPTION>
TRANSFER AGENCY FUNCTION FEE PAYABLE BY FUND
CLASS A, C AND I CLASS B
<S> <C> <C> <C>
1. Annual open shareholder
account fee (per year per
account).
a. Non-daily dividend series. $6.00 $6.00
b. Daily dividend series. $8.00 $8.00
2. Annual closed shareholder account
fee (per year per account). $6.00 $6.00
3. Contingent deferred sales charge Not
account fee (per year per open Applicable $2.25
account).
4. Establishment of new shareholder
account (per new account). $4.00 $4.00
5. Payment of dividend (per dividend
per account). $ .40 $ .40
6. Automated transaction (per
transaction).** $ .50 $ .50
7. Non-monetary transactions fee (per
year per open account). $2.00 $2.00
8. All other shareholder inquiry,
correspondence and research trans-
actions (per transaction). $1.25 $1.25
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund in
accordance with the provisions of Section 5 of the Agency
Agreement. All fees will be subject to offset by earnings
allowances under the Custody Agreement between Fund and IFTC.
The attached Transfer Agency Fee Schedule Supplement is a part of
this Exhibit A.
__________________
* The new shareholder account fee is not applicable to Class A
Share accounts established in connection with a conversion
from Class B Shares.
** Automated transaction includes, without limitation, money
market series purchases and redemptions, ACH purchases,
systematic exchanges and conversions from Class B Shares
to Class A Shares.
<PAGE> 18
TRANSFER AGENCY FEE SCHEDULE SUPPLEMENT
For purposes of the following limitation, "Class Expenses" are
expenses identified as attributable to a particular class of the
Fund and charged directly to the class. Class Expenses are
limited to the following: registration fees, directors' or
trustees' fees, expenses of periodic meetings of directors,
trustees or shareholders, transfer agency fees, legal and
accounting fees (other than fees for income tax return
preparation or income tax advice), and costs of shareholder
communications required by law (e.g., the preparation and mailing
of prospectuses and proxy statements). Class Expenses
specifically do not include Rule 12b-1 fees and administrative
service fees. Transfer agency fees and expenses will be limited
for any class of the Fund to the extent necessary to ensure that
the Class Expenses allocated to each share of a class of the Fund
for a fiscal year will differ from the Class Expenses allocated
to each share of any other class of the Fund by less than 50
basis points (.50%) of the average daily net asset value per
share of the class of shares with the smallest average net asset
value (adjusted as necessary for classes in effect for a partial
year). For a Fund with multiple series, the foregoing shall be
applied to each series separately.
<PAGE> 19
EXHIBIT B
IFTC INSURANCE COVERAGE
DESCRIPTION OF POLICY:
Fidelity Bond
Covers losses caused by dishonesty of employees, physical
loss of securities on or outside of premises while in
possession of authorized person, loss caused by forgery or
alteration of checks or similar instruments.
Errors and Omissions Insurance
Covers claims made for actual or alleged negligent acts,
errors or omissions committed in the performance of
transfer agency services.
Mail Insurance (applies to all full service operations)
Provides indemnity for the following types of securities
lost in the mails:
Non-negotiable securities mailed to domestic locations
via registered mail.
Non-negotiable securities mailed to domestic locations
via first-class or certified mail.
Non-negotiable securities mailed to foreign locations
via registered mail.
Negotiable securities mailed to all locations via
registered mail.
<PAGE> 1
EXHIBIT 99.B9(b)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this ____ day of December, 1995, by and between
KEMPER HORIZON FUND, a Massachusetts business trust (the "Fund"),
and KEMPER DISTRIBUTORS, INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to provide information and
administrative services for the benefit of the Fund and its
shareholders. In this regard, KDI shall appoint various broker-
dealer firms and other financial services firms ("Firms") to
provide related services and facilities for their clients who are
shareholders of the Fund ("clients"). The Firms shall provide
such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information
and services to shareholders of the Fund. 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 client inquiries
regarding the Fund and its special features, assistance to
clients in changing dividend and investment options, account
designations and addresses, and such other services as the Fund
or KDI may reasonably request. KDI may also provide some of the
above services for the Fund directly.
KDI accepts such appointment and agrees during such period to
render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all
purposes herein provided be deemed to be an independent
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
KDI, by separate agreement with the Fund, may also serve the Fund
in other capacities. In carrying out its duties and
responsibilities hereunder, KDI will appoint various Firms to
provide administrative and other services described herein
directly to or for the benefit of shareholders of the Fund who
may be clients of such Firms. Such Firms shall at all times be
deemed to be independent contractors retained by KDI and not the
Fund. KDI and not the Fund will be responsible for the payment
of compensation to such Firms for such services.
2. For the services and facilities described in Section 1, the
Fund will pay to KDI at the end of each calendar month an
administrative service fee computed at an annual rate of up to
0.25 of 1% of the average daily net assets of the Fund (except
assets attributable to Class I Shares). The current fee schedule
<PAGE> 2
is set forth as Appendix I hereto. The administrative service
fee will be calculated separately for each class of each series
of the Fund as an expense of each such class; provided, however,
no administrative service fee shall be payable with respect to
Class I Shares. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement
is in effect during such month and year, respectively. The
services of KDI to the Fund under this Agreement are not to be
deemed exclusive, and KDI shall be free to render similar
services or other services to others.
The net asset value for each share of the Fund shall be
calculated in accordance with the provisions of the Fund's
current prospectus. On each day when net asset value is not
calculated, the net asset value of a share of the Fund shall be
deemed to be the net asset value of such a share as of the close
of business on the last day on which such calculation was made
for the purpose of the foregoing computations.
3. The Fund shall assume and pay all charges and expenses of
its operations not specifically assumed or otherwise to be
provided by KDI under this Agreement.
4. This Agreement may be terminated at any time without the
payment of any penalty by the Fund or by KDI on sixty (60) days
written notice to the other party. Termination of this Agreement
shall not affect the right of KDI to receive payments on any
unpaid balance of the compensation described in Section 2 hereof
earned prior to such termination. This Agreement may not be
amended to increase the amount to be paid to KDI for services
hereunder above .25 of 1% of the average daily net assets of the
Fund without the vote of a majority of the outstanding voting
securities of the Fund. All material amendments to this
Agreement must in any event be approved by vote of the Board of
Trustees of the Fund.
5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
6. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
7. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments thereto,
all of which are on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of shareholder and trustee
liability contained therein. This Agreement has been executed by
and on behalf of the Fund by its representatives as such
-2-
<PAGE> 3
representatives and not individually, and the obligations of the
Fund hereunder are not binding upon any of the trustees, officers
or shareholders of the Fund individually but are binding upon
only the assets and property of the Fund.
8. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 7 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement
to be executed as of the day and year first above written.
KEMPER HORIZON FUND KEMPER DISTRIBUTORS, INC.
By: By:
--------------------------- -----------------------------
Title: Title:
------------------------ --------------------------
-3-
<PAGE> 4
APPENDIX I
KEMPER HORIZON FUND
FEE SCHEDULE FOR ADMINISTRATIVE
SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to
which this Appendix is attached, the Fund and KDI agree that the
initial administrative service fee will be computed at an annual
rate of .25 of 1% (the "Fee Rate"). For purposes of computing
the fee due KDI, the Fee Rate shall be applied against the amount
of assets of the Fund for which a broker-dealer or other
financial services firm is listed on the records of the Fund as
"dealer of record," which shall not include KDI.
Dated:
KEMPER HORIZON FUND KEMPER DISTRIBUTORS, INC.
By: By:
--------------------------- -----------------------------
Title: Title:
------------------------ --------------------------
<PAGE> 1
EXHIBIT 99.B10(a)
[VEDDER, PRICE, KAUFMAN & KAMMHOLZ LETTEHEAD]
December 14, 1995
Kemper Horizon Fund
120 South LaSalle Street
Chicago, Illinois 60603
Ladies and Gentlemen:
Reference is made to Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A under the Securities Act of 1933 being filed by Kemper
Horizon Fund (the "Fund") in connection with the proposed public offering of an
indefinite amount of units of beneficial interest, no par value ("Shares"), in
the Fund.
We have acted as counsel to the Fund since its inception and in such
capacity are familiar with the Fund's organization and have counseled the Fund
regarding various legal matters. We have examined such Fund records and other
documents and certificates as we have considered necessary or appropriate for
the purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us.
Based upon the foregoing and upon the opinion dated December 11, 1995
by Ropes & Gray of Boston, Massachusetts, we advise you and opine that (a) the
Fund is a duly authorized and validly existing voluntary association with
transferrable shares under the laws of the Commonwealth of Massachusetts and is
authorized to issue an unlimited number of Shares; and (b) upon the issuance of
the Shares in accordance with the Fund's Agreement and Declaration of Trust and
the receipt by the Fund of a purchase price not less than the net asset value
per Share, the Shares will be legally issued and outstanding, fully paid and
non-assessable (although shareholders of the Fund may be subject to liability
under certain circumstances described in Part B of the Registration Statement
of the Fund under the caption "Shareholder Rights").
We hereby consent to the use of this opinion in connection with said
Pre-Effective Amendment.
Very truly yours,
Vedder, Price, Kaufman & Kammholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
<PAGE> 1
EXHIBIT 99.B10(b)
[ROPES & GRAY LETTERHEAD]
December 11, 1995
Kemper Horizon Fund
120 South LaSalle Street
Chicago, Illinois 60603
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Ladies and Gentlemen:
We are furnishing this opinion with respect to the proposed offer and
sale from time to time of an indefinite number of shares of beneficial interest
(the "Shares") of Kemper Horizon Fund (the "Fund"), being registered under the
Securities Act of 1933, as amended, by a Registration Statement on Form N-1A
(the "Registration Statement").
We have acted as Massachusetts counsel for the Fund in connection with
its organization and are familiar with the action taken by its Trustees to
authorize the issuance of the Shares of the Fund. We have examined its by-laws
and its Agreement and Declaration of Trust, as amended, on file at the Office
of the Secretary of State of The Commonwealth of Massachusetts and we have also
examined such other documents as we deem necessary for the purpose of this
opinion.
We assume that appropriate action has been or will be taken to register
or qualify the sale of the Shares under any applicable state and federal laws
regulating sales and offerings of securities and that upon sale of the Shares,
the Fund will receive the net asset value thereof.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a legally organized and validly existing unincorporated
voluntary association under the laws of The Commonwealth of Massachusetts
which, unless terminated as provided in its Agreement and Declaration of Trust,
shall continue in existence without limitation of time.
<PAGE> 2
ROPES & GRAY
Kemper Horizon Fund
Vedder, Price, Kaufman & Kammholz -2- December 11, 1995
2. The Fund is authorized to issue an unlimited number of Shares and
upon the issue of any thereof for cash at net asset value after the
effectiveness of the Registration Statement and receipt by the Fund of the
authorized consideration therefor, the Shares so issued will be validly issued,
fully paid, and nonassessable by the Fund.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts and 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 Trustees or officers of the Fund. The Agreement and
Declaration of Trust provides for indemnification out of the property of the
Fund for all loss and expense of any shareholder of the Fund held personally
liable for the obligations of the Fund. Thus, the risk of liability is limited
to circumstances in which the Fund would be unable to meet its obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Ropes & Gray
Ropes & Gray
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors
and Reports to Shareholders" and to the use of our report dated December 11,
1995 in the Registration Statement (Form N-1A) of Kemper Horizon Fund, filed
with the Securities and Exchange Commission in this Pre-Effective Amendment No.
2 to the Registration Statement under the Securities Act of 1933 (File No.
33-63467) and in this Amendment No. 2 to the Registration Statement under the
Investment Company Act of 1940 (File No. 811-7365).
ERNST & YOUNG LLP
Chicago, Illinois
December 13, 1995
<PAGE> 2
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 20+
Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 5 Portfolio,
comprising Kemper Horizon Fund, as of December 11, 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 each of the Portfolios of
Kemper Horizon Fund at December 11, 1995 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 11, 1995
<PAGE> 1
EXHIBIT 99.B13
KEMPER HORIZON FUND
Subscription Agreement
1. Share Subscription. The undersigned agrees to
purchase from KEMPER HORIZON FUND (the "Fund") the number of
shares (the "Shares") without par value, set forth at the end
of this Agreement on the terms and conditions set forth
herein and in the Preliminary Prospectus ("Preliminary
Prospectus") described below, and hereby tenders the amount
of the price required to purchase these Shares at the price
set forth at the end of this Agreement.
The undersigned understands that the Fund has prepared a
registration statement or an amendment thereto for filing
with the Securities and Exchange Commission on Form N-1A,
which contains the Preliminary Prospectus which describes the
Fund and the Shares. By its signature hereto, the
undersigned hereby acknowledges receipt of a copy of the
Preliminary Prospectus.
The undersigned recognizes that the Fund will not be
fully operational until such time as it commences the public
offering of its shares. Accordingly, a number of features of
the Fund described in the Preliminary Prospectus, including,
without limitation, the declaration and payment of dividends,
and redemption of shares upon request of shareholders, are
not, in fact, in existence at the present time and will not
be instituted until the Fund's registration under the
Securities Act of 1933 is made effective.
2. Registration and Warranties. The undersigned hereby
represents and warrants as follows:
(a) It is aware that no Federal or state agency has
made any findings or determination as to the fairness for
investment, nor any recommendation or endorsement, of the
Shares;
(b) It has such knowledge and experience of
financial and business matters as will enable it to
utilize the information made available to it in
connection with the offering of the Shares, to evaluate
the merits and risks of the prospective investment and to
make an informed investment decision;
<PAGE> 2
(c) It recognizes that the Fund has no financial or
operating history and, further, that investment in the
Fund involves certain risks, and it has taken full
cognizance of and understands all of the risks related to
the purchase of the Shares, and it acknowledges that it
has suitable financial resources and anticipated income
to bear the economic risk of such an investment;
(d) It is purchasing the Shares for its own
account, for investment, and not with any present
intention of redemption, distribution, or resale of the
Shares, either in whole or in part;
(e) It will not sell the Shares purchased by it
without registration of the Shares under the Securities
Act of 1933 or exemption therefrom;
(f) This Agreement and the Preliminary Prospectus
and such material documents relating to the Fund as it
has requested have been provided to it by the Fund and
have been reviewed carefully by it; and
(g) It has also had the opportunity to ask
questions of, and receive answers from, representatives
of the Fund concerning the Fund and the terms of the
offering.
3. The undersigned recognizes that the Fund reserves
the unrestricted right to reject or limit any subscription
and to close the offer at any time.
Number of Shares. 3,473.684, 3,473.684 and 3,578.947
shares of Class A, Class B and Class C shares, respectively,
for each of Kemper Horizon 20+ Portfolio, Kemper Horizon 10+
Portfolio and Kemper Horizon 5 Portfolio. Subscription price
$9.50 per share for aggregate price of $300,000.00.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 11th day of December, 1995.
KEMPER FINANCIAL SERVICES, INC.
By:____________________________
Title:_________________________
2
<PAGE> 1
EXHIBIT 99.B14.(a)
KEMPER
RETIREMENT PLAN PROTOTYPE
A Keogh/Corporate Retirement
Plan for Professionals and
Small Corporations
THE KEMPER RED BOOK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
CHOOSING YOUR PLAN................................... SECTION 1
PLAN INSTALLATION FORMS.............................. SECTION 2
PARTICIPANT RECORDS ................................. SECTION 3
PLAN DOCUMENT ....................................... SECTION 4
</TABLE>
<PAGE> 3
CHOOSING YOUR PLAN
RETIREMENT PLANNING SOLUTIONS THAT BENEFIT BOTH YOU AND YOUR EMPLOYEES
Providing for retirement is an increasing concern for employers, as well
as employees. With a shrinking work force, employers will have to be more
competitive than ever to attract a qualified staff. The rising costs of
traditional pension plans, however, can be a significant financial drain
on a company's profits. So how can a company remain competitive and not
risk its bottom line?
Many employers have discovered that defined contribution plans such as
Money Purchase and Profit Sharing plans provide a viable solution that can
benefit both the company and its employees.
FIND OUT IF ONE OF THESE PLANS IS RIGHT FOR YOU...
With the variety of retirement plans available today, it's often difficult
to know which one is best for your company's needs. If you're a sole
proprietor, independent contractor, owner of a small business or in
private practice, with few or no employees, and are looking for a way to
save for retirement and reduce your tax liabilities, consider one of these
plans.
PROFIT SHARING PLAN
A profit sharing plan is just that - a plan that enables the
employees to participate in the profits of the company. The
flexibility of contribution limits and the relative ease of
maintenance make profit sharing plans an attractive alternative for
both employers and employees.
A profit sharing plan allows employees to participate in the
company's success, thereby giving further incentive for employee
productivity and loyalty. More profits mean higher contributions, up
to legal limits.
MONEY PURCHASE PLAN
A money purchase plan shares many of the same advantages and features
of a profit sharing plan, but has a higher contribution level. It
has the same eligibility requirements, tax benefits and distribution
choices. The difference is in the contribution limits and
requirements.
- Allows for higher contribution levels
- Contribution levels are fixed
Because there is a fixed contribution formula, required contributions
can be easily computed and budgeted. Once a percentage has been
determined, contributions are mandatory each year, and for the same
percentage level - regardless of whether the company is profitable
that year. Failure to contribute the required amount in a year could
result in stiff tax penalties, and jeopardize the qualified status of
the plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TYPE OF PLAN PROFIT SHARING MONEY PURCHASE COMBINATION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TYPE OF CONTRIBUTION Flexible Fixed Flexible/Fixed
- ------------------------------------------------------------------------------------------------------------
MAXIMUM ANNUAL 15% of 25% of 25% of
CONTRIBUTION LIMIT Eligible Payroll Eligible Payroll Eligible Payroll
- ------------------------------------------------------------------------------------------------------------
PARTICIPANT 25% of Compensation 25% of Compensation 25% of Compensation
ANNUAL LIMIT not to Exceed $30,000 not to Exceed $30,000 not to Exceed $30,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
COMBINED MONEY PURCHASE AND PROFIT SHARING PLAN
Many employers like the idea of making contributions as high as 25% of
eligible payroll, but are not comfortable committing to this every year.
Fortunately, the IRS allows a combination or "paired" plan that gives the
"best of both worlds."
- Higher contribution levels of a money purchase plan
- Flexible contribution limits of a profit sharing plan
Paired plans combine the flexibility of a profit sharing plan with the
higher contribution limits of a money purchase pension plan. A combined
plan lets you enjoy control over a portion of the contribution similar to
a profit sharing plan, but also offers the higher contribution limits
found in a money purchase plan. Employees are assured that they will be
provided with at least some level of retirement benefit.
Typically, if an employer wishes to maximize the contribution, he or she
would set the money purchase plan contribution at 10%, which would be
mandatory each year, and allow the remaining 15% to be a part of the
profit sharing plan, which is contingent on whether or not the company can
afford it. That way, the employer is only locked into a 10% mandatory
contribution rather than 25%.
THE KEMPER RED BOOK KEOGH PROTOTYPE
The Plan Document, contained in the last section of this booklet, provides
the plan parameters for self-employed partnerships and corporations, and
has been amended for the Tax Reform Act of 1986. Investors Fiduciary Trust
Company (IFTC) will act as trustee for a plan using Kemper mutual funds.
Kemper Investors Life Insurance Company (KILICO) annuities do not require
a trustee. Before any contributions can be made to the plan, an Adoption
Agreement (see section entitled "Plan Installation Forms") that outlines
the plan parameters must be signed and dated.
ELIGIBILITY
Since the plan is employer-sponsored, the employer has the ability to
establish minimum requirements for plan participation, generally based on
age and years of service. As the employer, you decide how flexible plan
participation will be, keeping within certain minimum requirements set by
the IRS. Of course, eligibility requirements may be lower. Those who must
be eligible for the plan are:
- Any employee over age 21, AND
- Employees who have had at least two years of service, AND
- Employees who are not covered by a collective bargaining agreement.
All employees (including leased and control group) who fulfill eligibility
requirements, except for union employees covered under a collective
bargaining agreement, are eligible participants in the plan. Entry dates
for the plan are semi-annual.
CONTRIBUTIONS
One of the most important benefits of the plan is that the employer's
contributions are a tax-deductible business expense. This special tax
treatment makes it one of the few remaining tax shelters available.
All plan participants employed on the last day of the plan year will share
in the employer's contribution regardless of the hours worked during the
plan year. Terminated participants will share in the employer's
contribution only if they completed at least 501 hours of service during
the plan year in which they terminated.
Compensation is defined as an employee's total gross salary earned while
the employee was actually a plan participant. Rollover contributions are
allowed if the Employer wishes. Employee after-tax contributions are not
allowed under this plan document.
<PAGE> 5
CHOOSING YOUR PLAN
DISTRIBUTIONS
Terminated participants will receive their distribution on the 60th day of
the plan year following separation of service. If the value of the account
is more than $3,500 the participant must agree to take his or her money,
and the participant can choose lump sum or installment payments. If the
account value is $3,500 or less, the participant receives a lump sum
payment. Participants are always 100% vested.
Kemper Financial Services, Inc. will provide self-trusteed, variable
documents which allow you to vary the plan parameters. Please contact your
representative or Kemper Financial Services, Inc. at 1-800-621-5027.
QUESTIONS AND ANSWERS
Q. WHAT IS THE DEADLINE FOR ESTABLISHING A RETIREMENT PLAN?
A. The plan must be established on or before the last day of the taxable
year for which a deduction is to be taken.
Q. DOES "ESTABLISH" MEAN THERE MUST BE ASSETS IN THE PLAN?
A. Yes, at least $250 is required to open and establish the account in
the tax year. The balance of the contribution must comply with tax
deadlines.
Q. WHAT IS THE DEADLINE FOR MAKING CONTRIBUTIONS ONCE THE PLAN IS
ESTABLISHED?
A. Contributions for any year must be made before the latest possible
filing date for the Employer's federal income tax return for that
year, including extensions.
Q. SHOULD I BE BONDED?
A. Yes, Employers should be bonded if the plan covers employees other
than the owner(s) and the owner(s) spouse; the bond must cover at
least 10% of the plan's assets; the face value of the bond may not be
less than $1,000.
Q. WHAT IS MEANT BY "YEAR OF SERVICE" WHEN DETERMINING WHO IS ELIGIBLE
TO PARTICIPATE IN THE PLAN?
A. "Year of Service" for purposes of eligibility means 12 consecutive
months during which an employee completes at least 1,000 hours of
service. The 12-month period begins on the day an employee performs
his or her first hour of service.
Q. WHEN DOES AN EMPLOYEE PARTICIPATE ONCE ELIGIBILITY REQUIREMENTS ARE
MET?
A. The employee becomes a Participant on the first day of the Plan Year,
or the first day of the seventh month of the Plan Year, following
satisfaction of the eligibility requirement. For example, if the Plan
Year is a calendar year and an employee satisfies the eligibility
requirement on March 1, he or she will enter the plan on July 1.
Q. CAN THE EMPLOYEE CONTRIBUTE UNDER THIS PLAN?
A. Pre-tax employee salary reduction contributions may be allowed, but
only if you elect to include the 401(k) arrangement found in Article
XIII of the Profit Sharing Adoption Agreement. After-tax
contributions are not allowed.
Q. WHAT IS SOCIAL SECURITY INTEGRATION?
A. When your overall retirement plan scheme combines Social Security
with your private retirement plan, this is called integration.
Integration allows you to take advantage of the Social Security tax
payments you already make when designing your private retirement
plan's formula. The result favors the highly paid employees because
they receive a larger portion of the total contribution.
Contribution formulas and worksheets for self-employed participants
in integrated plans are available from Kemper Financial Services upon
request.
Q. WHAT IS THE COMPENSATION FOR A SOLE PROPRIETOR?
A. If you are a sole proprietor or your business is a partnership, you
must base contributions on earned income, which is defined as net
profits minus the amount you contributed to the plan. Your net
profits are shown on the Schedule C form for a sole proprietor, and
the schedule K-1 form for a partnership. Contributions for all other
employees are based on gross earnings actually paid for services
rendered.
<PAGE> 6
Q. WHAT DOES IT MEAN TO "AMEND AND RESTATE" A PLAN?
A. To amend and restate your plan means you have updated your plan in
its entirety by replacing the plan document with a new plan document.
This may be necessary if your existing plan document prohibits plan
investments with Kemper or because of changes in the laws governing
qualified retirement plans.
Many employers are now formally updating their plans to comply with
the Tax Reform Act of 1986. These amendments must be retroactive to
the first day of your 1987 plan year unless interim amendments were
adopted for the 1987 and 1988 plan years.
INVESTING YOUR PLAN ASSETS
One of the most important decisions you have to make is where to invest
your plan's assets. The better your plan's investment performance, the
easier it will be for you and your employees to retire in comfort. You'll
want to select investments with a broad range of objectives to meet the
diverse investment needs of your employees, and take great care in
choosing the company that will manage your plan's assets.
...WITH KEMPER
That's why many plans like yours invest their plan assets with Kemper.
Kemper Financial Services, Inc. has managed investments for over 40 years
and has more than $67 billion in assets under management. Kemper offers a
variety of investment products to fit almost every investment objective.
Kemper's mutual funds and annuities provide investments to suit the needs
of either the aggressive or the conservative investor. Employees can
select the investments that best match their specific needs and
requirements. Consider Kemper's experience and professional managers when
choosing the investments for your plan.
FUNDING THE PLAN
...WITH MUTUAL FUNDS
The Employer completes the Employer Contribution Schedule. Each eligible
employee completes an Employee Enrollment Form. All necessary forms and a
check made payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419356
Kansas City, MO 64141-6356
The IFTC Trustee fee is $12 per account, per participant, per year, with a
$24 maximum charge per participant.
...WITH ANNUITIES
A KILICO Enrollment Application is completed for each plan participant.
Please call Policyholder Services for the proper forms at 1-800-554-5426.
The check should be made payable to Kemper Investors Life Insurance
Company and mailed to:
Kemper Investors Life Insurance Company
P.O. Box 95963
Chicago, IL 60694
There are no trustee fees when using KILICO products.
<PAGE> 7
CHOOSING YOUR PLAN
...WITH UNIT INVESTMENT TRUSTS
For a Kemper Capital Markets enrollment kit, please call Kemper
Capital Markets at 1-800-621-5024. Applications and a check made
payable to IFTC should be sent to:
Investors Fiduciary Trust Company
Attn: Retirement Plans
P.O. Box 419430
Kansas City, MO 64141-6430
The IFTC Trustee fee is $12 per account, per participant, per year,
with a $24 maximum charge per participant.
To obtain additional prospectuses for any of the Kemper products,
containing more complete information including management fees and
expenses, please contact your representative or Kemper Financial Services,
Inc. at 1-800-621-5027. Please read the prospectus carefully before you
invest or send money.
GETTING STARTED
The next two sections, "Plan Installation Forms" and "Participant
Records," provide the necessary forms to complete the installation of
the plan. Please read the instructions at the beginning of each
section carefully before completing the applicable forms.
If you are a sole proprietor and do not have any covered employees,
complete the Adoption Agreement only.
The last section, "Plan Document," is provided for your reference
only.
<PAGE> 8
PLAN INSTALLATION FORMS
GETTING STARTED
COMPLETE THE FOLLOWING DOCUMENTS AND RETURN ORIGINALS TO THE APPROPRIATE
ADDRESS SHOWN UNDER THE PRECEDING SECTION ENTITLED "FUNDING THE PLAN."
REMEMBER TO RETAIN A PHOTOCOPY FOR YOUR RECORDS.
ADOPTION AGREEMENT
Complete the information requested ONLY for the particular type
of plan you've selected (either profit sharing, money purchase or a
combination).
ENROLLMENT FORM
Photocopy and complete an enrollment form for EACH eligible participant.
SUMMARY PLAN DESCRIPTION CARD
Complete this card ONLY if you have Employees.
ASSET TRANSFER FORM
Complete this form ONLY if there are existing plan assets.
<PAGE> 9
"LINE-BY-LINE" INSTRUCTIONS FOR COMPLETING YOUR ADOPTION AGREEMENT
- Specify the type of business entity adopting the plan by checking the
appropriate box.
- Enter the address of the business. This may be a home address if there is
no separate business address.
- Enter the Employer's Taxpayer Identification Number (TIN). If you do not
presently have a TIN for your business, you should apply for one using IRS
Form SS-4. Form SS-4 is available from Kemper Financial Services upon
request.
- Enter the name of the Employer on the blank line provided. If the
Employer is a sole proprietor who does not have a formal business name,
enter the name of the individual adopting the plan.
ARTICLE I
1.17 (A) In most situations the Plan Year End will be December 31, but if
the Employer operates on a fiscal year, then enter the
appropriate date.
(B) If item (b) is left blank, the Limitation Year will be the same
as the Plan Year.
1.18 (A) If this Adoption Agreement is used to establish a new plan,
rather than amend an older plan, check item l.18(a) and skip
item 1.18(b).
(B) Complete item 1.18(b) if this is a restatement of an older plan.
ARTICLE II
2.01 (A) Check (1) or (2) to define the minimum age requirement (if any)
that must be attained before an employee is eligible to
participate in the plan.
(B) Check (1), (2) or (3) to define the minimum service (if any)
that must be completed before an employee is eligible to
participate in the plan. The plan defines a Year of Service as a
12 consecutive month period in which the employee works 1,000
hours or more. The 12 consecutive month period begins on the
date the employee first performs an Hour of Service and each
anniversary thereof.
ARTICLE III
3.01 If this is a MONEY PURCHASE PENSION PLAN, indicate the base
contribution rate in the first blank. The base contribution rate
must equal or exceed 3%. If the plan will be integrated with
Social Security, enter the integration rate in the second blank
and complete the integration level section.
3.04 If this is a PROFIT SHARING PLAN and the contribution allocation
will be integrated with Social Security, complete the
integration level section 13.00. If this is a PROFIT SHARING
PLAN, check here if you wish to include employee salary deferral
contributions. If you do NOT want to allow employee salary
deferral contributions, skip this item and go directly to the
"Effective Date Addendum" of Article V.
ARTICLE XIII
13.00 If this is a Profit Sharing Plan, check here if you wish to
include employee salary deferral contributions. If you do not
want to allow employee salary deferral contributions, skip this
item and go directly to the "Effective Date Addendum."
13.05 Enter a date, which is no later than April 15th, by which a
participant must notify you if he or she has exceeded the dollar
limit for employee salary deferral contributions. For
administrative ease, March 1 is recommended.
13.08(A) Leave blank and skip to item 13.09 if the Employer will not make
regular matching contributions to the plan. Check 13.08(a) if
the Employer intends to match the salary deferral contributions
of ALL participants.
(B) Check 13.08(b) if Highly Compensated Employees will not receive
the Employer's regular matching contribution.
(C) Enter the amount of the Employer's matching contribution on the
line provided. Note that the employer is REQUIRED to make this
matching contribution each year.
(D) If 13.08(d) is left blank, all of a participant's salary
deferral contributions will be matched by the Employer.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible for
the matching contribution.
13.09(A) Leave blank and skip to item 13.12 if the Employer will not make
Qualified Matching Contributions to the Plan.
Check 13.09(a) if the Employer intends to contribute Qualified
Matching Contributions for ALL participants.
<PAGE> 10
PLAN INSTALLATION FORMS
(B) Check 13.09 (b) if Highly Compensated Employees will not
receive the Qualified Matching Contribution.
(C) Enter the amount of the Employer's Qualified Matching
Contribution on the line provided. Note that the employer is
REQUIRED to make this Qualified Matching Contribution each
year.
(D) If (d) is left blank, all of a participant's salary deferral
contributions will be eligible for the qualified matching
contribution.
Enter a dollar amount and/or percentage on the blank lines
provided to limit the salary deferral contributions eligible
for the Qualified Matching Contribution.
13.12(A) Check 13.12 (a) if the Employer intends to contribute Qualified
Nonelective Contributions for ALL participants.
(B) Check 13.12 (b) if Highly Compensated Employees will not
receive Qualified Nonelective Contributions.
(C) If (c) is checked, a participant's share of the qualified
nonelective contribution will be based on the participant's
total compensation.
(D) If (d) is checked, only compensation up to the stated dollar
amount will be used to calculate a participant's share of the
qualified nonelective contribution.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
(A)(1) Check (1) and enter a percentage on the line provided if
you wish to establish a maximum deferral percentage.
(2) Check (2) and enter a percentage on the line provided if
you wish to establish a minimum deferral percentage.
(3) Check (3) if no restrictions are imposed on a participant's
salary reduction contributions.
(B) Check (1), (2), (3) OR (4) to restrict when a participant
may stop their salary deferral contributions.
(C) Check (1), (2), (3) OR (4) to indicate when a participant
may resume making salary deferral contributions.
(D) Check (1), (2), (3) OR (4) to indicate how frequently a
participant may change the amount of his or her salary
deferral contributions.
ARTICLE V
EFFECTIVE DATE ADDENDUM
If you are restating an older plan, complete only if the
effective date of the restatement is before January 1,1989
AND these specific provisions have changed as a result of
the restatement. If a provision listed below has changed, the
date on which that provision begins to apply may be later
than your restated effective date if you check the applicable
box. Indicate the later effective date by inserting a date
on the line provided.
If this is a NEW PLAN, skip the Effective Date Addendum and go
directly to "Participation Agreement."
PARTICIPATION AGREEMENT
If the Employer has an ownership interest in another business
which results in a controlled group of businesses as defined
by the Internal Revenue Code, then each related business must
sign the Participation Agreement as a Participating Employer.
The "Signatory Employer" is the Employer who also signs the
Execution Page of the adoption agreement.
If the employer sponsoring this plan has no ownership interest
in any other business, skip the Participation Agreement and go
directly to "Execution Page."
EXECUTION PAGE
The Employer should sign and date the appropriate Adoption
Agreement. The signature of the sole proprietor, general
partner or corporate officer belongs on the line above
"Employer." Whoever witnesses the Employer's signature should
sign on the line beside "Attest."
The Dealer/Agent should complete the dealer information section.
<PAGE> 11
ADOPTION AGREEMENT #001
STANDARDIZED PROFIT SHARING/401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:
________________________________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN):________________________
THE EMPLOYER HEREBY ESTABLISHES THE ____________________________________________
Name of Employer
PROFIT SHARING PLAN in accordance with all the terms of the KEMPER RETIREMENT
PLAN PROTOTYPE KEOGH/CORPORATE AND TRUST AGREEMENT attached hereto, which the
Employer has received, read, accepts and hereby incorporates into this
STANDARDIZED PROFIT SHARING/401(K) PLAN ADOPTION AGREEMENT #001 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending ________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: ________.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The Effective Date of the Plan is the first day of the
Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This Plan
is a substitution and amendment of an existing retirement plan
originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan,
an Employee must satisfy the following eligibility conditions:
(A) Age requirement. (Choose one)
/ / (1) Age __________ (specify age, not exceeding 21).
/ / (2) No age requirement.
(B) Service requirement. (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service without an intervening Break
in Service. See Section 2.03(a) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date (if
employed on that date) coincident with or immediately following the
date the Employee completes the eligibility conditions described in
Options (a) and (b) of this Adoption Agreement Section 2.01.
<PAGE> 12
PLAN INSTALLATION FORMS
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The amount of the Employer's annual contribution to the Trust will
equal the amount (or additional amount) the Employer may from time to
time deem advisable, irrespective of whether the Employer has Net
Profits.
3.04 CONTRIBUTION ALLOCATION
Profit Sharing plan - Employer contributions for the plan year will
be allocated to participants' accounts as follows: [NOTE: IF THE
EMPLOYER WILL NOT BE INTEGRATING THE PLAN WITH SOCIAL SECURITY OR
ADOPTING THE PAIRED MONEY PURCHASE PENSION PLAN #002, SKIP STEPS ONE,
TWO AND THREE BELOW AND GO DIRECTLY TO STEP FOUR.]
STEP ONE: Contributions will be allocated to each participant's
account in the ratio that each participant's total compensation bears
to all participants' total compensation, but not in excess of 3% of
each participant's total compensation.
STEP TWO: Any contributions remaining after the allocation in Step
One will be allocated to each participant's account in the ratio
that each participant's compensation for the plan year in excess of
the integration level bears to the excess compensation of all
participants, but not in excess of 3%.
STEP THREE: Any contributions remaining after the allocation in Step
Two will be allocated to each participant's account in the ratio that
the sum of each participant's total compensation plus excess
compensation bears to the sum of all participant's total compensation
plus total excess compensation, but not in excess of the
profit-sharing maximum disparity rate.
STEP FOUR: Any remaining employer contributions or forfeitures will
be allocated to each participant's account in the ratio that each
participant's total compensation for the plan year bears to all
participants' total compensation for that year.
The integration level shall be equal to the amount elected by the
employer in the Adoption Agreement. The taxable wage base (TWB) is
the maximum amount of earnings which may be considered wages for a
year under Section 3121(a)(1) of the Code in effect as of the
beginning of the plan year.
Compensation shall mean compensation as defined in Section 1.12 of
the plan.
The integration level is equal to (Choose one):
/ / Taxable Wage Base (TWB)
/ / $_______ (a dollar amount less than the TWB)
/ / ________ % of TWB (not to exceed 100%)
The maximum Profit Sharing disparity rate is equal to the lesser of:
(a) 2.7% or
(b) the applicable percentage determined in accordance with the
table below:
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN: BUT NOT MORE THAN: THE APPLICABLE PERCENTAGE IS:
- ------------------------ ------------------ -----------------------------
<S> <C> <C>
$0 X(*) 2.7%
X(*) of TWB 80% of TWB 1.3%
80% of TWB Y(**) of TWB 2.4%
</TABLE>
* X = the greater of $10,000 or 20% of the TWB.
**Y = any amount more than 80% of the TWB but less than 100% of the TWB.
If the integration level used is equal to the TWB, the applicable
percentage is 2.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
________________________________________________________________
________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
employer discretion.)
<PAGE> 13
ARTICLE XIII
401(k) ARRANGEMENT
13.00 / / CHECK THIS BOX IF THIS PLAN IS A 401(k) PLAN AND COMPLETE THE
FOLLOWING:
13.01 ELIGIBILITY
If the service requirement elected by the Employer at Section 2.01 of
this Adoption Agreement is two (2) years, an Employee's eligibility
to make elective deferrals will be determined as if the service
requirement at Section 2.01 were one (1) year.
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
Participants who claim Excess Elective Deferrals for the preceding
taxable year must submit their claims in writing to the plan
administrator by ___________________________________________________.
Specify a date no later than April 15
13.06 ACTUAL DEFERRAL PERCENTAGE TEST
Qualified Matching Contributions and Qualified Nonelective
Contributions may be taken into account as Elective Deferrals for
purposes of calculating the Actual Deferral Percentages. In
determining Elective Deferrals for the purpose of the ADP test, the
employer shall include Qualified Matching Contributions and Qualified
Nonelective Contributions under this plan or any other plan of the
employer, as provided by regulations under the Code.
The amount of Qualified Matching Contributions taken into account as
Elective Deferrals for purposes of calculating the Actual Deferral
Percentage, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Matching Contributions.
The amount of Qualified Nonelective Contributions taken into account
as Elective Deferrals for purposes of calculating the Actual Deferral
Percentages, subject to such other requirements as may be prescribed
by the Secretary of the Treasury, shall be all such Qualified
Nonelective Contributions.
13.08 MATCHING CONTRIBUTIONS
The employer will make Matching Contributions to the plan on behalf
of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Matching Contribution account an amount equal
to [______] percent of the participant's Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$______], or in excess of [______] percent, of
the participant's Compensation.
13.09 QUALIFIED MATCHING CONTRIBUTIONS
The Employer will make Qualified Matching Contributions to the plan
on behalf of [ELECT (a) or (b) plus (c) and/or (d)]:
/ / (A) All participants.
/ / (B) All participants who are Non Highly Compensated Employees
who make Elective Deferrals to the plan.
/ / (C) The Employer shall contribute and allocate to each
participant's Qualified Matching Contribution account an
amount equal to [_____] percent of the participant's
Elective Deferrals.
/ / (D) The Employer shall not match amounts provided above in
excess of [$________], or in excess of [_______] percent, of
the participant's Compensation.
<PAGE> 14
PLAN INSTALLATION FORMS
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS
In computing the Average Contribution Percentage, the Employer shall
take into account, and include as Contribution Percentage Amounts
Elective Deferrals and Qualified Nonelective Contributions under this
plan or any other plan of the Employer, as provided by regulations.
The amount of Qualified Nonelective Contributions that are taken into
account as Contribution Percentage Amounts for purposes of
calculating the Average Contribution Percentage, subject to such
other requirements as may be prescribed by the Secretary of the
Treasury, shall be an amount determined by the Employer.
The amount of Elective Deferrals taken into account as Contribution
Percentage Amounts for purposes of calculating the Average
Contribution Percentage, subject to such other requirements as may be
prescribed by the Secretary of the Treasury, shall be an amount
determined by the Employer.
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer will make Qualified Nonelective Contributions to the
plan. If the Employer does make such contributions to the plan, then
the amount of such contributions for each Plan Year shall be an
amount determined by the Employer.
Allocation of Qualified Nonelective Contributions shall be made to
the accounts of [ELECT ONE]:
/ / (A) All participants
/ / (B) Only Nonhighly Compensated participants
Allocation of Qualified Nonelective Contributions shall be made
[ELECT ONE]:
/ / (C) In the ratio that each participant's Compensation for the
Plan Year bears to the total Compensation of all
participants for such Plan Year.
/ / (D) In the ratio that each participant's Compensation not in
excess of [$______] for the Plan Year bears to the total
Compensation of all participants not in excess of [$______]
for such Plan Year.
SPECIAL RULES FOR SALARY REDUCTION AGREEMENTS
The following rules and restrictions apply to an Employee's salary
reduction agreement:
(A) Limitation on Amount. The Employee's salary reduction
contributions: (Choose at least one)
/ / (1) May not exceed _________% of Compensation for the
Plan Year, subject to the annual additions
limitation described in Part 2 of Article III of
the Plan.
/ / (2) Based on percentages of Compensation must equal at
least _________% of Compensation for the
reduction period.
/ / (3) No maximum limitation other than the annual
additions limitation.
(B) An Employee may revoke, on a prospective basis, a salary
reduction agreement: (Choose one)
/ / (1) Once during any Plan Year but not later than _________
of the Plan Year.
/ / (2) As of any Plan Entry Date.
/ / (3) As of the first day of any month.
/ / (4) Other (specify, but must be at least once per Plan
Year).
(C) An Employee who revokes his or her salary reduction agreement
may file a new salary reduction agreement with an effective
date: (Choose one):
/ / (1) No earlier than the first day of the next Plan Year.
/ / (2) As of any subsequent Plan Entry Date.
/ / (3) As of the first day of any month subsequent to the
month in which he or she revoked an Agreement.
/ / (4) Other (specify, but must be at least once per Plan
Year following the Plan Year of revocation).
(D) A Participant may increase or may decrease, on a prospective
basis, his salary reduction percentage or dollar amount:
/ / (1) As of the beginning of each payroll period.
/ / (2) As of the first day of each month.
/ / (3) As of any Plan Entry Date.
/ / (4) Other (specify, but must permit an increase or a
decrease at least once per Plan Year).
<PAGE> 15
ARTICLE V
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated
Effective Date specified in Adoption Agreement Section 1.18 is
earlier than January 1,1989, and if a different restated effective
date applies to at least one of the provisions listed in this
addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES
In lieu of the restated Effective Date in Adoption Agreement Section
1.18, the following Special Effective Dates apply:
(Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION
The Compensation definition of Section 1.12 (other than
the $200,000 limitation) is effective for Plan Years
beginning after ______. [Note: May not be effective
later than the first day of the first Plan Year beginning
after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS
The eligibility conditions specified in Adoption Agreement
Section 2.01 are effective for Plan Years beginning after
December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA
The contribution formula elected under Adoption Agreement
Section 3.01 is effective for Plan Years beginning after
December 31, 1988.
/ / (D) ELIMINATION OF NET PROFITS
The requirement for the Employer not to have net profits
to contribute to this Plan is effective for Plan Years
beginning after __________________. [Note: The date
specified may not be earlier than December 31, 1985.]
For Plan Years prior to the Special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will
control for purposes of the designated provisions.
<PAGE> 16
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the
____________________________________________________________________
Name of Employer
PROFIT SHARING PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the
Plan as made by ________________, the Signatory Employer to the
Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: _________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) the adoption of a new plan by the Employer.
/ / (B) the adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
_________________________________________________________________
and having an original effective date of __________________________.
Dated this ______ day of _______ ,19__.
Attest:__________________________ By: ___________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted:________________________ By:____________________________
Date Signatory Employer
Accepted:________________________ Investors Fiduciary Trust Company
Date
By:____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 17
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer by its
duly authorized officers, has executed this Adoption Agreement on this _______
day of _________,19__.
Attest:______________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:____________________________ By:__________________________________
Date Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Pension Plan with this Paired Profit Sharing Plan, identified
by 3-digit Adoption Agreement number: 002. This Adoption Agreement may be used
only in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Pension Plan, it may rely on the Plan Sponsor's
opinion letter covering this Plan for purposes of plan qualification. For this
purpose, the Employer has not maintained another plan if this Plan, or the
Paired Pension Plan, amended and restated that prior plan and the prior plan
was the same type of plan as the restated plan. If the Employer maintains or
has maintained another plan other than a Paired Pension Plan, including a
welfare benefit fund, as defined in Code Section 419(e), which provides post-
retirement medical benefits for key employees (as defined in Code Section
419A(d)(3)), or an individual medical account (as defined in Code Section
415(1)(2)), the Employer may not rely on this Plan's qualified status unless
it obtains a determination letter from the applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 18
PLAN INSTALLATION FORMS
ADOPTION AGREEMENT #002
STANDARDIZED MONEY PURCHASE PENSION PLAN
(PAIRED PENSION PLAN)
THE EMPLOYER IS A:
/ / sole proprietorship
/ / partnership
/ / corporation
EMPLOYER'S ADDRESS:____________________________________________________________
Street Address City State Zip Code
EMPLOYER'S FEDERAL TAXPAYER IDENTIFICATION NUMBER (TIN): ______________________
THE EMPLOYER HEREBY ESTABLISHES THE ___________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN in accordance with all the terms of the KEMPER
RETIREMENT PLAN PROTOTYPE KEOGH/CORPORATE and TRUST AGREEMENT attached hereto,
which the Employer has received, read, accepts and hereby incorporates into
this STANDARDIZED MONEY PURCHASE PENSION PLAN ADOPTION AGREEMENT #002 with the
following additional terms and conditions:
ARTICLE I
DEFINITIONS
1.17 PLAN YEAR/LIMITATION YEAR
/ / (A) Plan Year means the 12 consecutive month period ending
every __________.
/ / (B) The Limitation Year is the Plan Year unless the following month
is designated as the last month of the limitation year: _______.
1.18 EFFECTIVE DATE (CHOOSE ONE)
/ / (A) NEW PLAN. The "Effective Date" of the Plan is the first day of
the Plan Year in which the Plan is adopted.
/ / (B) RESTATED PLAN. The restated Effective Date is _________. This
Plan is a substitution and amendment of an existing retirement
plan originally established _____________. [Note: If the restated
Effective Date is earlier than January 1, 1989, see the Effective
Date Addendum immediately preceding the Participation
Agreement.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an
Employee must satisfy the following eligibility conditions:
/ / (A) Age requirement: (Choose one)
/ / (1) Age ______ (specify age, not exceeding 21).
/ / (2) No age requirement.
/ / (B) Service Requirement: (Choose one)
/ / (1) One Year of Service.
/ / (2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
/ / (3) No service requirement.
ENTRY DATE. Any Employee other than a Member of a Collective
Bargaining Unit will become a Participant on the Plan Entry Date
(if employed on that date) coincident with or immediately
following the date the Employee completes the eligibility
conditions described in Options (a) and (b) of this Adoption
Agreement Section 2.01.
<PAGE> 19
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT
The Employer will contribute for each participant who either
completes more than 500 hours of service during the Plan Year, or is
employed by the Employer on the last day of the Plan Year, an amount
equal to ______% (base contribution percentage, not less than 3%) of
each Participant's Compensation (as defined in Section 1.12 of the
Plan) for the Plan Year, plus _________% (not to exceed the base
contribution percentage by more than the lesser of: (1) the base
contribution percentage, or (2) the maximum disparity rate of such
Participant's Compensation in excess of the integration level.
NOTE: IF THE EMPLOYER ALSO MAINTAINS PAIRED PROFIT SHARING PLAN
#001, ONLY ONE OF THE PLANS MAY BE INTEGRATED.
The integration level shall be equal to the amount elected by the
Employer. The taxable wage base is the maximum amount of earnings
which may be considered wages for a year under Section 3121(a)(1) of
the Code in effect as of the beginning of the Plan Year.
The integration level is equal to: (Choose one)
/ / Taxable Wage Base (TWB)
/ / $_________ (a dollar amount less than the taxable wage base)
/ / __________ % of TWB (not to exceed 100%)
The maximum disparity rate is equal to the lesser of:
(A) 5.7%
(B) the applicable percentage determined in accordance with the
table below.
<TABLE>
<CAPTION>
IF THE INTEGRATION LEVEL:
IS MORE THAN BUT NOT MORE THAN THE APPLICABLE PERCENTAGE IS
- ------------------------- ----------------- ----------------------------
<S> <C> <C>
$0 X(*) 5.7%
X(*) of TWB 80% of TWB 4.3%
80% of TWB Y(**) 5.4%
(*) X = the greater of $10,000 or 20% of the TWB.
(**) Y = any more than 80% of the TWB but less than 100% of the TWB.
</TABLE>
If the integration level is equal to taxable wage base the
applicable percentage is 5.7%.
3.17 DEFINED BENEFIT PLAN LIMITATION
If a Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer:
______________________________________________________________________
______________________________________________________________________
(In the space above, provide language which will satisfy the 1.0
limitation under Code Section 415(e). Such language must preclude
Employer discretion.)
EFFECTIVE DATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is earlier than January 1, 1989,
and a different restated effective date applies to at least one of the
provisions listed in this addendum.
IDENTIFICATION OF SPECIAL EFFECTIVE DATES. In lieu of the restated Effective
Date in Adoption Agreement Section 1.18, the following Special Effective Dates
apply: (Choose whichever elections apply)
/ / (A) COMPENSATION DEFINITION. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan
Years beginning after ____________. [Note: May not be effective
later than the first day of the first Plan Year beginning after
the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986.]
/ / (B) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years
beginning after December 31, 1988.
/ / (C) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula
elected under Adoption Agreement Section 3.01 is effective for
Plan Years beginning after December 31, 1988.
For Plan Years prior to the Special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions.
<PAGE> 20
PLAN INSTALLATION FORMS
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the
_______________________________________________________________________________
Name of Employer
MONEY PURCHASE PENSION PLAN as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and agrees to be bound
by, all of the elections granted under the provisions of the Plan as made
by _________, the Signatory Employer to the Execution Page of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: ___________________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
/ / (A) The adoption of a new plan by the Employer.
/ / (B) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
______________________________________________________________________
and having an original effective date of ___________. Dated this ____
day of ______________, 19__.
Attest: ________________________ By: ______________________________
Participating Employer
ACCEPTANCE BY THE SIGNATORY EMPLOYER TO THE EXECUTION PAGE OF THE
ADOPTION AGREEMENT AND BY THE TRUSTEE.
Accepted: ______________________ By: _____________________________
Date Signatory Employer
Accepted: ______________________ Investors Fiduciary Trust Company
Date
BY: _____________________________
Authorized Signature
EACH PARTICIPATING EMPLOYER MUST COMPLETE A SEPARATE PARTICIPATION AGREEMENT.
TURN THE PAGE FOR IMPORTANT PLAN INFORMATION.
<PAGE> 21
EXECUTION PAGE
The Trustee, by executing this Adoption Agreement, accepts its position and
agrees to all of the obligations, responsibilities and duties imposed upon the
Trustee under this Plan and Trust. The Employer hereby agrees to the provisions
of this Plan and Trust, and in witness of its agreement, the Employer, by its
duly authorized officers, has executed this Adoption Agreement on this
__________ day of _______, 19__.
Attest:________________________________ By:__________________________________
Employer
Investors Fiduciary Trust Company
Accepted:______________________________ By:__________________________________
Authorized Signature
USE OF ADOPTION AGREEMENT
Failure to properly complete the elections in this Adoption Agreement may
result in disqualification of the Employer's Plan. The 3-digit number assigned
to this Adoption Agreement is solely for the Plan Sponsor's record keeping
purposes and does not necessarily correspond to the plan number the Employer
assigns to its Plan for ERISA reporting purposes. The Plan Sponsor offers the
following Paired Profit Sharing Plan with this Paired Pension Plan, identified
by 3-digit Adoption Agreement number 001. This Adoption Agreement may be only
used in conjunction with Basic Plan Document 01.
PLAN SPONSOR
The Plan Sponsor identified on the first page of the basic plan document will
notify all adopting Employers of any amendment to this Plan or of any
abandonment or discontinuance by the Plan Sponsor of its maintenance of this
Plan. For inquiries regarding the adoption of the Plan, the Plan Sponsor's
intended meaning of any plan provisions or the effect of the opinion letter
issued to the Plan Sponsor, please contact the Plan Sponsor at the following
address and telephone number: Kemper Financial Services, Inc., 120 South LaSalle
Street, Chicago, Illinois 60603, 1-800-621-1148.
RELIANCE ON OPINION LETTER
If the Employer does not maintain (and has never maintained) any plan other
than this Plan and a Paired Profit Sharing Plan, it may rely on the Plan
Sponsor's opinion letter covering this Plan for purposes of plan qualification.
For this purpose, the Employer has not maintained another plan if this Plan, or
the Paired Profit Sharing Plan, amended and restated that prior plan and the
prior plan was the same type of plan as the restated plan. If the Employer
maintains or later adopts or has maintained another plan other than a Paired
Profit Sharing Plan, including a welfare benefit fund, as defined in Code
Section 419(e), which provides post-retirement medical benefits for key
employees (as defined in Code Section 419A(d)(3)), or an individual medical
account (as defined in Code Section 415(1)(2)), the Employer may not rely on
this Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
==============================================================================
FOR DEALER USE ONLY
______________________________________________________________________________
Name or Number of Dealer Address
______________________________________________________________________________
Name or Number of Dealer's Representative
______________________________________________________________________________
Representative's Phone Number
______________________________________________________________________________
Location of Dealer Office in Which Plan Opened
______________________________________________________________________________
Authorized Signature of Dealer Date
<PAGE> 22
PLAN INSTALLATION FORMS
EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS
INSTRUCTIONS:
1. Complete this form for each participant.
2. Enclose a check for the sum of all contributions made payable to
Investors Fiduciary Trust Company.
3. Deliver a prospectus(es) to each participant. (Participants should be
provided with a prospectus for each fund in which they are invested.)
Note: If you are enrolling more than five participants or if you are
enrolling participants for a 401(k) plan, you should use the KemFlex
Employer Master Account Application (Form-07) and a separate KemFlex
Employee Enrollment Form (Form-36) for each employee.
PARTICIPANT INFORMATION
______________________________________________________________________________
Name of Plan Date
______________________________________________________________________________
Participant Name
______________________________________________________________________________
Participant Social Security Number Participant Birthday
______________________________________________________________________________
Statement Mailing Address
______________________________________________________________________________
City State Zip Code
INVESTMENT SELECTION
FUND NAME AMOUNT
$
_______________________________________ ______________________
_______________________________________ ______________________
_______________________________________ ______________________
TOTAL $
______________________
THIS FORM SHOULD BE USED ONLY FOR MUTUAL FUND PURCHASES. TO FUND WITH
ANNUITIES, CALL KILICO CUSTOMER SERVICE AT 1-800-554-5426 AND REQUEST FORM
L-1004 (FORM L-1005 FOR 401(k) PLANS). TO FUND WITH UNIT INVESTMENT TRUSTS
CONTACT UIT CUSTOMER SERVICE AT 1-800-422-2848 AND REQUEST A UIT RETIREMENT
PLAN APPLICATION.
<PAGE> 23
PLAN INSTALLATION FORMS
ASSET TRANSFER FORM
INSTRUCTIONS:
This form is provided for your use in substituting the Kemper Red Book
Keogh Retirement Plan Prototype for your present qualified defined
contribution (profit sharing or money purchase pension plan).
1. Consult with your attorney or other tax advisor as to the
consequences of such an amendment.
2. Contact the present custodian bank, trustee or insurance company to
determine their requirements with respect to such transfer of assets.
3. Fill out the appropriate Kemper Red Book Keogh Retirement Plan
Prototype Adoption Agreement and Employee Enrollment Form for Mutual
Funds. Attach this Statement to it, and submit them to Investors
Fiduciary Trust Company, P.O. Box 419356, Kansas City, MO 64141-6356.
4. This statement and a letter of acceptance will be sent to the former
custodian, trustee or insurance company by IFTC. This statement
should suffice as instruction with respect to transmitting the funds
to Investors Fiduciary Trust Company, but the present custodian,
trustee, or insurance company may ask you to use its own form or
instructions, or impose additional requirements.
5. Indicate the total amount transferred on behalf of each participant
in the "Total Account Balance" column opposite the name of each
participant.
We hope this information will be useful to you; if you have any questions,
call Kemper's Sales Support Department at 1-800-621-5027.
To:____________________________________________________________________________
Current Custodian, Trustee or Insurance Company
_______________________________________________________________________________
Street Address
_______________________________________________________________________________
City State Zip Code
The undersigned Employer previously established a qualified retirement plan on
____________, 19____ described as:
_______________________________________________________________________________
Indicate Plan Name - for example, ABC, Inc. Profit Sharing Plan
The undersigned Employer has amended and restated the plan and named Investors
Fiduciary Trust Company as a trustee of the Plan effective ___________, 19____.
The undersigned employer hereby directs the above named custodian bank, trustee
or insurance company now holding assets of the Plan to liquidate all said
assets and transfer the proceeds directly to Investors Fiduciary Trust Company,
P.O. Box 419356, Kansas City, MO 64141-6356, as trustee of the Plan, as amended
and restated.
The following is an accurate description of the allocations of Plan assets. If
you are transferring any voluntary contributions, please notify us of each
account balance.
Participant Total Account Balance
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
_______________________________________ _____________________________________
Employer's Signature Date
AFTER MAKING A COPY FOR YOUR RECORDS, ATTACH THIS FORM TO THE ADOPTION
AGREEMENT AND THE EMPLOYEE ENROLLMENT FORM FOR MUTUAL FUNDS (PREVIOUS PAGE).
MAIL ALL FORMS TO INVESTORS FIDUCIARY TRUST COMPANY, P.O. BOX 419356,
KANSAS CITY, MO 64141-6356.
<PAGE> 24
PARTICIPANT RECORDS
PARTICIPANT RECORDS
The following forms allow you to complete the administrative details
that are required of you as a plan sponsor. After they have been distributed to
and completed by your employees, they should be kept on record in your
files and should NOT be returned to Kemper.
NOTICE TO INTERESTED PARTIES
If you have employees, this notice should be posted
with other labor relations information bulletins.
BENEFICIARY FORMS
Photocopy and distribute to EACH participant.
Collect and file with other plan records.
PRE-RETIREMENT NOTICE AND WAIVER
Distribute to each affected participant (see instructions).
Collect and file Waiver.
DISTRIBUTION ELECTION FORM
Photocopy and distribute ONLY to employees terminating employment.
Collect and file with other plan records.
<PAGE> 25
NOTICE TO INTERESTED PARTIES
1. Notice To: All Employees of ______________________________________________
Name of Employer
2. _______________________________ has ______________________________________
Name of Employer Adopted/Amended
the plan described below on ______________________________________________
Date
3. Name of Plan _____________________________________________________________
4. 3-Digit Plan Identification Number _______________________________________
5. Opinion Letter Number
/ / PS-D257426a
/ / MP-D257427a
6. Sponsor: Kemper Growth Fund, Inc., 120 South LaSalle Street, Chicago, IL
60603
7. Employer's TIN __________________________________________________________
8. Address of Employer _____________________________________________________
_________________________________________________________________________
9. Address of Key Director having jurisdiction of plan _____________________
_________________________________________________________________________
10. It ____________________ contemplated that the Plan will be submitted to
is/is not
the Internal Revenue Service for an advance determination as to whether
or not it meets the qualification requirements of section 401 of the
Internal Revenue Code with respect to its _______________________________
_________________________________________________________________________
Initial Qualification/Amendment
11. All Employees who have completed ___ Years of Service and attained age ___
are eligible to participate.
12. The IRS _________________ previously issued a determination letter with
has/has not
respect to the qualification of this Plan.
13. You have the right to submit to the Key District Director, at the above
address, either individually or jointly with other interested parties,
your comments as to whether this Plan meets the qualification requirements
of the Internal Revenue Code. You may instead, individually or jointly
with other interested parties, request the Department of Labor to submit,
on your behalf, comments to the Key District Director regarding
qualification of the Plan. If the Department declines to comment on all or
some of the matters you raise, you may, individually, or jointly if your
request was made to the Department jointly, submit your comments on these
matters to the Key District Director.
<PAGE> 26
PARTICIPANT RECORDS
14. The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 Employees or 10 percent of
the Employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this Plan is ______.
If you request the Department to comment, your comment must in writing and
must specify the matters upon which comments are requested, and must also
include: (1) the information contained in items 2 through 9 of this
Notice; and (2) the number of persons needed for the Department to
comment. A request to the Department to comment should be addressed as
follows: Administrator of Pension and Welfare Benefit Programs, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, DC 20216,
Attn: 3001 Comment Request.
15. Comments submitted by you to the Key District Director must be in writing
and received by him by
_________________________________________________________________________
75 days after adoption date
However, if there are matters that you request the Department of Labor to
comment upon on your behalf, and the Department declines, you may submit
comments on these matters to the Key District Director to be received by
him within 15 days from the time the Department notifies you that it will
not comment on a particular matter, or by ___________________________,
75 days after adoption date
whichever is later, but in no event later than ___________________________.
90 days after adoption date
A request to the Department to comment on your behalf must be received by
it by ___________________________ if you wish to preserve your right to
45 days after adoption date
comment on a matter upon which the Department declines to comment, or by
_____________________________ if you wish to waive that right.
55 days after adoption date
16. Detailed instructions regarding the requirements for notification of
interested parties may be found in Sections 16, 17, and 18 of Revenue
Procedure 92-6. Additional information concerning this __________________
adoption/amendment
(including where applicable, an updated copy of the Plan and related Trust
Agreement, a copy of the Adoption Agreement establishing the Plan, and
copies of Section 16 of Revenue Procedure 92-6) is available during the
hours of __________ for inspection and copying. (There is a nominal charge
for copying and mailing.)
<PAGE> 27
DESIGNATION OF BENEFICIARY
ALL PARTICIPANTS MUST COMPLETE. RETURN TO YOUR EMPLOYER.
_______________________________________________________________________________
Name of Plan Date
_______________________________________________________________________________
Last Name First Name MI
_______________________________________________________________________________
Social Security Number
_______________________________________________________________________________
Date of Birth (month, day, year) Sex
I hereby designate the person(s) named below as the beneficiary of my vested
account(s) payable under the Plan by reason of my death. I UNDERSTAND THAT IF I
DESIGNATE ANYONE OTHER THAN MY SPOUSE AS THE SOLE BENEFICIARY, THE SPOUSAL
CONSENT PORTION OF THIS FORM MUST BE SIGNED IN THE PRESENCE OF A NOTARY PUBLIC
OR A REPRESENTATIVE OF THE PLAN.
_______________________________________________________________________________
Name of Beneficiary (Full given name)
_______________________________________________________________________________
Relation to Participant
_______________________________________________________________________________
Address (if different from Participant)
If more than one person is named as beneficiary, any payments to which they may
be entitled will be paid in equal shares to such of the designated persons as
shall then be living; or if none, then pursuant to the terms of Section 8.02 of
the Plan.
I RESERVE THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION. I HEREBY
REVOKE ALL PRIOR DESIGNATIONS (IF ANY) OF PRIMARY BENEFICIARIES AND CONTINGENT
BENEFICIARIES.
____________________________________ ____________________________
Date of this Designation Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named in the foregoing
"Designation of Beneficiary," hereby consent to and accept the beneficiary
designation, without regard to whether I survive or predecease my spouse. I
understand this consent allows the beneficiary(ies) named above to be paid
amounts which would otherwise be paid to me. This consent is irrevocable unless
my spouse changes the designation. If my spouse changes the designation I
understand I must file a similar consent to the new designation, or my consent
is no longer effective.
___________________________________ ____________________________________
Date Signature of Spouse
___________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 28
PARTICIPANT RECORDS
PRE-RETIREMENT SURVIVOR ANNUITY MEMORANDUM
INSTRUCTIONS:
This memorandum must be provided to married money purchase pension plan and
certain profit sharing plan participants unless their spouse is the beneficiary
of at least 50% of the participant's account balance. A participant should
receive this memorandum during the Plan Year in which they turn age 32. They
will have the right to waive it, with spousal consent, during the Plan Year in
which the participant turns age 35. A married participant age 35 or older
should immediately be given this memorandum and the Waiver of Pre-retirement
Survivor Annuity form.
________________________________________________________________________ Plan
Name of Employer
PRE-RETIREMENT SURVIVOR ANNUITY. The Plan requires the Employer to distribute a
pre-retirement survivor annuity to your surviving spouse if your death occurs
before distributions have begun and you and your spouse are married during the
one year period ending on the date of your death.
Under the pre-retirement survivor annuity, your spouse will receive lifetime
monthly annuity payments. The Employer will purchase the annuity contract from
an insurance company using 50% of your vested account balance (including the
proceeds, if any, of life insurance contracts purchased on your behalf under
the Plan). The contract will be given to your surviving spouse as evidence of a
right to receive the annuity payments from the insurance company. Generally,
the Employer may not begin payment of the annuity prior to the date a
participant would have reached age 65 without the surviving spouse's consent.
However, the surviving spouse may elect to have distribution of the
pre-retirement survivor annuity at any time following the participant's death.
If, at the time of your death, 50% of your account balance is less than
$3,500, the Employer will pay your spouse a lump sum payment instead of the
annuity.
WAIVER ELECTION. The Plan requires payment of the pre-retirement survivor
annuity unless you have a valid waiver election in effect on the date of your
death. To have a valid waiver you and your spouse must complete the waiver
election form. YOUR WAIVER ELECTION IS NOT VALID UNLESS YOUR SPOUSE, DURING THE
ELECTION PERIOD, ALSO CONSENTS IN WRITING TO YOUR BENEFICIARY DESIGNATION,
UNLESS YOUR SPOUSE IS THE SOLE PRIMARY BENEFICIARY. Your waiver election is not
valid unless you and your spouse make the election within the election period.
The election period begins on the first day of the Plan Year immediately before
your 35th birthday or, if later, the date you receive this notice. The election
period ends on the date of your death. If you wish, you may waive the
pre-retirement survivor annuity prior to the beginning of the election period.
However, on the first day of the election period mentioned above, you and your
spouse would have to complete a second waiver form. If you terminate
employment, you may waive the pre-retirement survivor annuity at any time after
the date of your termination. You may revoke or make a new waiver election as
often as you like during the election period. You may revoke a waiver election
without your spouse's consent, but your spouse would have to consent to a new
waiver. A waiver election is valid only for the spouse consenting to the
waiver. Therefore, you should inform the Employer of any change in your marital
status.
FINANCIAL EFFECT OF YOUR ELECTION. If you and your spouse do NOT waive the
pre-retirement survivor annuity, the Employer will pay your surviving spouse
the pre-retirement survivor annuity and pay the remaining value of the account
to your designated beneficiary. If the Employer pays your spouse the annuity,
the Plan does not need your spouse's consent to the beneficiary designation.
Under a pre-retirement survivor annuity, your surviving spouse will receive
lifetime income. Benefits will not continue to other beneficiaries after your
spouse's death. Your surviving spouse can choose a lump sum or installment
payments instead of the pre-retirement survivor annuity.
If you and your spouse waive the pre-retirement survivor annuity, the Employer
will pay your entire vested account balance to your designated beneficiary. The
Plan generally requires payment of the death benefit in lump sum. If your
beneficiary receives a lump sum payment, the Employer will provide the
beneficiary a notice of the special tax benefits, if any, available for the
distribution. If your vested account balance at the time of your death exceeds
$3,500, your beneficiary may choose a lump sum or installment payments. Under
the installment method, the Employer will continue payments from your account
until the entire account has been depleted. Furthermore, your vested account
balance will continue to earn investment income. If a vested account balance
remains in the Plan at the time of your primary beneficiary's death, the Plan
will pay the remaining account balance to your primary beneficiary's estate,
unless your beneficiary designation directs otherwise. If you and your spouse
waive the pre-retirement survivor annuity, your spouse must consent to the
identity of the designated beneficiary but does not have to consent to the form
of payment made to the beneficiary.
PROCEDURE. If you and your spouse wish to have the pre-retirement survivor
annuity apply, YOU DO NOT NEED TO MAKE ANY ELECTION. If you and your spouse do
NOT wish to have the pre-retirement survivor annuity apply, sign the enclosed
Waiver of Pre-retirement Survivor Annuity election form within the election
period. We also have enclosed a Designation of Beneficiary Form.
PARTICIPANTS SHOULD RETAIN THIS IN THEIR FILES
<PAGE> 29
WAIVER OF PRE-RETIREMENT SURVIVOR ANNUITY
MARRIED PARTICIPANTS MUST COMPLETE THIS FORM IF THEY WISH TO WAIVE PAYMENT OF A
PRE-RETIREMENT SURVIVOR ANNUITY. RETURN TO YOUR EMPLOYER.
__________________________________________________________________________ Plan
Name of Employer
I elect to waive payment of a pre-retirement survivor annuity if my death
occurs before distributions have begun under the Plan. The Employer has given
me an explanation of the terms of the Pre-retirement Survivor Annuity, my right
to make this waiver election, the time period during which I may make this
waiver election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand I may revoke this election at any
time during the election period.
______________________________________ _______________________________________
Date Signature of Participant
CONSENT OF SPOUSE
I, the undersigned spouse of the Participant named above, consent to the Waiver
of the Pre-retirement Survivor Annuity form of payment. I understand the terms
of the Pre-retirement Survivor Annuity, my right not to consent to this waiver
election, the time period during which my spouse and I may make this waiver
election, and the financial effect of my election not to receive the
Pre-retirement Survivor Annuity. I understand my consent is irrevocable unless
my spouse revokes the waiver election. I further understand my consent is valid
only if I consent, in writing, to my spouse's beneficiary designation or any
change in my spouse's beneficiary designation, unless my spouse has designated
me as sole primary beneficiary.
________________________________ ___________________________________________
Date Signature of Spouse
____________________________________________________________________________
Signature of Witness Title
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 30
PARTICIPANT RECORDS
DISTRIBUTION ELECTION
PARTICIPANTS MUST COMPLETE THIS FORM ONLY IF THEIR ACCOUNT(S) IS OVER $3,500.
RETURN TO YOUR EMPLOYER.
_______________________________________________________________________ Plan
Name of Employer
A. INDICATE THE FORM OF DISTRIBUTION PAYMENT.
I, the undersigned Participant, elect payment of my account balance in
the following manner:
(1) / / I elect to transfer my distribution directly to a Kemper
IRA and defer taxes until I actually receive the money.
(Complete a Kemper IRA application if electing this
option.)
(2) / / In a lump sum.
(3) / / In a series of _______________________________
(monthly, quarterly, or annual)
installments over ____ years.
(4) / / In a qualified joint and survivor annuity contract.
(5) / / I elect to postpone distribution until the age of 65.
___________________________________ __________________________________
Date Signature of Participant
NOTE TO MARRIED MONEY PURCHASE PENSION PLAN AND CERTAIN PROFIT SHARING
PLAN PARTICIPANTS: If you requested payment of your account balance in a
form other than a qualified joint and survivor annuity, your spouse must
consent by signing Section B.
B. CONSENT OF SPOUSE
I, __________________________, spouse of the Participant, hereby consent
to the form of distribution payment elected above. I understand that by
giving this consent I am giving up the right to receive annuity benefit
payments which would otherwise be payable to me for my lifetime. I
understand my consent is irrevocable unless my spouse changes the form of
distribution payment. I understand any change is subject to my consent,
unless my spouse elects to receive the qualified joint and survivor
annuity.
___________________________________ ______________________________________
Date Signature of Participant
___________________________________ ______________________________________
Signature of Witness Title
IMPORTANT NOTE: A PARTICIPANT MAY WAIVE A QUALIFIED JOINT AND SURVIVOR
ANNUITY CONTRACT, AND A SPOUSE MAY CONSENT TO SUCH WAIVER PROVIDED THIS
ELECTION IS MADE WITHIN 90 DAYS OF THE FIRST PLAN DISTRIBUTION.
COMPLETE AND RETURN TO EMPLOYER
<PAGE> 31
PLAN DOCUMENT
RETIREMENT PLAN
PROTOTYPE DOCUMENT
The following Plan Document and Opinion Letters
are part of your permanent plan records and may be consulted to
reference specific plan provisions.
<PAGE> 32
KEMPER RED BOOK
KEOGH RETIREMENT PLAN PROTOTYPE TRUST AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I, DEFINITIONS
1.01 EMPLOYEE.............................................1
1.02 TRUSTEE..............................................1
1.03 PLAN ................................................1
1.04 ADOPTION AGREEMENT ..................................1
1.05 PLAN ADMINISTRATOR ..................................1
1.06 ADVISORY COMMITTEE...................................1
1.07 EMPLOYEE.............................................1
1.08 SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE .............1
1.09 HIGHLY COMPENSATED EMPLOYEE..........................1
1.10 PARTICIPANT..........................................2
1.11 BENEFICIARY..........................................2
1.12 COMPENSATION.........................................2
1.13 EARNED INCOME .......................................3
1.14 ACCOUNT..............................................3
1.15 ACCRUED bENEFIT .....................................3
1.16 NONFORFEITABLE.......................................3
1.17 PLAN YEAR/LIMITATION YEAR............................3
1.18 EFFECTIVE DATE ......................................3
1.19 PLAN ENTRY DATE .....................................3
1.20 ACCOUNTING DATE .....................................3
1.21 TRUST................................................3
1.22 TRUST FUND ..........................................3
1.23 NONTRANSFERABLE ANNUITY .............................3
1.24 ERISA ...............................................3
1 25 CODE.................................................3
1 26 SERVICE .............................................3
1 27 HOUR OF SERVICE .....................................3
1.28 DISABILITY...........................................4
1.29 SERVICE FOR PREDECESSOR EMPLOYER ....................4
1.30 RELATED EMPLOYERS....................................4
1.31 LEASED EMPLOYEES ....................................5
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES ...................5
1.33 TAXABLE WAGE BASE ...................................5
1.34 PAIRED PLANS ........................................5
1.35 MEMBER OF A COLLECTIVE BARGAINING UNIT ..............6
1.36 DESIGNATED INVESTMENT COMPANY .......................6
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY..........................................6
2.02 YEAR OF SERVICE - PARTICIPATION .....................6
2.03 BREAK IN SERVICE - PARTICIPATION.....................6
2.04 PARTICIPATION UPON RE-EMPLOYMENT ....................6
2.05 CHANGE IN EMPLOYEE STATUS ...........................6
2.06 ELECTION NOT TO PARTICIPATE .........................6
</TABLE>
<PAGE> 33
PLAN DOCUMENT
<TABLE>
<S> <C>
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT ..............................................7
3.02 DETERMINATION OF CONTRIBUTION .......................7
3.03 TIME OF PAYMENT OF CONTRIBUTION .....................7
3.04 RESERVED ............................................7
3.05 ACCRUAL OF BENEFIT ..................................7
3.06 .....................................................7
3.07 .....................................................7
3.08 .....................................................7
3.09 .....................................................7
3.10 .....................................................8
3.11 .....................................................8
3.12 .....................................................8
3.13 .....................................................8
3.14 .....................................................8
3.15 LIMITATIONS ON ALLOCATIONS ..........................8
3.16 SPECIAL ALLOCATION LIMITATION .......................9
3.17 DEFINED BENEFIT PLAN LIMITATION .....................9
3.18 DEFINITIONS - ARTICLE III ........................9-11
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS ............11
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS ...............11
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS .................11
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY...........12
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION .12
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT..........12
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE ..............................12
5.02 VESTING ............................................12
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT ..............13-15
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT ............15-17
6.03 BENEFIT PAYMENT ELECTIONS...........................17
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND
SURVIVING SPOUSES ...............................17-19
6.05 WAIVER ELECTION - QUALIFIED JOINT AND
SURVIVOR ANNUITY ...................................19
6.06 WAIVER ELECTION - PRE-RETIREMENT
SURVIVOR ANNUITY ................................19-20
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS.......20
ARTICLE VII, TRUSTEE, POWERS AND DUTIES
7.01 INVESTMENT OF TRUST ASSETS .........................21
7.02 VOTING AND OTHER ACTION ............................21
7.03 REPORTS OF THE TRUSTEE AND EMPLOYER ................21
7.04 TRUSTEE FEES AND EXPENSES OF THE ACCOUNT ...........21
7.05 CONCERNING THE TRUSTEE .............................22
7.06 AMENDMENT ..........................................22
7.07 RESIGNATION OR REMOVAL OF TRUSTEE...................22
7.08 TERMINATION OF TRUST ...............................22
7.09 MISCELLANEOUS ......................................22
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION ............................23
8.02 NO BENEFICIARY DESIGNATION..........................23
8.03 PERSONAL DATA TO COMMITTEE..........................23
8.04 ADDRESS FOR NOTIFICATION............................23
8.05 ASSIGNMENT OR ALIENATION ...........................23
8.06 NOTICE OF CHANGE IN TERMS ..........................24
</TABLE>
<PAGE> 34
<TABLE>
<S> <C>
8.07 LITIGATION AGAINST THE TRUST .......................24
8.08 INFORMATION AVAILABLE...............................24
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS ............24
8.10 PARTICIPANT DIRECTION OF INVESTMENT ................24
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANT'S ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES ....................25
9.02 TERM ...............................................25
9.03 POWERS .............................................25
9.04 GENERAL ............................................25
9.05 FUNDING POLICY .....................................25
9.06 MANNER OF ACTION ...................................25
9.07 INTERESTED MEMBER ..................................25
9.08 INDIVIDUAL ACCOUNTS ................................25
9.09 VALUE OF PARTICIPANT'S ACCRUED BENEFIT .............26
9.10 ALLOCATIONS AND DISTRIBUTION OF NET INCOME
GAIN OR lOSS .......................................26
9.11 INDIVIDUAL STATEMENT................................26
9.12 ACCOUNT CHARGED ....................................26
9.13 MISSING BENEFICIARY ................................26
ARTICLE X, PROVISIONS RELATING TO INSURANCE
10.01 INSURANCE BENEFIT OR ANNUITY ......................27
10.02 FORM OF CONTRACT AND PREMIUM ......................27
10.03 LIMITATION OF LIFE INSURANCE PROTECTION ...........27
ARTICLE XI, MISCELLANEOUS
11.01 EVIDENCE ..........................................28
11.02 NO RESPONSIBILITY FOR EMPLOYER ACTION .............28
11.03 FIDUCIARIES NOT INSURERS ..........................28
11.04 WAIVER OF NOTICE ..................................28
11.05 SUCCESSORS.........................................28
11.06 WORD USAGE ........................................28
11.07 EMPLOYER'S RIGHT TO PARTICIPATE....................28
11.08 EMPLOYMENT NOT GUARANTEED .........................28
ARTICLE XII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 EXCLUSIVE BENEFIT .................................29
12.02 AMENDMENT BY EMPLOYER..............................29
12.03 AMENDMENT BY PLAN SPONSOR..........................30
12.04 DISCONTINUANCE.....................................30
12.05 MERGER/DIRECT TRANSFER.............................30
12.06 TERMINATION........................................31
ARTICLE XIII, CODE SECTION 401(k) ARRANGEMENTS
13.01 ELIGIBILITY........................................32
13.02 SALARY REDUCTION AGREEMENT ........................32
13.03 DEFINITIONS ....................................32-33
13.04 ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION ......33
13.05 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS ......33-34
13.06 ACTUAL DEFERRAL PERCENTAGE TEST ...................34
13.07 DISTRIBUTION OF EXCESS CONTRIBUTIONS...............35
13.08 MATCHING CONTRIBUTIONS ............................35
13.09 QUALIFIED MATCHING CONTRIBUTIONS ..................35
13.10 LIMITATIONS ON MATCHING CONTRIBUTIONS ..........35-36
13.11 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS ....36
13.12 QUALIFIED NONELECTIVE CONTRIBUTIONS ...............36
13.13 DISTRIBUTION REQUIREMENTS..........................37
</TABLE>
<PAGE> 35
PLAN DOCUMENT
ARTICLE I
DEFINITIONS
1.01 "EMPLOYER" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "TRUSTEE" means Investors Fiduciary Trust Company.
1.03 "PLAN" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement
which the Employer has executed.
1.04 "ADOPTION AGREEMENT" means the document executed by the Employer and the
Trustee by which the Employer establishes or continues this Plan.
1.05 "PLAN ADMINISTRATOR" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition
to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA with
respect to this Agreement.
1.06 "ADVISORY COMMITTEE" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "EMPLOYEE" means any employee of the employer maintaining the Plan or of
any other employer required to be aggregated with such employer under
Code Section 4l4(b), (c), (m) or (o). The term employee shall also
include any leased employee deemed to be an employee of any employer
described in the previous paragraph as provided in Code Section 4l4(n)
or (o).
1.08 "SELF-EMPLOYED INDIVIDUAL/OWNER-EMPLOYEE." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned
Income but for the fact that the trade or business did not have net
earnings) for the taxable year from the trade or business for which the
Plan is established. "Owner-Employee" means a Self-Employed Individual
who is the sole proprietor in the case of a sole proprietorship. If the
Employer is a partnership, "Owner-Employee" means a Self-Employed
Individual who is a partner and owns more than 10% of either the capital
or profits interest of the partnership.
1.09 "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(A) is a 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles
of Code Section 318, for an unincorporated entity);
(B) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(C) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is
part of the top-paid 20% group of Employees (based on
Compensation for the relevant year);
(D) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A) (relating to defined benefit plans)
and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not
satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken
into account under clause (d) will not exceed the greater of 3 or 10% of
the total number (after application of the Code Section 414(q)
exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant
year, the Advisory Committee will treat the highest paid officer as
satisfying clause (d) for that year.
For purposes of this Section, "Compensation" means Compensation as
defined in Section 1.12, and Compensation must include: (i) elective
deferrals under a Code Section 401(k) arrangement or under a Simplified
Employee Pension maintained by the Employer; and (ii) amounts paid by
the Employer which are not currently includible in the Employee's gross
income because of Code Sections 125 (cafeteria plans) or 403(b)
(tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the
top 100 paid Employees, the number of officers includible in clause (d)
and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a
calendar year election to determine the Highly Compensated Employees for
the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all plans and arrangements of the Employer. For
purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury
regulations, the Advisory Committee will not treat as a separate
Employee a family member (a spouse, a lineal ascendant or descendant, or
a spouse of lineal ascendant or descendant) of a Highly Compensated
Employee described in clause (a) of this Section, or a family member of
one of the ten Highly Compensated Employees with the greatest
Compensation for the Plan Year, but will treat the Highly Compensated
Employee and all family members as a single Highly Compensated Employee.
This aggregation rule applies to a family member even if that family
member is a Highly Compensated Employee without family aggregation.
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The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs
no Service for the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or any Plan Year
ending on or after his 55th birthday. If the former Employee's
Separation from Service occurred prior to January 1, 1987, he is a
Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1)
the year of his Separation from Service (or the prior year); or (2) any
year ending after his 54th birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Code Section 414(q) and the regulations thereunder.
1.10 "PARTICIPANT" is any Employee other than a Member of a Collective
Bargaining Unit who is eligible to be and becomes a Participant in
accordance with the provisions of Section 2.01.
1.11 "BENEFICIARY" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the
Plan until the Trustee has fully distributed his benefit to him. A
Beneficiary's right to (and the Plan Administrator's, the Advisory
Committee's or a Trustee's duty to provide to the Beneficiary)
information or data concerning the Plan does not arise until he first
becomes entitled to receive a benefit under the Plan.
1.12 "COMPENSATION" means compensation as that term is defined in Section
3.18(b) of the Plan. If compensation for any prior plan year is taken
into account in determining an employee's contributions or benefits for
the current year, the compensation for such prior year is subject to the
applicable annual compensation limit in effect for that prior year. For
this purpose, for years beginning before January 1, 1990, the applicable
annual compensation limit is $200,000. For any self-employed individual
covered under the plan, compensation will mean earned income.
Compensation shall include only that compensation which is actually paid
to the participant during the applicable period. Except as provided
elsewhere in this plan, the applicable period shall be the plan year.
Furthermore, notwithstanding the above, the definition of compensation
includes elective contributions made by the Employer on the Employee's
behalf. "Elective contributions" are amounts excludible from the
Employee's gross income under Code Section 402(a)(8) (relating to a Code
Section 401(k) arrangement), Code Section 402(h) (relating to a
Simplified Employee Pension), Code Section 125 (relating to a cafeteria
plan) or Code Section 403(b) (relating to a tax-sheltered annuity) and
contributed at the Employee's election. The term "Compensation" does
not include:
(A) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are
not included in the gross income of the Employee for the taxable
year in which contributed, on behalf of an Employee to a
Simplified Employee Pension Plan to the extent such contributions
are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the
Employee when distributed.
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture.
(C) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(D) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includible in the gross income of the
Employee), or contributions made by an Employer (whether or not
under a salary reduction agreement) towards the purchase of an
annuity contract described in Code Section 403(b) (whether or
not the contributions are excludible from the gross income of the
Employee), other than "elective contributions," if elected in the
Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into
account only Compensation actually paid for the relevant period.
For any Plan Year beginning after December 31, 1988, the Advisory
Committee must take into account only the first $200,000 (or such larger
amount as the Commissioner of Internal Revenue may prescribe under Code
Section 415(d)) of any Participant's Compensation, except that the dollar
increase in effect on January 1 of any calendar year is effective for
years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1,1990. If a plan determines
compensation on a period of time that contains fewer than 12 calendar
months, then the annual compensation limit is an amount equal to the
annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing
the number of full months in the period by 12. The $200,000
Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under
Section 1.09 and who is either (i) the Employee's spouse; or (ii) the
Employee's lineal descendant who has not attained age 19 before the
close of the year. If, as a result of the application of such rules, the
adjusted $200,000 limitation is exceeded, then (except for purposes of
determining the portion of compensation up to the integration level if
this plan provides for permitted disparity, the Advisory Committee will
apply the contribution and allocation provisions of Article III by
prorating the $200,000 (or adjusted) limitation among the affected
individuals in proportion to each such individual's Compensation
determined prior to application of this limitation.
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PLAN DOCUMENT
NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees: Compensation
means Compensation as defined in this Section 1.12.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Code Section 22(e)(3)) is the compensation such
Participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Code Section 414(g)) and contributions made on behalf of
such participant are nonforfeitable when made.
1.13 "EARNED INCOME" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material
income producing factor. The Advisory Committee will determine net
earnings without regard to items excluded from gross income and the
deductions allocable to those items. Net earnings are reduced by
contributions by the employer to a qualified plan to the extent
deductible under Code Section 404. The Advisory Committee will
determine net earnings after the deduction allowed to the
Self-Employed Individual for all contributions made by the Employer
to a qualified plan and, for Plan Years beginning after December 31,
1989, the deduction allowed to the Self-Employed under Code
Section 164(f) for self-employment taxes.
1.14 "ACCOUNT" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "ACCRUED BENEFIT" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and
Employee contributions and earnings thereon including rollovers
whether vested before or after death and including the proceeds of
insurance contracts on the participant's life, if any.
1.16 "NONFORFEITABLE" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.17 "PLAN YEAR" means the fiscal year, of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's
Adoption Agreement also must specify the "Limitation Year" applicable
to the limitations on allocations described in Article III. If the
Employer maintains Paired Plans, each Plan must have the same Plan
Year.
1.18 "EFFECTIVE DATE" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "PLAN ENTRY DATE" means the first day of the Plan Year or the first
day of the sixth month of the Plan Year.
1.20 "ACCOUNTING DATE" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all
Plan allocations for a particular Plan Year as of the Accounting Date
of that Plan Year.
1.21 "TRUST" means the separate Trust created under the Employer's Plan.
1.22 "TRUST FUND" means all property of every kind held or acquired by the
Trustee under the Employer's Plan, other than incidental benefit
insurance contracts.
1.23 "NONTRANSFERABLE ANNUITY" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any
purpose to any person other than Kemper Investors Life Insurance
Company. If the Trustee distributes an annuity contract, the contract
must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
l.25 "CODE" means the Internal Revenue Code of 1986, as amended.
1.26 "SERVICE" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave
of absence authorized by the Employer under a uniform,
nondiscriminatory policy applicable to all Employees. "Separation from
Service" means a separation from Service with the Employer maintaining
this Plan.
1.27 "HOUR OF SERVICE" means:
(A) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties for the
Employer. The Advisory Committee credits Hours of Service
under this paragraph (a) to the Employee for the computation
period in which the Employee performs the duties, irrespective
of when paid;
(B) Each Hour of Service for back pay, irrespective of mitigation
of damages, to which the Employer has agreed or for which the
Employee has received an award. The Advisory Committee credits
Hours of Service under this paragraph (b) to the Employee for
the computation period(s) to which the award or the agreement
pertains rather than for the computation period in which the
award, agreement or payment is made; and
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<PAGE> 38
(C) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated) for reasons other than for the
performance of duties during a computation period, such as
leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than
501 Hours of Service under this paragraph (c) to an Employee
on account of any single continuous period during which the
Employee does not perform any duties (whether or not such
period occurs during a single computation period). The
Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b)
and (c) of Labor Reg. Section 2530.200b-2, which the Plan, by
this reference, specifically incorporates in full within this
paragraph (c).
The Advisory Committee will not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of
this Section 1.27 is the Plan Year, Year of Service period, Break in
Service period or other period, as determined under the Plan provision
for which the Advisory Committee is measuring an Employee's Hours of
Service. The Advisory Committee will resolve any ambiguity with
respect to the crediting of an Hour of Service in favor of the
Employee.
An Employee for whom a record of hours worked is not maintained shall
be credited with 45 Hours of Service for each week in which he or she
completes at least one Hour of Service.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee
must credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the
Employee's absence is due to the Employee's pregnancy, the birth of
the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child immediately following the
child's birth or placement. The Advisory Committee credits Hours of
Service under this paragraph on the basis of the number of Hours of
Service the Employee would receive if he were paid during the absence
period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours
per day during the absence period. The Advisory Committee will credit
only the number (not exceeding 501) of Hours of Service necessary to
prevent an Employee's Break in Service. The Advisory Committee credits
all Hours of Service described in this paragraph to the computation
period in which the absence period begins or, if the Employee does not
need these Hours of Service to prevent a Break in Service in the
computation period in which his absence period begins, the Advisory
Committee credits these Hours of Service to the immediately following
computation period.
Hours of service will also be credited for any individual considered
an employee for purposes of this Plan under Code Section 414(n) or
Section 414(o) and the regulations thereunder.
1.28 "DISABILITY" means inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12
months. The permanence and degree of such impairment shall be
supported by medical evidence. The Plan considers a Participant
disabled on the date the Advisory Committee determines the Participant
satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to
confirm disability. The Advisory Committee will apply the provisions
of this Section 1.28 in a nondiscriminatory, consistent and uniform
manner.
1.29 "SERVICE FOR PREDECESSOR EMPLOYER"
If the Employer maintains the plan of a predecessor employer, the Plan
treats service of the Employee with the predecessor employer as
service with the Employer. If the Employer does not maintain the plan
of a predecessor employer, the Plan does not credit service with the
predecessor employer.
1.30 "RELATED EMPLOYERS"
A related group is a controlled group of corporations (as
defined in Code Section 414(b)), trades or businesses (whether or not
incorporated) which are under common control (as defined in Code
Section 414(c)), or an affiliated service group (as defined in Code
Section 414(m) or in Code Section 414(o)). If the Employer is a member
of a related group, the term "Employer" includes the related group
members for purposes of crediting Hours of Service, determining Years
of Service and Breaks in Service under Articles II and V, applying the
limitations on allocations in Part 2 of Article III, applying the top
heavy rules and the minimum allocation requirements of Article III,
the definitions of Employee, Highly Compensated Employee, Compensation
and Leased Employee, and for any other purpose required by the
applicable Code section or by a Plan provision. However, an Employer
may contribute to the Plan only by being a signatory to the Execution
Page of the Adoption Agreement or to a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's
related group members becomes Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members, for all
purposes of the Plan, and "Plan Administrator" means the Employer that
is the signatory to the Execution Page of the Adoption Agreement.
All Employees of the Employer or of any member of the Employer's
related group, are eligible to participate in the Plan, irrespective
of whether the related group member directly employing the Employee is
a Participating Employer.
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<PAGE> 39
PLAN DOCUMENT
1.31 "LEASED EMPLOYEES"
The Plan treats a Leased Employee as an Employee of the Employer. A
Leased Employee is an individual (who otherwise is not an Employee of
the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer
(or for the Employer and any persons related to the Employer
determined in accordance with Code Section 414(n)(6) on a substantially
full-time basis for at least one year and who performs services
historically performed by employees in the Employer's business field.
If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, "Compensation" includes Compensation from
the leasing organization which is attributable to services performed
for the Employer. Contributions or benefits provided a leased employee
by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by
the recipient employer.
SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a
safe harbor plan and, prior to application of this safe harbor plan
exception, 20% or less of the Employer's Employees (other than Highly
Compensated Employees) are Leased Employees. A safe harbor plan is a
money purchase pension plan providing immediate participation, full
and immediate vesting, and a nonintegrated contribution formula equal
to at least 10% of the employee's compensation without regard to
employment by the leasing organization on a specified date. The safe
harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective
contributions (as defined in Section 1.12).
OTHER REQUIREMENTS. The Advisory Committee must apply this Section
1.31 in a manner consistent with Code Sections 414(n) and 414(o) and
the regulations issued under those Code sections. If a Leased
Employee is a Participant in the Plan and also participates in a
defined contribution plan maintained by the leasing organization,
then the Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without
taking into account the Leased Employee's allocation, if any, under
the leasing organization's plan.
1.32 "SPECIAL RULES FOR OWNER-EMPLOYEES"
The following special provisions and restrictions apply to
Owner-Employees:
If this plan provides contributions or benefits for one or more
owner-employees who control both the business for which this plan is
established and one or more other trades or businesses, this plan and
the plan established for other trades or businesses must, when looked
at as a single plan, satisfy sections 401(a) and (d) for the
employees of this and all other trades or businesses.
If the plan provides contributions or benefits for one or more
owner-employees who control one or more other trades or businesses,
the employees of the other trades or businesses must be included in a
plan which satisfies sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
owner-employees under this plan.
If an individual is covered as an owner-employee under the plans of
two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses
which are controlled must be as favorable as those provided for him
under the most favorable plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or
more owner-employees, will be considered to control a trade or
business if the owner-employee, or two or more owner-employees
together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an owner-employee, or two or
more owner-employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such owner-employee, or such two or more owner-employees, are
considered to control within the meaning of the preceding sentence.
1.33 "TAXABLE WAGE BASE" means 100% of the taxable wage base as determined
under Section 230 of the Social Security Act in effect on the first
day of the plan year.
1.34 "PAIRED PLANS" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Kemper Retirement Plan Prototype
Keogh/Corporate, one Adoption Agreement being a Paired Profit Sharing
Plan and one Adoption Agreement being a Paired Pension Plan. A Paired
Profit Sharing Plan may include a Code Section 401(k) arrangement. A
Paired Pension Plan must be a money purchase pension plan. Paired
Plans must be the subject of a favorable opinion letter issued by
the National Office of the Internal Revenue Service.
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<PAGE> 40
1.35 "MEMBER OF A COLLECTIVE BARGAINING UNIT" means any employee who is
included in a unit and whose terms and conditions of employment are
covered by a collective bargaining agreement between the Employer and
employee representatives which does not provide for participation in
the Plan, provided that there is evidence that, in connection with
such agreement, retirement benefits were the subject of good-faith
bargaining. For this purpose, the term "employee representatives" does
not include any organization more than half of whose members are
employees who are owners, officers or executives of the Employer.
1.36 "DESIGNATED INVESTMENT COMPANY" means any registered investment
company the investment manager or principal underwriter of which is
Kemper Financial Services, Inc. or an affiliate.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 "ELIGIBILITY"
Each Employee becomes a Participant in the Plan in accordance with the
participation option selected by the Employer in its Adoption
Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues
as a Participant in the Plan.
2.02 "YEAR OF SERVICE - PARTICIPATION"
For purposes of an Employee's participation in the Plan under Adoption
Agreement Section 2.01, the Plan takes into account all of his Years
of Service with the Employer, except that if an Employee has a Break
in Service before satisfying the Plan's requirement for eligibility,
Service before such break will not be taken into account. "Year of
Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the
beginning of the first 12 month period from the Employment
Commencement Date, and each anniversary thereof. "Employment
Commencement Date" means the date on which the Employee first performs
an Hour of Service for the Employer.
2.03 "BREAK IN SERVICE - PARTICIPATION"
An Employee incurs a "Break in Service" if during any 12 consecutive
month period he does not complete more than 500 Hours of Service with
the Employer. The "12 consecutive month period" under this Section 2.03
is the same 12 consecutive month period for which the Plan measures
"Years of Service" under Section 2.02.
TWO-YEAR ELIGIBILITY. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section
2.01, the Plan treats an Employee who incurs a one year Break in
Service and who has never become a Participant as a new Employee on
the date he first performs an Hour of Service for the Employer after
the Break in Service.
2.04 "PARTICIPATION UPON RE-EMPLOYMENT"
A Participant whose employment terminates re-enters the Plan as a
Participant on the date of his re-employment. An Employee who
satisfies the Plans' eligibility conditions but who terminates
employment prior to becoming a Participant becomes a Participant on
the later of the Plan Entry Date on which he would have entered the
Plan had he not terminated employment or the date of his
re-employment. Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in
accordance with Adoption Agreement Section 2.01.
2.05 "CHANGE IN EMPLOYEE STATUS"
If a Participant has not incurred a Separation from Service but ceases
to be eligible to participate in the Plan, by reason of becoming a
member of a Collective Bargaining Unit, the Advisory Committee must
treat the Participant as an excluded employee during the period such a
Participant is a Member of a Collective Bargaining Unit. The Advisory
Committee determines a Participant's sharing in the allocation of
Employer contributions by disregarding his Compensation paid by the
Employer for services rendered in his capacity as a Member of a
Collective Bargaining Unit. However, during such period of exclusion,
the Participant, without regard to employment classification,
continues to receive credit for vesting under Article V for each
included Year of Service and the Participant' Account continues to
share fully in Trust Fund allocations under Section 9.11.
If an excluded employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment
classification, he will participate in the Plan immediately if he has
satisfied the eligibility conditions of Section 2.01 and would have
been a Participant had he not been an excluded employee during his
period of Service. Furthermore, the Plan takes into account all of the
Participant's included Years of Service with the Employer as an
Excluded Employee for purposes of vesting credit under Article V.
In the event a participant is no longer a member of an eligible class
of employees and becomes ineligible to participate but has not
incurred a break in service, such employee will participate
immediately upon returning to an eligible class of employees. If such
participant incurs a break in service, eligibility will be determined
under the break in service rules of the plan.
2.06 "ELECTION NOT TO PARTICIPATE"
The Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan.
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<PAGE> 41
PLAN DOCUMENT
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS:
SECTIONS 3.01 THROUGH 3.06
3.01 "AMOUNT"
For each Plan Year, the Employer contributes to the Trust the amount
determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a
contribution to the Trust for any Plan Year to the extent the
contribution would exceed the Participants' Maximum Permissible
Amounts.
The Trustee, upon written request from the Employer, must return to
the Employer the amount of the Employer's contribution made by the
Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code Section 404. The
Trustee will not return any portion of the Employer's contribution
under the provisions of this paragraph more than one year after:
(A) The Employer made the contribution by mistake of fact; or
(B) The disallowance of the contribution as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to
the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee
may require the Employer to furnish it whatever evidence the Trustee
deems necessary to enable the Trustee to confirm the amount the
Employer has requested be returned is properly returnable under ERISA.
3.02 "DETERMINATION OF CONTRIBUTION"
The Employer, from its records, determines the amount of any
contributions to be made by it to the Trust under the terms of the
Plan.
3.03 "TIME OF PAYMENT OF CONTRIBUTION"
The Employer may pay its contribution for each Plan Year in one or
more installments without interest. The Employer must make its
contribution to the Trustee within the time prescribed by the Code or
applicable Treasury regulations.
3.04 "RESERVED"
3.05 "ACCRUAL OF BENEFIT"
The accrual of benefit shall be determined on the basis of the Plan
Year. In determining the amount of the Employer contribution to a
participant's account, only compensation with respect to that part of
a Plan Year the employee is actually a participant shall be taken into
account.
Employer contributions will be allocated to each Participant who
either completes 500 hours of service during the Plan Year or who is
employed by the Employer on the last day of the Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.06 THROUGH 3.09
[Note: Sections 3.06 through 3.09 apply only to Participants in this
Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund as defined in Code
Section 419(e) or an individual medical account as defined in Code
Section 415(1)(2) maintained by the Employer.
3.06 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
3.07 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated.
3.08 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the
Participant's actual Compensation for such Limitation Year.
3.09 If, pursuant to Section 3.08 there is an Excess Amount with respect to
a Participant for a Limitation Year, the Advisory Committee will
dispose of such Excess Amount as follows:
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<PAGE> 42
(A) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the
return would reduce the Excess Amount.
(B) If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
Contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary.
(C) If, after the application of paragraph (b), an Excess Amount
still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the Advisory Committee
will hold the Excess Amount unallocated in a suspense account.
The Advisory Committee will apply the suspense account to
reduce Employer Contributions for all remaining Participants
in the next Limitation Year, and in each succeeding Limitation
Year if necessary.
(D) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants. If a
suspense account is in existence at any time during a
limitation year pursuant to this section, it will not
participate in the allocation of the trust's investment gains
and losses. If a suspense account is in existence at any time
during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to
participants' accounts before any employer or any employee
contributions may be made to the plan for that limitation
year.
[Note: Sections 3.10 through 3.15 apply if, in addition to this Plan,
the Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare
benefit fund, as defined in Code Section 419(e) maintained by the
Employer or an individual medical account, as defined in Code Section
415(1)(2) maintained by the Employer which provides an annual
addition during any Limitation Year.]
3.10 The annual additions which may be credited to a participant's account
under this plan for any such limitation year will not exceed the
maximum permissible amount reduced by the annual additions credited to
a participant's account under the other plans and welfare benefit
funds for the same limitation year. If the annual additions with
respect to the participant under other defined contribution plans and
welfare benefit funds maintained by the employer are less than the
maximum permissible amount and the employer contribution that would
otherwise be contributed or allocated to the participant's account
under this plan would cause the annual additions for the limitation
year to exceed this limitation, the amount contributed or allocated
will be reduced so that the annual additions under all such plans and
funds for the limitation year will equal the maximum permissible
amount. If the annual additions with respect to the participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum permissible amount,
no amount will be contributed or allocated to the participant's
account under this plan for the limitation year.
3.11 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the
amounts referred to in 3.10 above on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory
Committee will make this determination on a reasonable and uniform
basis for all Participants similarly situated.
3.12 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts
referred to in 3.10 on the basis of the Participant's actual
Compensation for such Limitation Year.
3.13 If pursuant to Section 3.12, a Participant's Annual Additions under
this Plan and all such other plans result in an Excess Amount, such
Excess Amount will consist of the Amounts last allocated. The Advisory
Committee will determine the Amounts last allocated by treating the
Annual Additions attributable to a welfare benefit fund or individual
medical account as allocated first, irrespective of the actual
allocation date under the welfare benefit fund.
3.14 If the Advisory Committee allocates an Excess Amount to a Participant
on an allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan equals
the product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated
but for the limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified master or
prototype defined contribution plans (determined without
regard to the limitations of Code Section 415).
3.15 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.09.
[Note: Section 3.16 applies only to Participants who, in addition to
this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
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PLAN DOCUMENT
3.16 "SPECIAL ALLOCATION LIMITATION"
The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on behalf of any Participant are limited in
accordance with the provisions of Section 3.10 through 3.15, as though
the other plan were a Master or Prototype plan.
3.17 "DEFINED BENEFIT PLAN LIMITATION"
If the Employer maintains a defined benefit plan, or has ever
maintained a defined benefit plan which the Employer has terminated,
then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The annual additions which may be credited to the
participant's account under this plan for any limitation year will be
limited in accordance with Section 3.17 of the adoption agreement. To
the extent necessary to satisfy the limitations of this Section 3.17,
the Employer will reduce the Participant's projected annual benefit
under the defined benefit plan under which the Participant
participates. The Employer also must provide in an addendum to its
Adoption Agreement the manner in which the Plan will satisfy the
top-heavy requirements of Code Section 416 after taking into account
the existence (or prior maintenance) of the defined benefit plan.
3.18 "DEFINITIONS - ARTICLE III"
For purposes of this Article III, the following terms mean:
(A) "ANNUAL ADDITION" - The sum of the following amounts
allocated on behalf of a Participant for a Limitation Year, of
(i) all Employer contributions; (ii) all forfeitures; and
(iii) all Employee contributions. Except to the extent
provided in Treasury regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess
aggregate contributions described in Code Section 401(m) and
excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such
excess amounts. Annual Additions also include Excess Amounts
reapplied to reduce Employer contributions under Section 3.09.
Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code Section 415(1)(2))
included as part of a defined benefit pension or annuity plan
maintained by the Employer are Annual Additions. Furthermore,
Annual Additions include contributions paid or accrued after
December 31, 1985, for taxable years ending after December
31,1985, attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare benefit
fund (as defined in Code Section 419(e)) maintained by the
Employer. For this purpose, any excess amount applied in the
limitation year to reduce employer contributions will be
considered annual additions for such limitation year.
(B) "COMPENSATION" - For purposes of applying the limitations of
Part 2 of this Article III, "Compensation" means a
participant's earned income, wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the employer maintaining the plan to the
extent that the amounts are includible in gross income
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements and expense allowances), and
excluding the following:
(I) Employer contributions to a plan of deferred
compensation which are not includible in the
employee's gross income for the taxable year in which
contributed, or employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(II) Amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property)
held by the employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(III) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(IV) other amounts which received special tax benefits, or
contributions made by the employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in section 403(b) of
the Internal Revenue Code (whether or not the amounts
are actually excludible from the gross income of the
employee).
For purposes of applying the limitations of this article,
compensation for a limitation year is the compensation actually paid
or includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a participant
in a defined contribution plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the compensation such
participant would have received for the limitation year if the
participant would have received for the limitation year if the
participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed
compensation for the disabled participant may be taken into account
only if the participant is not a highly compensated employee (as
defined in Section 414(g) of the Code) and contributions made on
behalf of such participant are nonforfeitable when made.
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<PAGE> 44
(C) "EMPLOYER" - The Employer that adopts this Plan and any
related employers described in Section 1.30. Solely for
purposes of applying the limitations of Part 2 of this Article
III, the Advisory Committee will determine related employers
described in Section 1.30 by modifying Code Sections 414(b)
and (c) in accordance with Code Section 415(h).
(D) "EXCESS AMOUNT" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(E) "LIMITATION YEAR" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the
Employer must use the same Limitation Year. If the Employer
amends the Limitation Year to a different 12 consecutive
month period, the new Limitation Year must begin on a date
within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(F) "MASTER OR PROTOTYPE PLAN" - A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
(G) "MAXIMUM PERMISSIBLE AMOUNT" - The lesser of (i) $30,000 (or,
if greater, one-fourth of the defined benefit dollar
limitation under Code Section 415(b)(1)(A)), or (ii) 25% of the
Participant's Compensation for the Limitation Year. If there
is a short Limitation Year because of a change in Limitation
Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year: 12
The 25% compensation limitation shall not apply to any
contribution for medical benefits (within the meaning of Code
Section 401(h) or 419A(f)(2) which is otherwise treated as an
annual addition under Code Section 415(l)(1) or 419A(d)(2).
(H) "DEFINED CONTRIBUTION PLAN" - A retirement plan which
provides for an individual account for each participant and
for benefits based solely on the amount contributed to the
participant's account, and any income, expenses, gains and
losses, and any forfeitures of accounts of other participants
which the plan may allocate to such participant's account. The
Advisory Committee must treat all defined contribution plans
(whether or not terminated) maintained by the Employer as a
single plan. Solely for purposes of the limitations of Part 2
of this Article III, the Advisory Committee will treat
employee contributions made to a defined benefit plan
maintained by the Employer as a separate defined contribution
plan. The Advisory Committee also will treat as a defined
contribution plan an individual medical account (as defined in
Code Section 415(1)(2)) included as part of a defined benefit
plan maintained by the Employer and, for taxable years ending
after December 31,1985, a welfare benefit fund under Code
Section 419(e) maintained by the Employer to the extent there
are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section
419A(d)(3)).
(I) "DEFINED BENEFIT PLAN" - A retirement plan which does not
provide for individual accounts for Employer contributions.
The Advisory Committee must treat all defined benefit plans
(whether or not terminated) maintained by the Employer as a
single plan.
[Note: The definitions in paragraphs (j) and (k) apply only if
the limitation described in Section 3.17 applies to the
Employer's Plan.]
(J) "DEFINED BENEFIT PLAN FRACTION" -PROJECTED annual benefit of
the Participant under the defined benefit plan(s) The lesser of
(I) 125% of the dollar limitation determined under
Code Section 415 (b) and (d) for the Limitation Year,
or
(II) 140% of the Participant's average Compensation
for his high three (3) consecutive Years of Service
To determine the denominator of this fraction, the
Advisory Committee will make any adjustment required under
Code Section 415(b) and will determine a Year of Service,
unless otherwise provided in an addendum to Adoption Agreement
Section 3.06, as a Plan Year in which the Employee completed
at least 1,000 Hours of Service. The "projected annual
benefit" is the annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if the plan
expresses such benefit in a form other than a straight life
annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal
retirement age (or current age, if later) as stated in the
defined benefit plan, his compensation continues at the same
rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other
relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year
for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits
in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the dollar
limitation used in the denominator of this fraction will not
be less than the Participant's Current Accrued Benefit. A
Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the
Participant had accrued as of the end of the 1986 Limitation
Year (the last Limitation Year beginning before January
1, 1987), determined without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued
Benefit rule applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 as in effect at the end of the 1986
Limitation Year.
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<PAGE> 45
PLAN DOCUMENT
Notwithstanding the above, if the participant was a
participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined
benefit plans maintained by the employer which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the participant had accrued as
of the close of the last limitation year beginning before
January 1,1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Section 415 for all limitation years beginning before January
1, 1987
(k) "DEFINED CONTRIBUTION PLAN FRACTION" - Section 5.5 Defined
contribution fraction: A fraction, the numerator of which is
the sum of the annual additions to the participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the employer for the current and all
prior limitation years (including the annual additions
attributable to the participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code,
maintained by the employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and
all prior limitation years of service with the employer
(regardless of whether a defined contribution plan was
maintained by the employer). The maximum aggregate amount in
any limitation year is the lesser of 125 percent of the
dollar limitation determined under Sections 415(b) and (d) of
the Code in effect under Section 415(c)(1)(A) of the Code or
35 percent of the participant 's compensation for such year.
If the employee was a participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise
exceed 1.0 under the terms of this plan. Under the adjustment,
an amount equal to the product of (l) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
plan made after May 5, 1986, but using the Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
The average compensation for the three consecutive years of
service with the employer that produces the highest average.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 "PARTICIPANT ON DEDUCTIBLE CONTRIBUTIONS"
This Plan does not permit Participant nondeductible contributions. If,
prior to the adoption of this Plan, the Plan accepted Participant
nondeductible contributions for a Plan Year beginning after December
31, 1986, those contributions must satisfy the requirements of Code
Section 401(m) and must be maintained in a separate account which
will be nonforfeitable at all times. This Section 4.01 does not
prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan
Year in which the Employer adopts this Plan.
4.02 "PARTICIPANT DEDUCTIBLE CONTRIBUTIONS"
The Plan will not accept Participant deductible contributions which
are made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account which will be nonforfeitable at all times. The account will
share in the gains and losses of the trust in the same manner as
described in Section 9.10 of the Plan. No part of the deductible
voluntary contribution account will be used to purchase life
insurance. Subject to Article VI, joint and survivor annuity
requirements (if applicable), the participant may withdraw any part of
the deductible voluntary contribution account by making a written
application to the Advisory Committee.
4.03 "PARTICIPANT ROLLOVER CONTRIBUTIONS"
Any Participant, with the Employer's written consent and after filing
with the Employer the form prescribed by the Advisory Committee, may
contribute cash or other property to the Trust other than as a
voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified
plan. Before accepting a rollover contribution, the Trustee may
require an Employee to furnish satisfactory evidence that the proposed
transfer is in fact a "rollover contribution" which the Code permits
an employee to make to a qualified plan. A rollover contribution is
not an Annual Addition under Part 2 of Article III.
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<PAGE> 46
The Employer will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the
Employer in its sole discretion, agrees to invest the rollover
contribution as part of the Trust Fund. The Employer will not have
any investment responsibility with respect to a Participant's
segregated rollover Account. The Participant, however, from time to
time, may direct the Employer in writing as to the investment of his
segregated rollover Account in shares of a Designated Investment
Company, annuity contract(s) or life insurance sold or distributed by
Kemper Financial Services, Inc. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from
investments made at the direction of the Participant. As of the
Accounting Date (or other valuation date) for each Plan Year, the
Advisory Committee will allocate and credit the net income (or net
loss) from a Participant's segregated rollover Account and the
increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Employer is
not liable nor responsible for any loss resulting to any Beneficiary,
nor to any Participant, by reason of any sale or investment made or
other action taken pursuant to and in accordance with the direction of
the Participant. In all other respects, the Employer will administer
and distribute a rollover contribution in the same manner as any
Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same
extent and in the same manner as a Participant. If an Employee makes a
rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat
the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan. If the Employee has a Separation from Service prior to
becoming a Participant, the Trustee will distribute his rollover
contribution Account to him as if it were an Employer contribution
Account.
4.04 "PARTICIPANT CONTRIBUTION - FORFEITABILITY"
A Participant's Accrued Benefit is, at all times, 100% Nonforfeitable.
4.05 "PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION"
A Participant, by giving prior written notice to the Trustee, may
withdraw all or any part of the value of his Accrued Benefit derived
from his Participant contributions described in this Article IV. A
distribution of Participant contributions must comply with the joint
and survivor requirements described in Article VI, if those
requirements apply to the Participant. A Participant may not exercise
his right to withdrawn the value of his Accrued Benefit derived from
his Participant contributions more than once during any Plan Year. The
Trustee, in accordance with the direction of the Advisory Committee,
will distribute a Participant's unwithdrawn Accrued Benefit
attributable to his Participant contributions in accordance with the
provisions of Article VI applicable to the distribution of the
Participant's Nonforfeitable Accrued Benefit.
4.06 "PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT"
The Advisory Committee must maintain, or must direct the Trustee to
maintain, a separate Account(s) in the name of each Participant to
reflect the Participant's Accrued Benefit under the Plan derived from
his Participant contributions. A Participant's Accrued Benefit derived
from his Participant contributions as of any applicable date is the
balance of his separate Participant contribution Account(s). A
separate account will be maintained by the trustee for the
nondeductible employee contribution of each participant.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 "NORMAL RETIREMENT AGE"
Normal Retirement Age is age 65.
5.02 "VESTING"
All contributions made by or on behalf of each participant, together
with all earnings thereon, shall immediately become, and at all times
shall remain, fully vested in such participant, and nonforfeitable.
The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b)) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
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<PAGE> 47
PLAN DOCUMENT
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 "TIME OF PAYMENT OF ACCRUED BENEFIT"
Unless, pursuant to Section 6.03, the Participant or the Beneficiary
elects in writing to a different time or method of payment, the
Advisory Committee will direct the Trustee to commence distribution of
a Participant's Nonforfeitable Accrued Benefit in accordance with this
Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of the
distribution to the Participant, exceeds $3,500 and the Participant
has not attained the later of Normal Retirement Age or age 62.
Furthermore, the Participant's spouse also must consent, in writing,
to any distribution, for which Section 6.04 requires the spouse's
consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the
Plan pays an amount as an annuity or in any other form. A distribution
date under this Article VI unless otherwise specified within the Plan,
is the 60th day of the Plan Year, or as soon as administratively
practicable following that distribution date. For purposes of the
consent requirements under this Article VI, if the present value of
the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
If the value of a participant's vested account balance derived from
employer and employee contribution exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the participant and the participant's
spouse (or where either the participant or the spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the participant and the participant's spouse shall be
obtained in writing within the 90-day period ending on the annuity
starting date. The annuity starting date is the first day of the first
period for which an amount is paid an annuity or any other form. The
plan administrator shall notify the participant and the participant's
spouse of the right to defer any distribution until the participant's
account balance is no longer immediately distributable. Such
notification shall include a general description of the material
features, and explanation of the relative values of, the optional
forms of benefit available under the plan in a manner that would
satisfy the notice requirements of Code Section 417(a)(3), and shall be
provided no less than 30 days and no more than 90 days prior to the
annuity starting date. Notwithstanding the foregoing, only the
participant need consent to the commencement of a distribution in the
form of a qualified joint and survivor annuity while the account
balance is immediately distributable. (Furthermore, if payment in the
form of a qualified joint and survivor annuity is not required with
respect to the participant pursuant to Section 6.04(E) of the plan,
only the participant need consent to the distribution of an account
balance that is immediately distributable.) Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Code Section
401(a)(9) or to the extent that a distribution is required to satisfy
Code Sections 401(a)(9) or 415. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider) and if the employer or any entity within the same
controlled group as the employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code), the participant's account
balance may, without the participant's consent, be distributed
to the participant. However, if any entity within the same controlled
group as the employer maintains another defined contribution plan
(other than an employee stock ownership plan as defined in section
4975(e)(7) of the Code) then the participant's account balance will be
transferred, without the participant's consent, to the other plan if
the participant does not consent to an immediate distribution.
Notwithstanding the foregoing, only the participant need consent to
the commencement of a distribution in the form of a qualified joint
and survivor annuity while the account balance is immediately
distributable. (Furthermore, if payment in the form of a qualified
joint and survivor annuity is not required with respect to the
participant pursuant to Section 6.04(E) of the plan, only the
participant need consent to the distribution for an account balance
that is immediately distributable). Neither the consent of the
participant nor the participant's spouse shall be required to the
extent that a distribution is required to satisfy Section 401(a)(9)
or Section 415 of the Code. In addition, upon termination of this
plan, if the plan does not offer an annuity option (purchased from a
commercial provider), the participant's account balance may, without
the participant's consent, be distributed to the participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
An account balance is immediately distributable if any part of the
account balance could be distributed to the participant (or surviving
spouse) before the participant attains or would have attained if not
deceased the later of normal retirement age or age 62.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
plan year beginning after December 31, 1988, the participant's vested
account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH. For a
Participant who separates from Service with the Employer for a
reason other than death, the Advisory Committee will direct
the Trustee to commence distribution of the Participant's
Accrued Benefit, as follows:
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT
EXCEEDING $3,500. In a lump sum, on the 60th day
following the close of the Plan Year in which the
Participant's Separation from Service occurs.
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<PAGE> 48
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. In a form and at the time elected by the
Participant, pursuant to Section 6.03. In the absence
of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in a
lump sum (or, if applicable, the normal annuity form
of distribution required under Section 6.04), on the
60th day following the close of the Plan Year in
which the latest of the following events occurs: (a)
the Participant attains Normal Retirement Age; (b)
the Participant attains age 62; or (c) the
Participant separates from Service. Notwithstanding
the foregoing, the failure of a participant and
spouse to consent to a distribution while a benefit
is immediately distributable shall be deemed to be an
election to defer commencement of payment of any
benefit sufficient to satisfy this section.
(3) DISABILITY. If the Participant terminates employment
because of disability, in lump sum, no later than the
60th day following the close of the Plan Year in
which the participant terminates employment because
of disability, subject to the requirements of this
Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and
(2).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by
Plan provision or by Participant election (or nonelection), is
later than the Participant's Required Beginning Date, the
Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's
Required Beginning Date. A Participant's Required Beginning
Date is the April 1 following the close of the calendar year
in which the Participant attains age 70-1/2. However, if the
Participant, prior to incurring a Separation from Service,
attained age 70-1/2 by January 1, 1988, and, for the five Plan
Year period ending in the calendar year in which he attained
age 70-1/2 and for all subsequent years, the Participant was
not a more than 5% owner (as defined in Section 1.09(a)), the
Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from
Service, or, if earlier, the April 1 following the close of
the calendar year in which the Participant becomes a more than
5% owner. Furthermore, if a Participant attained age 70-1/2
during 1988 and did not incur a Separation from Service prior
to January 1,1989, his Required Beginning Date is April 1,
1990. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum (or, if applicable, the
normal annuity form of distribution required under Section
6.04) unless the Participant, pursuant to the provisions of
this Article VI, makes a valid election to receive an
alternative form of payment.
(1) GENERAL RULE. The required beginning date of a
participant is the first day of April of the calendar
year following the calendar year in which the
participant attains age 70-1/2.
(2) TRANSITIONAL RULES. The required beginning date of a
participant who attains age 70-1/2 before January
1, 1988, shall be determined in accordance with (a) or
(b) below:
(A) NON-FIVE PERCENT OWNERS. The required
beginning date of a participant who is not a
five-percent owner is the first day of April
of the calendar year following the calendar
year in which the later of retirement or
attainment of age 70-1/2 occurs.
(B) FIVE-PERCENT OWNERS. The required beginning
date of a participant who is a five-percent
owner during any year beginning after
December 31, 1979, is the first day of April
following the later of:
(i) the calendar year in which the
participant attains age 70-1/2, or
(ii) the earlier of the calendar year
with or within which ends the plan
year in which the participant
becomes a five-percent owner, or the
calendar year in which the
participant retires.
The required beginning date of a participant who is not a
five-percent owner who attains age 70-1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1, 1990.
(3) FIVE-PERCENT OWNER. A participant is treated as a
five-percent owner for purposes of this section if
such participant is a five-percent owner as defined
in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to
whether the plan is top-heavy) at any time during
the plan year ending with or within the calendar
year in which such owner attains age 66-1/2 or any
subsequent plan year.
(4) Once distributions have begun to a five-percent owner
under this section, they must continue to be
distributed, even if the participant ceases to be a
five-percent owner in a subsequent year.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct
the Trustee, in accordance with this Section 6.01(C), to
distribute to the Participant's Beneficiary the Participant's
Nonforfeitable Accrued Benefit remaining in the Trust at the
time of the Participant's death.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT
DOES NOT EXCEED $3,500. The Advisory Committee,
subject to the requirements of Section 6.04, must
direct the Trustee to pay the deceased Participant's
Nonforfeitable Accrued Benefit in a single cash sum,
as soon as administratively practicable following the
Participant's death or, if later, the date on which
the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
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<PAGE> 49
PLAN DOCUMENT
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEED
$3,500. The Advisory Committee will direct the Trustee to pay
the deceased Participant's Nonforfeitable Accrued Benefit at
the time and in the form elected by the Participant or, if
applicable by the Beneficiary, as permitted under this Article
VI. In the absence of an election, subject to the requirements
of Section 6.04, the Advisory Committee will direct the
Trustee to distribute the Participant's undistributed
Nonforfeitable Accrued Benefit in a lump sum on the first
distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death.
If the death benefit is payable to the Participant's surviving
spouse in full, the surviving spouse, in addition to the
distribution options provided in this Section 6.01(C), may
elect distribution at any time or in any form (other than a
joint and survivor annuity) this Article VI would permit for a
Participant.
Subject to Article VI Joint and Survivor Annuity Requirements,
the requirements of this Article shall apply to any
distribution of a participant's interest and will take
precedence over any inconsistent provisions of this plan.
Unless otherwise specified, the provisions of this Article
apply to the calendar year beginning after December 31, 1984.
All distributions required under this Article shall be
determined and made in accordance with the proposed
regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
6.02 "METHOD OF PAYMENT OF ACCRUED BENEFIT"
Subject to the annuity distribution requirements, if any, prescribed
by Section 6.04, and any restrictions prescribed by Section 6.03, a
Participant or Beneficiary may elect distribution under one, or any
combination, of the following methods: (a) by payment in a lump sum;
or (b) by payment in monthly, quarterly or annual installments over a
fixed reasonable period of time, not exceeding the life or life
expectancy of the Participant, or the joint and last survivor life or
life expectancy of the Participant and an individual the Participant
designates as his Beneficiary (his "designated Beneficiary").
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500. To facilitate installment payments under this Article
VI, the Advisory Committee may direct the Trustee to segregate all or
any part of the Participant's Accrued Benefit in a separate Account.
The Trustee will invest the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or
loss it incurs. A Participant or Beneficiary may elect to receive an
installment distribution in the form of a Nontransferable Annuity
Contract. Under an installment distribution, the Participant or
Beneficiary, at any time, may elect to accelerate the payment of all,
or any portion, of the Participant's unpaid Nonforfeitable Accrued
Benefit, subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS.
The Advisory Committee may not direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit,
nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of
payment which, as of the Required Beginning Date, does not
satisfy the minimum distribution requirements under Code
Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest
valuation date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his designated Beneficiary (as determined
under Section 8.01, subject to the requirements of the Code
Section 401(a)(9) regulations). The Advisory Committee will
increase the Participant's Nonforfeitable Accrued Benefit, as
determined on the relevant valuation date, for contributions
allocated after the valuation date and by December 31 of the
valuation calendar year, and will decrease the valuation by
distributions made after the valuation date and by December 31
of the valuation calendar year. For purposes of this
valuation, the Advisory Committee will treat any portion of
the minimum distribution for the first distribution calendar
year made after the close of that year as a distribution
occurring in that first distribution calendar year. In
computing a minimum distribution the Advisory Committee must
use the unisex life expectancy multiples under Treas. Reg.
Section 1.72-9. The Advisory Committee, only upon the
participant's written request, will not compute the minimum
distribution for a calendar year subsequent to the first
calendar year for which the Plan requires a minimum
distribution by redetermining the applicable life expectancy.
Otherwise, the Advisory Committee will redetermine the joint
life and last survivor expectancy of the Participant and a
nonspouse designated Beneficiary in a manner which takes into
account any adjustment to a life expectancy other than the
Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary,
a method of payment to the Participant (whether by Participant
election or by Advisory Committee direction) may not provide
more than incidental benefits to the Beneficiary. For Plan
Year beginning after December 31, 1988, the Plan must satisfy
the minimum distribution incidental benefit ("MDIB")
requirement in the Treasury regulations issued under Code
Section 401(a)(9) for distributions made on or after the
Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the
Advisory Committee will compute the minimum distribution
required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the
Participant's death, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) solely
on the basis of the applicable life expectancy factor and will
disregard the MDIB factor.
15
<PAGE> 50
For Plan Years beginning prior to January l, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement benefits
payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant
and his Beneficiaries. The Advisory Committee must determine
whether benefits to the Beneficiary are incidental as of the
date the Trustee is to commence payment of the retirement
benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar
year is due by the Participant's Required Beginning Date. The
minimum distribution for each subsequent distribution calendar
year, including the calendar year in which the Participant's
Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of
a Nontransferable Annuity Contract, the distribution satisfies
this Section 6.02(A) if the contract complies with the
requirements of Code Section 401(a)(9) and the applicable
Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES.
If any portion of the Participant's interest is payable to a
designated beneficiary, method of distribution to the
Participant's Beneficiary must satisfy Code Section 401(a)(9)
and the applicable Treasury regulations. If the Participant's
death occurs after his Required Beginning Date or, if earlier,
the date the Participant commences an irrevocable annuity
pursuant to Section 6.04, the method of payment to the
Beneficiary must provide for completion of payment over a
period which does not exceed the payment period which had
commenced for the Participant. If the Participant's death
occurs prior to his Required Beginning Date, and the
Participant had not commenced an irrevocable annuity pursuant
to section 6.04, the method of payment to the Beneficiary,
subject to Section 6.04, must provide for completion of
payment to the Beneficiary over a period not exceeding (i) by
December 31 of the calendar year containing the fifth
anniversary of the Participant's; or (ii) if the Beneficiary
is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of
the Participant's Nonforfeitable Accrued Benefit over a period
described in clause (ii) unless the Trustee will commence
payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which
the Participant's death occurred or, if later, and the
designated Beneficiary is the Participant's surviving spouse,
December 31 of the calendar year in which the Participant
would have attained age 70-1/2. If the Trustee will make
distribution in accordance with clause (ii), the minimum
distribution for a calendar year equals the Participant's
Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the
designated Beneficiary's life expectancy. The Advisory
Committee must use the unisex life expectancy multiples under
Treas. Section Reg. 1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written
request of the Participant or of the Participant's surviving
spouse, may recalculate the life expectancy of the
Participant's surviving spouse no more frequently than
annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary after the Trustee commences
payment to the designated Beneficiary. The Advisory Committee
will apply this paragraph by treating any amount paid to the
Participant's child, which becomes payable to the
Participant's surviving spouse upon the child's attaining the
age of majority, as paid to the Participant' surviving spouse.
Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon
as administratively practicable following the effective date
of that request.
If the participant has not made an election pursuant to this
Section 6.02 by the time of his or her death, the
participant's designated beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to
begin under this Section, or (2) December 31 of the calendar
year which contains the fifth anniversary of the date of death
of the participant. If the participant has no designated
beneficiary, or if the designated beneficiary does not elect a
method of distribution, distribution of the participant's
entire interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the
participant's death.
For purposes of this Section 6.02, if the surviving spouse
dies after the participant, but before payments to such spouse
begin, the provisions of this Section 6.02, with the exception
of paragraph (b) therein, shall be applied as if the surviving
spouse were the participant.
For the purposes of this Section 6.02, distribution of a
participant's interest is considered to begin on the
Participant's required beginning date (or the date
distribution is required to begin to the surviving spouse). If
distribution in the form of an annuity irrevocably commences
to the Participant before the required beginning date, the
date distribution is considered to begin is the date
distribution actually commences.
APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
16
<PAGE> 51
PLAN DOCUMENT
DISTRIBUTION CALENDAR YEAR. A calendar year for which a
minimum distribution is required. For distributions beginning
before the participant's death, the first distribution
calendar year is the calendar year immediately preceding the
calendar year which contains the participant's required
beginning date. For distributions beginning after the
participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin
pursuant to this Section 6.02 above.
6.03 "BENEFIT PAYMENT ELECTIONS"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features
and relative values of those options, and the Participant's right to
defer distribution until he attains the later of Normal Retirement Age
or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in
accordance with that election. Any election under this Section 6.03 is
subject to the requirements of Section 6.02 and of Section 6.04. The
Participant or Beneficiary must make an election under this Section
6.03 by filing his election with the Advisory Committee at any time
before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATE FROM SERVICE. If the
present value of a Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, he may elect to have the Trustee
commence distribution as of any distribution date, but not
earlier than the first distribution date of the first Plan
Year following the Participant's separation from service. The
Participant may reconsider an election at any time prior to
the annuity starting date and elect to commence distribution
as of any other distribution date. A Participant who has not
separated from Service may elect distribution as of any
distribution date following his attainment of Normal
Retirement Age.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. No
distribution options are permitted prior to a Participant's
Separation of Service.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
the Participant's Beneficiary may elect to have the Trustee
distribute the Participant's Nonforfeitable Accrued Benefit in
a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions
designated in writing by the Participant and not revoked as of
his date of death.
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of
Section 6.01 and 6.02, if the Participant (or Beneficiary)
signed a written distribution designation prior to January 1,
1984, the Advisory Committee must distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the requirements, if
applicable, of Sections 6.04, 6.05 and 6.06. This Section
6.03(D) does not apply to a pre-1984 distribution designation,
and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method
of distribution would have disqualified the Plan under Code
Section 401(a)(9) as in effect on December 31, 1983; (2) the
Participant did not have an Accrued Benefit as of December
31, 1983; (3) the distribution designation does not specify the
timing and form of the distribution and the death
Beneficiaries (in order of priority); (4) the substitution of
a Beneficiary modifies the payment period of the distribution;
or, (5) the Participant (or Beneficiary) modifies or revokes
the distribution designation. In the event of a revocation,
the Plan must distribute, no later than December 31 of the
calendar year following the year of revocation, the amount
which the Participant would have received under Section
6.02(A) if the election had not been in effect or, if the
Beneficiary revokes the election, the amount which the
Beneficiary would have received under Section 6.02(B) if the
election had not been in effect. The Advisory Committee will
apply this Section 6.03(D) to rollovers and transfers in
accordance with Part J of the Code Section 401(a)(9)
regulations.
6.04 "ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES"
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct
the Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified
joint and survivor annuity, unless the Participant makes a
valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. The
participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the plan. The
earliest retirement age is the earliest date on which, under
the plan, the participant could elect to receive retirement
benefits. If, as of the annuity starting date, the participant
is married, a qualified joint and survivor annuity is an
immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life
annuity for the Participant and a survivor annuity payable for
the remaining life of the Participant's surviving spouse equal
to not less than 50% and not more than 100% of the amount of
the annuity payable during the life of the Participant. If, as
of the annuity starting date, the Participant is not married,
a qualified joint and survivor annuity is an immediate life
annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the
annuity starting date, the Advisory Committee, without
Participant or spousal consent, must direct the Trustee to pay
the Participant's Nonforfeitable Accrued Benefit in a lump
sum, in lieu of a qualified joint and survivor annuity, in
accordance with Section 6.01, if the Participant's
Nonforfeitable Accrued Benefit is not greater than $3,500.
This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after
August 23, 1984.
17
<PAGE> 52
(B) PRE-RETIREMENT SURVIVOR ANNUITY. If a married Participant dies
prior to his annuity starting date, the Advisory Committee
will direct the Trustee to distribute a portion of the
Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a pre-retirement
survivor annuity, unless the Participant has a valid waiver
election (as described in Section 6.06) in effect within the
election period, or unless the Participant and his spouse were
not married throughout the one year period ending on the date
of his death. The surviving spouse may elect to have such
annuity distributed within a reasonable period after the
participant's death. The period which begins on the first day
of the plan year in which the participant attains age 35 and
ends on the date of the participant's death. If a participant
separates from service prior to the first day of the plan
year in which age 35 is attained, with respect to the account
balance as of the date of separation, the election period
shall begin on the date of separation. A pre-retirement
survivor annuity is an annuity which is purchasable with 50%
of the Participant's Nonforfeitable Accrued Benefit
(determined as of the date of the Participant's death) and
which is payable for the life of the Participant's surviving
spouse. The value of the pre-retirement survivor annuity is
attributable to Employer contributions and to Employee
contributions in the same proportion as the Participant's
Nonforfeitable Accrued Benefit is attributable to those
contributions. If the present value of the pre-retirement
survivor annuity does not exceed $3,500, the Advisory
Committee, on or before the annuity starting date (as
determined under Section 6.01(C)), must direct the Trustee to
make a lump sum distribution to the Participant's surviving
spouse, in lieu of a pre-retirement survivor annuity. This
Section 6.04(B) applies only to a Participant who dies after
August 22, 1984, and either (i) completes at least one Hour of
Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as
defined in Section 5.06) and completed at least one Hour of
Service with the Employer in a Plan Year beginning after
December 31, 1975.
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the
pre-retirement survivor annuity exceeds $3,500, the
Participant's surviving spouse may elect to have the Trustee
commence payment of the pre-retirement survivor annuity at any
time following the date of the Participant's death, but not
later than the mandatory distribution periods described in
Section 6.02, and may elect either or any combination of the
two forms of payment described in Section 6.02, in lieu of the
pre-retirement survivor annuity. In the absence of an election
by the surviving spouse, the Advisory Committee must direct
the Trustee to distribute the pre-retirement survivor annuity
on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs (i)
the Participant's death; (ii) the date the Advisory Committee
receives notification of or otherwise confirms the
Participant's death; (iii) the date the Participant would have
attained Normal Retirement Age; or (iv) the date the
Participant would have attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver
election regarding the qualified joint and survivor annuity or
the pre-retirement survivor annuity, the Advisory Committee
must direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with Sections
6.01, 6.02 and 6.03. For purposes of applying this Article VI,
the Advisory Committee treats a former spouse as the
Participant's spouse or surviving spouse, and a current spouse
will not be treated as the spouse or surviving spouse, to the
extent provided under a qualified domestic relations order
described in Section 6.07. The provisions of this Section
6.04, and of Sections 6.05 and 6.06, apply separately to the
portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the
portion of the Participant's Nonforfeitable Accrued Benefit
not subject to that order. The spouse (surviving spouse) is
the spouse or surviving spouse of the participant, provided
that a former spouse will be treated as the spouse or
surviving spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided under a
qualified domestic relations order as described in Section
414(p) of the Code.
(E) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing
plan, the preceding provisions of this Section 6.04 do not
apply to any Participant in the Plan except: (1) a Participant
as respects whom the Plan is a direct or indirect transferee
from a plan subject to the Code Section 417 requirements and
the Plan received the transfer after December 31, 1984, unless
the transfer is an elective transfer described in Section
12.06; (2) a Participant who elects a life annuity
distribution (if Section 12.02 of the Plan requires the Plan
to provide a life annuity distribution option); and (3) a
Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided
under this Plan. Sections 6.05 and 6.06 only apply to
Participants to whom the preceding provisions of this Section
6.04 apply.
This Section shall apply to a participant in a profit-sharing
plan, and to any distribution, made on or after the first day
of the first plan year beginning after December 31, 1988, from
or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of a
participant in a money purchase pension plan (including a
target benefit plan), if the following conditions are
satisfied: (1) the participant does not or cannot elect
payments in the form of a life annuity; and (2) on the death
of a participant, the participant's vested account balance
will be paid to the participant's surviving spouse, but if
there is no surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified election, then
to the participant's designated beneficiary. The surviving
spouse may elect to have distribution of the vested account
balance commence within the 90-day period following the date
of the participant's death. The account balance shall be
adjusted for gains or losses occurring after the participant's
death in accordance with the provision of the plan governing
the adjustment of account balances for other types of
distributions. This section Section 6.04(E) shall not be
operative with respect to a participant in a profit-sharing
plan if the plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a target benefit
plan, stock bonus, or profit-sharing plan which is subject to
the survivor annuity requirements of Section 401(a)(11) and
Section 417. If this Section 6.04(E) is operative, then the
provisions of this Article, other than this Section 6.04,
shall be inoperative.
18
<PAGE> 53
The participant may waive the spousal death benefit described in this
Section at any time provided that no such waiver shall be effective
unless it satisfies the conditions of Section 6.05 (other than the
notification requirement referred to therein) that would apply to the
participant's waiver of the qualified pre-retirement survivor annuity.
For purposes of this Section 6.04(E), vested account balance shall
mean, in the case of a money purchase pension plan or a target benefit
plan, the participant's separate account balance attributable solely
to accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code. In the case of a profit-sharing plan,
vested account balance shall have the same meaning as Nonforfeitable
Accrued Benefit.
6.05 "WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY"
Not earlier than 90 days before nor later than 30 days before the
Participant's annuity starting date, the Plan Administrator must
provide the Participant a written explanation of the terms and
conditions of the qualified joint and survivor annuity, the
Participant's right to make, and the effect of, an election to waive
the joint and survivor form of benefit, the rights of the
Participant's spouse regarding the waiver election and the
Participant's right to make, and the effect of, a revocation of a
waiver election. The Plan does not limit the number of times the
Participant may revoke a waiver of the qualified joint and survivor
annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under
the qualified joint and survivor annuity) has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of
the election, and a notary public or the Plan Administrator (or his
representative) witnesses the spouse's consent, (b) the election
designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the participant without any further spousal consent;
(c) the spouse consents to the alternate form of payment designated by
the Participant or to any change in that designated form of payment,
and (d) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary
designation or to any change in the Participant's Beneficiary
designation. The spouse's consent to a waiver of the qualified joint
and survivor annuity is irrevocable, unless the Participant revokes
the waiver election. The spouse may execute a blanket consent to any
form of payment designation or to any Beneficiary designation made by
the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right.
The consent requirements of this Section 6.05 apply to a former spouse
of the Participant, to the extent required under a qualified domestic
relations order described in Section 6.07. A revocation of a prior
waiver may be made by a participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the participant has received notice as
provided in this Section 6.05.
The Plan Administrator will accept as valid a waiver election which
does not satisfy the spousal consent requirements if the Plan
Administrator establishes the Participant does not have a spouse, the
Plan Administrator is not able to locate the Participant's spouse, the
Participant is legally separated or has been abandoned (within the
meaning of State law) and the Participant has a court order to that
effect, or other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement. If the Participant's
spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
Any consent obtained from a spouse shall be effective only with
respect to such spouse.
6.06 "WAIVER ELECTION - PRE-RETIREMENT SURVIVOR ANNUITY"
The Plan Administrator must provide a written explanation of the
pre-retirement survivor annuity to each married Participant, within
the following period which ends last: (1) the period beginning on the
first day of the Plan Year in which the Participant attains age 32 and
ending on the last day of the Plan Year in which the Participant
attains age 35; (2) a reasonable period ending after an Employee
becomes a Participant; (3) a reasonable period ending after the joint
and survivor rules become applicable to the Participant; or (4) a
reasonable period ending after a fully subsidized pre-retirement
survivor annuity no longer satisfies the requirements for a fully
subsidized benefit. A reasonable period described in clauses (2), (3)
and (4) is the two-year period beginning one year before and ending
one year after the applicable event. If the Participant separates from
Service before attaining age 35, clauses (1), (2), (3) and (4) do not
apply and the Plan Administrator must provide the written explanation
within the two-year period beginning one year before and ending one
year after the Separation from Service. The written explanation must
describe, in a manner consistent with Treasury regulations, the terms
and conditions of the pre-retirement survivor annuity comparable to
the explanation of the qualified joint and survivor annuity required
under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the pre-retirement survivor annuity
or make a new waiver during the election period.
A Participant's waiver election of the pre-retirement survivor annuity
is not valid unless (a) the Participant makes the waiver election no
earlier than the first day of the Plan Year in which he attains age 35
and (b) the Participant's spouse (to whom the pre-retirement survivor
annuity is payable) satisfies the consent requirements described in
Section 6.05, except the spouse need not consent to the form of
benefit payable to the designated Beneficiary. The spouse's consent to
the waiver of the pre-retirement survivor annuity is irrevocable,
unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the
Participant separates from Service prior to the first day of the Plan
Year in which he attains age 35, the Plan Administrator will accept a
waiver election as respects the Participant's Accrued Benefit
attributable to his Service prior to his Separation from Service. If
the participant thereafter returns to employment with the employer,
the applicable period for such participant shall be redetermined.
Pre-age 35
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waiver: A participant who will not yet attain age 35 as of the end of
any current Plan Year may make a special qualified election to waive
the qualified pre-retirement survivor annuity for the period beginning
on the date of such election and ending on the first day of the Plan
Year in which the participant will attain age 35. Such election shall
not be valid unless the participant receives a written explanation of
the qualified pre-retirement survivor annuity in such terms as are
comparable to the explanation required under Section 6.05. Qualified
pre-retirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
participant attains age 35. Any new waiver on or after such date shall
be subject to the full requirements of this Article.
Notwithstanding the other requirements of this Section 6.06, the
respective notices prescribed by this Section need not be given to a
participant if (1) the plan "fully subsidizes" the costs of a
qualified joint and survivor annuity or qualified pre-retirement
survivor annuity, and (2) the plan does not allow the participant to
waive the qualified joint and survivor annuity or qualified
pre-retirement survivor annuity and does not allow a married
participant to designate a nonspouse beneficiary. For purposes of this
Section 6.06, a plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the participant may
result from the participant's failure to elect another benefit. Any
consent obtained from a spouse shall be effective only with respect to
such spouse.
6.07 "DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS"
Nothing contained in this Plan prevents the Trustee, in accordance
with the direction of the Advisory Committee, from complying with the
provisions of a qualified domestic relations order (as defined in Code
Section 414(p)). This Plan specifically permits distribution to an
alternate payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's
attainment of earliest retirement age is available only if: (l) the
order specifies distribution at that time or permits an agreement
between the Plan and the alternate payee to authorize an earlier
distribution; and (2) if the present value of the alternate payee's
benefits under the Plan exceeds $3,500, and if the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this
Section 6.07 permits a Participant a right to receive distribution at
a time otherwise not permitted under the Plan nor does it permit the
alternate payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon
receiving a domestic relations order, the Plan Administrator promptly
will notify the Participant and any alternate payee named in the
order, in writing, of the receipt of the order and the Plan's
procedures for determining the qualified status of the order. Within a
reasonable period of time after receiving the domestic relations
order, the Plan Administrator must determine the qualified status of
the order and must notify the Participant and each alternate payee, in
writing, of its determination. The Plan Administrator must provide
notice under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner consistent
with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order,
the Advisory Committee must make a separate accounting of the amounts
payable. If the Plan Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first
are payable following receipt of the order, the Advisory Committee
will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Plan Administrator does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee
to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct
the Trustee to invest any partitioned amount in a segregated
subaccount or separate account and to invest the account in Federally
insured, interest-bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A
segregated subaccount remains a part of the Trust, but it alone shares
in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distributions required
under this Section 6.07 by separate benefit checks of other separate
distribution to the alternate payee(s).
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PLAN DOCUMENT
ARTICLE VII
TRUSTEE, POWERS AND DUTIES
7.01 "INVESTMENT OF TRUST ASSETS"
The Trustee shall accept and hold in the Trust such contributions of
money on behalf of the Employer and Participants as it may receive
from time to time, but not more frequently than once each month, from
the Employer. All such contributions of money shall be accompanied by
written instructions from the Employer specifying the Participants'
sub-accounts to which they are to be credited, the amount to be
invested in and the choice of Designated Investment Company stock, and
by furnishing such instructions the Employer represents to the Trustee
that the same are in accordance with any uniform rules adopted by the
Employer and made known to Participants. If written instructions are
not received, or if received, are in the opinion of the Trustee
unclear, the Trustee may hold all or a portion of the contributions in
cash without liability for rising security prices or distributions,
pending receipt of written instructions or clarification. A
Participant, through his Employer, may request an exchange of all or
part of the investment company shares held hereunder for any other
investment company shares eligible for purchase under the Plan, upon
terms and conditions and within the limitations imposed by the then
current prospectuses of the respective investment companies.
Investment in shares of the Designated Investment Company shall be
made at the price and in the manner in which such shares are then
being publicly offered by such investment company. All dividends and
capital gain distributions received on such shares shall be reinvested
in such shares. If any distribution on shares of the fund may be
received at the election of the shareholder in additional shares or in
cash or other property, the Trustee shall elect to receive it in
additional shares. Sales charges attributable to the acquisition of
shares shall be charged to the account of the Participant for which
such shares are acquired. All investment company shares acquired by
the Trustee shall be registered in the name of the Trustee or of its
registered nominee.
The Employer shall remit directly to the insurance company any
premiums life insurance or annuities which constitute contributions
under the Plan, and the Trustee shall have no duty to account
therefor. Any such life insurance and/or annuity contracts shall be
issued in restricted and nontransferable form and be held by the
Employer.
7.02 "VOTING AND OTHER ACTIONS"
The Trustee shall deliver, or cause to be executed and delivered, to
the Employer all notices, prospectuses, financial statements, proxies,
and proxy soliciting material relating to shares of Designated
Investment Company stock held pursuant to the Plan. The Trustee shall
not vote any of the shares of the Fund held hereunder.
7.03 "REPORTS OF THE TRUSTEE AND EMPLOYER"
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions under this Trust.
Not later than forty-five (45) days after the close of each Plan Year
(or after the Trustee's resignation or removal pursuant to Section XI
hereof), the Trustee shall file with the Employer and each Participant
or Beneficiary for whom account is maintained by the Trustee under
this Agreement a written report or reports reflecting the receipts,
disbursements and other transactions effected by it during such Plan
Year (or period ending with such resignation or removal) and the
assets and liabilities of such account at its close. Upon the
expiration of a period of sixty (60) days immediately following the
date on which such reports are filed, the Trustee shall be forever
released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties, obligations or
responsibility as shown in or reflected by such reports, except with
respect to any such acts or transactions as to which written
objections have been filed with the Trustee within such sixty day
period.
The Employer shall furnish to the Trustee, and the Trustee shall
furnish to the Employer, such information relevant to the Plan and
Trust as may be required under the Internal Revenue Code and any
Regulations issued or forms adopted by the Treasury Department
thereunder.
The Trustee shall keep such records, make such identifications, and
file with the Internal Revenue Service such returns and other
information concerning the Trust as may be required of it under the
Internal Revenue Code and any Regulations issued or forms adopted by
the Treasury Department thereunder.
7.04 "TRUSTEE FEES AND EXPENSES OF THE ACCOUNT"
Any income taxes or other taxes of any kind whatsoever that may be
levied or assessed upon or in respect of the Trust, any transfer taxes
incurred in connection with the investment and reinvestment of the
assets of the Trust, all other administrative expenses incurred by the
Trustee in the performance of its duties including fees for legal
services rendered to the Trustee, and such compensation to the Trustee
as may be agreed upon from time to time between the Trustee and the
Employer shall be paid from the assets of the Trust and shall, unless
allocable to the Accounts of specific Participants, be charged
proportionately to their respective accounts.
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<PAGE> 56
7.05 "CONCERNING THE TRUSTEE"
The Trustee shall not be responsible in any way for the collection of
contributions provided for under the Plan, the purpose or propriety of
any distribution made pursuant to Section V hereof, or any other
action taken at the Employer's request. Nor shall the Trustee be
responsible for the administration of the Plan, its validity or
effect, or the qualification of the Plan or of the Trust Agreement
under the provisions of the Internal Revenue Code. The Trustee shall
not be required to examine the Plan or be charged with notice of its
provisions. The Trustee shall not be required to take any action upon
receipt of any notice from the Internal Revenue Service except to
forward a copy thereof to the Employer with a request for written
instructions. The Employer shall at all times fully indemnify and save
harmless the Trustee, its successors and assigns, from and against any
and all loss resulting from liability to which the Trustee may be
subject by reason of any act or conduct (except willful misconduct or
gross negligence) in its capacity as Trustee hereunder, including all
expenses reasonably incurred in its defense, in case the Employer
fails to provide such defense. The Trustee shall be under no duty to
take any action other than as herein specified with respect to the
Trust unless the Employer shall furnish the Trustee with instructions
in proper form and as authorized by the terms of the Plan; or to
defend or engage in any suit with respect to the Trust unless the
Trustee shall have first agreed in writing to do so and shall have
been fully indemnified to the satisfaction of the Trustee. The Trustee
shall be protected in acting upon any written order from the Employer
or any other notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly
executed, and, so long as it acts in good faith, in taking or omitting
to take any other action. The Trustee shall not be liable for interest
on any cash or cash balances maintained in the Trust pending
investment in accordance with appropriate directions from the
Employer.
7.06 "AMENDMENT"
If the Employer's plan fails to attain or retain qualification, such
plan will no longer participate in the prototype Plan and will be
considered an individually designed plan.
7.07 "RESIGNATION OR REMOVAL OF TRUSTEE"
The Trustee may resign at any time upon thirty (30) days notice in
writing to the Employer, and may be removed by the Employer at any
time upon thirty (30) days notice in writing to the Trustee. Upon such
resignation or removal, the Employer shall appoint a successor
Trustee. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and
pay over to such successor the assets of the Trust Account and all
records pertaining thereto. The Trustee is authorized, however, to
reserve such sum of money as it may deem advisable for payment of all
its fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the
Trust or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid
over to it under terms similar to those of this Agreement that qualify
under section 401 of the Code. If within thirty (30) days after the
Trustee's resignation or removal the Employer has not appointed a
successor Trustee which has accepted such appointment, the Trustee
shall, unless it elects to terminate the Trust pursuant to Section
XII, appoint such successor itself.
7.08 "TERMINATION OF TRUST"
The Trustee may elect to terminate the Trust if within thirty (30)
days after its resignation or removal pursuant to Section X the
Employer has not appointed a successor Trustee which has accepted such
appointment. The Trustee shall terminate the Trust upon receiving
notice of the Employer's death, if the Employer is a sole proprietor,
or upon receiving notice of the termination of the partnership, if the
Employer is a partnership, or upon receiving notice of the dissolution
of the corporation, if the Employer is a corporation, unless provision
is made by a successor to the business of the Employer for the
continuation of the Plan and this Agreement upon terms satisfactory to
the Trustee.
Termination of the Trust shall be effected by distributing all assets
thereof to the Participants and their designated beneficiaries
pursuant to the direction of the Employer (or in the absence of such
direction as determined by the Trustee), as on the termination of the
Plan. Upon the completion of such distribution, the Trustee shall be
relieved from all further liability with respect to all amounts so
paid.
7.09 "MISCELLANEOUS"
At no time shall it be possible for any part of the assets of the
Trust to be used for or diverted to purposes other than for the
exclusive benefit of Participants and Beneficiaries.
Any notice from the Trustee to the Employer, Participant or
Beneficiary provided for in this Agreement shall be effective if sent
by first class mail to the last address of record.
Upon receipt of a written request from the Employer, the Trustee shall
transfer the assets in the Trust for a Participant to any other
qualified plan maintained by the Employer for the benefit of such
Participant; and the Trustee shall have no further liability under the
Plan and Trust with respect to any assets so transferred.
This Agreement shall bind and inure to the benefit of the personal
representatives, successors and assigns of the Employer and the
Trustee.
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<PAGE> 57
PLAN DOCUMENT
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 "BENEFICIARY DESIGNATION"
Any Participant may from time to time designate, in writing, any
person or persons, contingently or successively, to whom the Trustee
will pay his Accrued Benefit (including any life insurance proceeds
payable to the Participant's Account) on event of his death and the
Participant may designate the form and method of payment. The Advisory
Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the
Advisory Committee, the form effectively revokes all designations
filed prior to that date by the same Participant.
COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01
does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of
spousal consent (as required by Article VI) to the Beneficiary
designation: (1) any waiver of the joint and survivor annuity or of
the pre-retirement survivor annuity is not valid; and (2) if the
Participant dies prior to his annuity starting date, the Beneficiary
designation will apply only to the portion of the death benefit which
is not payable as a pre-retirement survivor annuity.
PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan,
and the Employer elects to apply the joint and survivor requirements
only to Participants described in Section 6.04(E), the Beneficiary
designation of a married Participant who is not described in Section
6.04(E) is not valid unless the Participant's spouse consents (in a
manner described in Section 6.05) to the Beneficiary designation. The
spousal consent requirement in this paragraph does not apply if the
Participant and his spouse are not married throughout the one year
period ending on the date of the Participant's death, or if the
Participant's spouse is the Participant's sole primary Beneficiary.
8.02 "NO BENEFICIARY DESIGNATION"
If a Participant fails to name a Beneficiary in accordance with
Section 8.01, or if the Beneficiary named by a Participant predeceases
him or dies before complete distribution of the Participant's Accrued
Benefit as prescribed by the Participant's Beneficiary form, then the
Trustee will pay the Participant's Accrued Benefit in accordance with
Section 6.02 in the following order of priority:
(A) The Participant's surviving spouse;
(B) The Participant's surviving children, including adopted
children, in equal shares;
(C) The Participant's surviving parents, in equal shares; or
(D) The legal representative of the estate of the last to die of
the Participant and his Beneficiary.
The Advisory Committee will direct the Trustee as to the method and to
whom the Trustee will make payment under this Section 8.02. If a
benefit is forfeited because the participant or beneficiary cannot be
found, such benefit will be reinstated if a claim is made by the
participant or beneficiary.
8.03 "PERSONAL DATA TO COMMITTEE"
Each Participant and each Beneficiary of a deceased Participant must
furnish to the Advisory Committee such evidence, data or information
as the Advisory Committee considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition
precedent that each Participant will furnish promptly full, true and
complete evidence, data and information when requested by the Advisory
Committee, provided the Advisory Committee advises each Participant of
the effect of his failure to comply with its request.
8.04 "ADDRESS FOR NOTIFICATION"
Each Participant and each Beneficiary of a deceased Participant must
file with the Advisory Committee from time to time, in writing, his
post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or
Beneficiary, at his last post office address filed with the Advisory
Committee, or as shown on the records of the Employer, binds the
Participant, or Beneficiary, for all purposes of this Plan.
8.05 "ASSIGNMENT OR ALIENATION"
Subject to Code Section 414(p) relating to qualified domestic
relations orders or domestic relations orders entered into before
January 1, 1985, neither a Participant nor a Beneficiary may
anticipate, assign or alienate voluntarily or involuntarily (either at
law or in equity) any benefit provided under the Plan, and the Trustee
will not recognize any such anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
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<PAGE> 58
8.06 "NOTICE OF CHANGE IN TERMS"
The Plan Administrator, within the time prescribed by ERISA and the
applicable regulations, must furnish all Participants and
Beneficiaries a summary description of any material amendment to the
Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 "LITIGATION AGAINST THE TRUST"
A court of competent jurisdiction may authorize any appropriate
equitable relief to redress violations of ERISA or to enforce any
provisions of ERISA or the terms of the Plan. A fiduciary may receive
reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 "INFORMATION AVAILABLE"
Any Participant in the Plan or any Beneficiary may examine copies of
the Plan description, latest annual report, any bargaining agreement,
this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office,
or in such other place or places as he may designate from time to time
in order to comply with the regulations issued under ERISA, for
examination during reasonable business hours. Upon the written request
of a Participant or Beneficiary the Plan Administrator must furnish
him with a copy of any item listed in this Section 8.08. The Plan
Administrator may make a reasonable charge to the requesting person
for the copy so furnished.
8.09 "APPEAL PROCEDURE FOR DENIAL OF BENEFITS"
The Plan Administrator must provide adequate notice in writing to any
Participant or to any Beneficiary ("Claimant") whose claim for
benefits under the Plan the Advisory Committee has denied. The Plan
Administrator's notice to the Claimant must set forth:
(A) The specific reason for the denial;
(B) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(C) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed; and
(D) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee
within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice
must further advise the Claimant that his failure to appeal
the action to the Advisory Committee in writing within the
75-day period will render the Advisory Committee's
determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever
issues and comments he, or his duly authorized representative, feels
are pertinent. The Claimant, or his duly authorized representative,
may review pertinent Plan documents. The Advisory Committee will
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under
the circumstances. The Advisory Committee must advise the Claimant of
its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make
the rendering of a decision within the 60-day limit unfeasible, but in
no event may the Advisory Committee render a decision respecting a
denial for a claim for benefits later than 120 days after its receipt
of a request for review.
The Plan Administrator's notice of denial of benefit must identify the
name of each member of the Advisory Committee and the name and address
of the Advisory Committee member to whom the Claimant may forward
his appeal.
8.10 "PARTICIPANT DIRECTION OF INVESTMENT"
A Participant has the right to direct the Employer with respect to the
investment or re-investment of the assets comprising the Participant's
individual Account only if the Employer consents in writing to permit
such direction. If the Employer consents to Participant direction of
investment, the Employer and each Participant must execute a letter
agreement as a part of this Plan containing such conditions,
limitations and other provisions they deem appropriate before the
Employer will follow any Participant direction as respects the
investment or re-investment of any part of the Participant's
individual Account. The Employer is not liable for any loss, nor is
liable for any breach, resulting from a Participant's direction of the
investment of any part of his individual Account.
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<PAGE> 59
PLAN DOCUMENT
ARTICLE IX
ADVISORY COMMITTEE -
DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 "MEMBERS' COMPENSATION, EXPENSES"
The Employer must appoint an Advisory Committee to administer the
Plan, the members of which may or may not be Participants in the Plan,
or which may be the Plan Administrator acting alone. The members of
the Advisory Committee will serve without compensation for services as
such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 "TERM"
Each member of the Advisory Committee serves until the appointment of
his successor.
9.03 "POWERS"
In case of a vacancy in the membership of the Advisory Committee, the
remaining members of the Advisory Committee may exercise any and all
of the powers, authority, duties and discretion conferred upon the
Advisory Committee pending the filling of the vacancy.
9.04 "GENERAL"
The Advisory Committee has the following powers and duties:
(A) To select a Secretary, who need not be a member of
the Advisory Committee;
(B) To determine the rights of eligibility of an Employee
to participate in the Plan, the value of a
Participant's Accrued Benefit and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(C) To adopt rules of procedure and regulations necessary
for the proper and efficient administration of the
Plan provided the rules are not inconsistent with the
terms of this Agreement;
(D) To enforce the terms of the Plan and the rules and
regulations it adopts;
(E) To direct the Trustee as respects the crediting and
distribution of the Trust;
(F) To review and render decisions respecting a claim for
(or denial of a claim for) a benefit under the Plan;
(G) To furnish the Employer with information which the
Employer may require for tax or other purposes;
(H) To engage the service of agents whom it may deem
advisable to assist it with the performance of its
duties;
(I) To establish and maintain a funding standard account
and to make credits and charges to the account to the
extent required by and in accordance with the
provisions of the Code.
The Advisory Committee must exercise all of its powers, duties
and discretion under the Plan in a uniform and
nondiscriminatory manner.
9.05 "FUNDING POLICY"
The Advisory Committee will review, not less often than annually, all
pertinent Employee information and Plan data in order to establish the
funding policy of the Plan and to determine the appropriate methods of
carrying out the Plan's objectives.
9.06 "MANNER OF ACTION"
The decision of a majority of the members appointed and qualified
controls.
9.07 "INTERESTED MEMBER"
No member of the Advisory Committee may decide or determine any matter
concerning the distribution, nature or method of settlement of his own
benefits under the Plan, except in exercising an election available to
that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory
Committee.
9.08 "INDIVIDUAL ACCOUNTS"
The Advisory Committee will maintain, or direct the Trustee to
maintain, a separate Account, or multiple Accounts, in the name of
each Participant to reflect the Participant's Accrued Benefit under
the Plan.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants
in accordance with the provisions of Section 9.11. The Advisory
Committee may direct the Trustee to maintain a temporary segregated
investment Account in the name of a Participant to prevent a
distortion of income, gain or loss allocations under Section 9.11. The
Advisory Committee must maintain records of its activities.
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9.09 "VALUE OF PARTICIPANT'S ACCRUED BENEFIT"
The value of each Participant's Accrued Benefit consists of that
proportion of the net worth (at fair market value) of the Employer's
Trust Fund which the net credit balance in his Account (exclusive of
the cash value of incidental benefit insurance contracts) bears to the
total net credit balance in the Accounts (exclusive of the cash value
of the incidental benefit insurance contracts) of all Participants
plus the cash surrender value of any incidental benefit insurance
contracts held by the Employer on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date
immediately preceding the date of the distribution.
9.10 "ALLOCATIONS AND DISTRIBUTION OF NET INCOME GAIN OR LOSS"
A "valuation date" under this Plan is each Accounting Date. As of each
valuation date, the Advisory Committee must adjust Accounts to reflect
net income, gain or loss since the last valuation date. The valuation
period is the period beginning the day after the last valuation date
and ending on the current valuation date.
The assets of the trust will be valued annually at fair market value
as of the last day of the plan year. On such date, the earnings and
losses of the trust will be allocated to each participant's account in
the ratio that such account balance bears to all account balances.
TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply
to all Participant Accounts other than segregated investment Accounts.
The Advisory Committee first will adjust the Participant Accounts, as
those Accounts stood at the beginning of the current valuation period,
for amounts charged during the valuation period to the Accounts in
accordance with Section 9.12 (relating to distributions) and Section
10.01 (relating to insurance premiums), for the cash value of
incidental benefit insurance contracts and for the amount of any
Account which the Trustee has fully distributed since the immediately
preceding valuation date. The Advisory Committee subject to Section
9.12, will allocate the net income, gain or loss pro rata to the
adjusted Participant Accounts. The allocable net income, gain or loss
is the net income (or net loss), including the increase or decrease in
the fair market value of assets, since the last valuation date.
SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
ADDITIONAL RULES. An Excess Amount or suspense account
described in Part 2 of Article III does not share in the allocation of
net income, gain or loss described in this Section 9.10. If the
Employer's Plan includes a Code Section 401(k) arrangement, the
Employer may specify in its Adoption Agreement alternate valuation
provisions authorized by that Adoption Agreement. This Section 9.10
applies solely to the allocation of net income, gain or loss of the
Trust. The Advisory Committee will allocate the Employer contributions
in accordance with Article III.
9.11 "INDIVIDUAL STATEMENT"
As soon as practicable after the Accounting Date of each Plan Year,
but within the time prescribed by ERISA and the regulations under
ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA
requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect
the records reflecting the Account of any other Participant.
9.12 "ACCOUNT CHARGED"
The Advisory Committee will charge all distributions made to a
Participant or to his Beneficiary from his Account against the Account
of the Participant when made.
9.13 "MISSING BENEFICIARY"
If the Employer shall be unable to locate any Beneficiary entitled to
receive payment of any death benefit payable hereunder, after
reasonable search, for a period of two years after such benefit
becomes payable, the amount of such benefit shall cease to be payable
to such Beneficiary, and shall become payable instead to the personal
representative of such former Participant.
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PLAN DOCUMENT
ARTICLE X
PROVISIONS RELATING TO INSURANCE
10.01 "INSURANCE BENEFIT ANNUITY"
The Employer in accordance with the direction of the respective
Participants in accordance with any uniform rules adopted by the
Employer and made known to Participants may elect to invest
contributions to the Plan in incidental life insurance benefits or
one or more annuity contracts distributed by Kemper Financial
Services, Inc. or an affiliate, provided, however, that:
(A) ORDINARY LIFE. The premiums paid for ordinary life
insurance on the life of a Participant must at all times
be less than 50% of the Employer contributions made on
behalf of such Participant. For purposes of these
incidental insurance provisions, ordinary life insurance
contracts are contracts with both nondecreasing death
benefits and nonincreasing premiums.
(B) TERM. The premiums paid for term, universal and all
other life insurance which is not ordinary life insurance
on the life of any Participant may not exceed 25% of the
Employer contributions made on behalf of such
Participant.
(C) COMBINATION. If both ordinary life and term insurance are
purchased on the life of any Participant, the sum of the term
insurance premium plus one-half of the ordinary life premiums
may not exceed 25% of the Employer contributions made on
behalf of such Participant.
(D) ANNUITIES. The terms of any annuity contract purchased
and distributed by the Plan to a Participant shall comply
with the requirements of this Plan.
Such direction of the participant's creates a segregated
asset account. Except as provided in this Section 10.01
and Section 8.10, each participant will have a ratable
interest in all assets of the trust. It will be the
Employer's responsibility to see that the limitations of
this Article X are not exceeded.
10.02 "FORM OF CONTRACT AND PREMIUM"
The Employer shall apply for any contract under this Article X and
each application for contract, and the contracts themselves, shall
nominate and designate the Participant as sole owner, but each
contract shall be held by the Employer and shall be restricted and
not transferable.
The Employer shall pay directly to the insurance company all
amounts pursuant to an election under this Article X and shall
charge the premiums on any such contract(s) against the
contributions by or on behalf of such Participant. After payment
of any premium, the Employer shall remit the balance of such
contributions to the Trustee hereunder. The Employer shall hold
all contracts issued under the Plan and fully account for same to
the Trustee upon written request.
In the event of any conflicts between the terms of this Plan and
the terms of any insurance contracts hereunder, the Plan provisions
shall control.
Any dividends or credits earned on insurance contracts will be
allocated to the participant's account derived from employer
contributions for whose benefit the contract is held.
10.03 "LIMITATION OF LIFE INSURANCE PROTECTION"
The Employer shall not continue any life insurance protection for
any Participant beyond his actual termination of employment.
If the Employer holds any insurance contract(s) on the life of a
Participant when the Participant terminates his employment, subject
to Article VI, the Employer shall transfer the contract(s) to the
Participant endorsed so as to vest in the transferee all right,
title and interest to the contract(s), free and clear of the Plan;
subject, however, to restrictions as to surrender or payment of
benefits as the issuing insurance company may permit and as the
Employer shall direct.
Subject to Article VI, Joint and Survivor Annuity Requirements, the
contracts on a participant's life will be converted to cash or an
annuity or distributed to the participant upon commencement of
benefits.
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ARTICLE XI MISCELLANEOUS
11.01 "EVIDENCE"
Anyone required to give evidence under the terms of the Plan may do
so by certificate, affidavit, document or other information which the
person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper
party or parties. Both the Advisory Committee and the Trustee are
fully protected in acting and relying upon any evidence described
under the immediately preceding sentence.
11.02 "NO RESPONSIBILITY FOR EMPLOYER ACTION"
Neither the Trustee nor the Advisory Committee has any obligation or
responsibility with respect to any action required by the Plan to be
taken by the Employer, any Participant or eligible Employee, or for
the failure of any of the above persons to act or make any payment or
contribution, or to otherwise provide any benefit contemplated under
this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the
Plan, or to determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Advisory Committee need
inquire into or be responsible for any action or failure to act on
the part of the others. Any action required of a corporate Employer
must be by its Board of Directors or its designate.
11.03 "FIDUCIARIES NOT INSURERS"
The Trustee, the Advisory Committee, the Plan Administrator and the
Employer in no way guarantee the Trust Fund from loss or
depreciation. The Employer does not guarantee the payment of any
money which may be or becomes due to any person from the Trust Fund.
The liability of the Advisory Committee and the Trustee to make any
payment from the Trust Fund at any time and all times is limited to
the then available assets of the Trust.
11.04 "WAIVER OF NOTICE"
Any person entitled to notice under the Plan may waive the notice.
11.05 "SUCCESSORS"
The Plan is binding upon all persons entitled to benefits under the
Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the
Advisory Committee, the Plan Administrator and their successors.
11.06 "WORD USAGE"
Words used in the masculine also apply to the feminine where
applicable, and wherever the context of the Employer's Plan dictates,
the plural includes the singular and the singular includes the
plural.
11.07 "EMPLOYER'S RIGHT TO PARTICIPATE"
If the Employer's Plan fails to attain or retain qualification under
section 401 of the Code, the Plan will no longer participate in this
Kemper Simplified Prototype Retirement Plan and will be considered an
individually-designed plan.
11.08 "EMPLOYMENT NOT GUARANTEED"
Nothing contained in this Plan, or with respect to the establishment
of the Trust, or any modification of amendment to the Plan or Trust,
or in the creation of any Account, or the payment of any benefit,
gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the
Employer, or Employee of the Employer, or against the Trustee, or its
agents or employees, or against the Plan Administrator, except as
expressly provided by the Plan, the Trust, ERISA or by a separate
agreement.
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PLAN DOCUMENT
ARTICLE XII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 "EXCLUSIVE BENEFIT"
Any contribution made by the employer because of a mistake of fact
must be returned to the employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines
that the plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the employer must be returned to the employer within one year after
the date the initial qualification is denied, but only if the
application for the qualification is made by the time prescribed by
law for filing the employer's return for the taxable year in which
the plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
12.02 "AMENDMENT BY EMPLOYER"
The Employer may change the choice of options in the adoption
agreement and add overriding language in the adoption agreement when
such language is necessary to satisfy Section 415 or Section 416 of
the Code because of the required aggregation of multiple plans, and
add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause
the plan to be treated as individually designed. An employer that
amends the plan for any other reason, including a waiver of the
minimum funding requirement under Section 412(d), will no longer
participate in this master or prototype plan and will be considered
to have an individually designed plan.
No amendment may authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the
exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer. The Employer
also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the
Advisory Committee without the written consent of the affected
Trustee, the Plan Administrator or the affected member of the
Advisory Committee.
If the plan's vesting schedule is amended, or the plan is amended in
any way that directly or indirectly affects the computation of the
participant's nonforfeitable percentage or if the plan is deemed
amended by an automatic change to or from a top-heavy vesting
schedule, each participant with at least 3 years of service with the
employer may elect, within a reasonable period after the adoption of
the amendment or change, to have the nonforfeitable percentage
computed under the plan without regard to such amendment or change.
For participants who do not have at least one hour of service in any
plan year beginning after December 31, 1988, the preceding sentence
shall be applied by substituting "five years of service" for "three
years of service" where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
on the latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the participant is issued written notice of
the amendment by the employer or plan administrator.
Furthermore, if the vesting schedule of a plan is amended, in the
case of an employee who is a participant as of the later of the date
such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
employee's right to his employer-derived accrued benefit will not be
less than his percentage computed under the plan without regard to
such amendment.
CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including
the adoption of this Plan as a restatement of an existing plan) may
not decrease a Participant's Accrued Benefit, except to the extent
permitted under Code Section 412(c)(8), and may not reduce or
eliminate Code Section 411 (d)(6) protected benefits determined
immediately prior to the adoption date (or, if later, the effective
date) of the amendment. An amendment reduces or eliminates Code
Section 411 (d)(6) protected benefits if the amendment has the effect
of either (1) eliminating or reducing an early retirement benefit or
a retirement-type subsidy (as defined in Treasury regulations), or
(2) except as provided by Treasury regulations, eliminating an
optional form of benefit. The Advisory Committee must disregard an
amendment to the extent application of the amendment would fail to
satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan must
continue for the affected Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively
effective. See Section 11.08 for the effect of certain amendments
adopted by the Employer.
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12.03 "AMENDMENT BY PLAN SPONSOR"
The Plan Sponsor, without the Employer's consent, may amend the Plan
and Trust, from time to time, in order to conform the Plan and Trust
to any requirement for qualification of the Plan and Trust under the
Internal Revenue Code. The Plan Sponsor may not amend the Plan in any
manner which would modify any election made by the Employer under the
Plan without the Employer's written consent.
For purposes of sponsoring organization amendments, the mass
submitter shall be recognized as the agent of the sponsoring
organization. If the sponsoring organization does not adopt the
amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
12.04 "DISCONTINUANCE"
The Employer has the right, at any time, to suspend or discontinue
its contributions under the Plan, and to terminate, at any time, this
Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(A) The date terminated by action of the Employer;
(B) The date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorizes continued
maintenance of the Plan;
(C) The dissolution, merger, consolidation or reorganization
of the Employer or the sale by the Employer of all or
substantially all of its assets, unless the successor or
purchaser makes provision to continue the Plan, in which
event the successor or purchaser must substitute itself
as the Employer under this Plan.
In the event of a complete discontinuance of contributions under the
plan, the account balance of each affected participant will be
nonforfeitable.
12.05 "MERGER/DIRECT TRANSFER"
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger,
consolidation or transfer (if the plan is then terminated), the
surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the
Plan terminated immediately before the merger or consolidation or
transfer. The Trustee possesses the specific authority to enter into
merger agreements or direct transfer of assets agreements with the
trustees of other retirement plans described in Code Section 401(a),
including an elective transfer, and to accept the direct transfer of
plan assets, or to transfer plan assets, as a party to any such
agreement.
The Trustee may accept a direct transfer of plan assets on behalf of
an Employee prior to the date the Employee satisfies the Plan's
eligibility conditions. If the Trustee accepts such a direct transfer
of plan assets, the Advisory Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer
contributions under the Plan until he actually becomes a Participant
in the Plan.
The Trustee, after August 9,1988, may not consent to, or be a
party to a merger, consolidation or transfer of assets with a defined
benefit plan, except with respect to an elective transfer. The
Trustee will hold, administer and distribute the transferred assets
as a part of the Trust Fund and the Trustee must maintain a separate
Employer contribution Account for the benefit of the Employee on
whose behalf the Trustee accepted the transfer in order to reflect
the value of the transferred assets. Unless a transfer of assets to
this Plan is an elective transfer, the Plan will preserve all Code
Section 411(d)(6) protected benefits with respect to those
transferred assets, in the manner described in Section 13.02. A
transfer is an elective transfer if: (1) the transfer satisfies the
first paragraph of this Section 13.06; (2) the transfer is voluntary,
under a fully informed election by the Participant; (3) the
Participant has an alternative that retains his Code Section
411(d)(6) protected benefits (including an option to leave his
benefit in the transferor plan, if that plan is not terminating); (4)
the transfer satisfies the applicable spousal consent requirements of
the Code; (5) the transferor plan satisfies the joint and survivor
notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a
right to immediate distribution from the transferor plan, in lieu of
the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor
plan for which the Participant is eligible or the present value of
the Participant's accrued benefit under the transferor plan payable
at that plan's normal retirement age; (8) the Participant has a 100%
Nonforfeitable interest in the transferred benefit; and (9) the
transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type. Any
direct transfer of assets from a defined benefit plan after August 9,
1988, which is not an elective transfer will render the Employer's
Plan individually designed.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of elective
contributions (or amounts treated as elective contributions) under a
Plan with a Code Section 401(k) arrangement, the distribution
restrictions of Code Sections 401(k)(2) and (10) continue to apply
to those transferred elective contributions.
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<PAGE> 65
PLAN DOCUMENT
12.06 "TERMINATION"
Upon termination of the Plan, the distribution provisions of Article
VI remain operative, with the following exceptions:
(1) If the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, the Advisory
Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit to him in
lump sum as soon as administratively practicable after
the Plan terminates; and
(2) If the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500, the Participant or the
Beneficiary, in addition may elect to have the Trustee
commence distribution of his Nonforfeitable Accrued
Benefit as soon as administratively practicable after the
Plan terminates.
To liquidate the Trust, the Advisory Committee will
purchase a deferred annuity contract for each Participant
which protects the Participant's distribution rights
under the Plan, if the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500 and the Participant does
not elect an immediate distribution pursuant to Paragraph
(2). The Trust will continue until the Trustee in
accordance with the direction of the Advisory Committee
has distributed all of the benefits under the Plan.
On each valuation date, the Advisory Committee will
credit any part of a Participant's Accrued Benefit
retained in the Trust with its proportionate share of the
Trust's income, expenses, gains and losses, both realized
and unrealized. Upon termination of the Plan, the Amount,
if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A
resolution or amendment to freeze all future benefit
accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section
12.06.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If
the Employer's Plan includes a Code Section 401(k)
arrangement or if transferred assets described in Section
13.06 are subject to the distribution restrictions of Code
Sections 401(k)(2) and (10), the special distribution
provisions of this Section 12.06 are subject to the
restrictions of this paragraph. The portion of the Participant's
Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code
Section 401(k) arrangement as elective contributions) is
not distributable on account of Plan termination, as
described in this Section 12.06, unless: (a) the
Participant otherwise is entitled under the Plan to a
distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs
without the establishment of a successor plan. A
successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or
by a related employer) at the time of the termination of
the Plan or within the period ending twelve months after
the final distribution of assets. A distribution made
after March 31, 1988, pursuant to clause (b), must be part
of a lump sum distribution to the Participant of his
Nonforfeitable Accrued Benefit.
In the event of the termination or partial termination of
the plan, the account balance of each affected
participant will be nonforfeitable.
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ARTICLE XIII
CODE SECTION 401(k) ARRANGEMENTS
13.01 "ELIGIBILITY"
This Article XIII applies to an Employer's Plan only if the Plan
includes a Code Section 401(k) arrangement.
An employee's eligibility to make Elective Deferrals may not be
conditioned upon the completion of more than one (1) year of service
or the attainment of more than age twenty-one (21). An employee's
eligibility to receive Matching Contributions, Qualified Matching
Contributions, or Qualified Nonelective Contributions may be
conditioned upon the completion of up to two (2) years of service. No
contributions or benefits (other than Matching Contributions or
Qualified Matching Contributions) may be conditioned upon an
employee's Elective Deferrals.
The Employer must specify a reasonable period in the Adoption
Agreement of at least once each calendar year during which a
participant may elect to commence Elective Deferrals. Such election
may not be made retroactively. A participant's election to commence
elective Deferrals must remain in effect until modified or
terminated.
The Employer must also specify in the Adoption Agreement a reasonable
period at least once each calendar year to terminate an election or
to modify the amount or frequency of his or her Elective Deferrals.
13.02 "SALARY REDUCTION AGREEMENT"
The Employer will elect in its Adoption Agreement the terms of the
Code Section 401(k) arrangement under the Plan.
Any Employee eligible to participate in the Plan may file a salary
reduction agreement with the Advisory Committee. The salary reduction
agreement may not be effective earlier than the following date which
occurs last: (i) the Employee's Plan Entry Date (or, in the case of
a reemployed Employee, his reparticipation date under Article II);
(ii) the execution date of the Employee's salary reduction agreement;
(iii) the date the Employer adopts the Code Section 401(k)
arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified
in the Employer's Adoption Agreement. A salary reduction agreement
must specify the amount of Compensation (as defined in Section 1.12)
or percentage of Compensation the Employee wishes to defer. The
salary reduction agreement will apply only to Compensation which
becomes currently available to the Employee after the effective
date of the salary reduction agreement. The Employer will apply a
reduction election to all Compensation (and to increases in such
Compensation) unless the Employee specifies in his salary reduction
agreement to limit the election to certain Compensation. The Employer
will specify in Adoption Agreement Section 3.01 the rules and
restrictions applicable to the Employee's salary reduction
agreements, however, under no circumstances, may a salary reduction
agreement or other deferral mechanism be adopted retroactively.
13.03 "DEFINITIONS"
For purposes of this Article XIII:
(1) "ACTUAL DEFERRAL PERCENTAGE" shall mean, for a specified
group of participants for a Plan Year, the average of the
ratios (calculated separately for each participant in
such group) of (1) the amount of employer contributions
actually paid over to the trust on behalf of such
participant for the Plan Year to (2) the participant's
Compensation for such Plan Year to (whether or not the
employee was a participant for the entire Plan Year).
Employer contributions on behalf of any participant shall
include: (1) any Elective Deferrals made pursuant to the
participant's deferral election, including Excess
Elective Deferrals of Highly Compensated Employees, but
excluding Elective Deferrals that are taken into account
in the Contribution Percentage test (provided the ADP
test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the
employer, Qualified Nonelective Contributions and
Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an employee who
would be a participant but for the failure to make
Elective Deferrals shall be treated as a participant on
whose behalf no Elective Deferrals are made.
(2) "AGGREGATE LIMIT" shall mean the sum of (i) 125 percent
of the greater of the ADP of the Nonhighly Compensated
Employees for the Plan Year or the ACP of Nonhighly
Compensated Employees under the plan subject to Code
Section 401(m) for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of
200% or two plus the lesser of such ADP or ACP. "Lesser"
is substituted for "greater" in (i) above, and "greater"
is substituted for "lesser" after "two plus the" in (ii),
if it would result in a larger Aggregate Limit.
(3) "AVERAGE CONTRIBUTION PERCENTAGE" shall mean the average
of the Contribution Percentages of the Eligible
Participants in a group.
(4) "CONTRIBUTION PERCENTAGE" shall mean the ratio (expressed
as a percentage) of the participant's Contribution
Percentage Amounts to the participant's Compensation for
the Plan Year (whether or not the employee was a
participant for the entire Plan Year).
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<PAGE> 67
PLAN DOCUMENT
(5) "CONTRIBUTION PERCENTAGE AMOUNTS" shall mean the sum of
the Employee Contributions, Matching Contributions, and
Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the
plan on behalf of the participant for the Plan Year. If
so elected in the adoption agreement the employer may
include Qualified Nonelective Contributions in the
Contribution Percentage Amounts. The employer also may
elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those
Elective Deferrals that are used to meet the ACP test.
(6) "ELECTIVE DEFERRALS" shall mean any employer
contributions made to the plan at the election of the
participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction
agreement or other deferral mechanism. With respect to
any taxable year, a participant's Elective Deferral is
the sum of all Employer contributions made on behalf of
such participant pursuant to an election to defer under
any qualified CODA as described in Code Section 401(k),
any simplified employee pension cash or deferred
arrangement as described in Code Section 402(h)(1)(B),
any eligible deferred compensation plan under Code
Section 457, any plan as described under Code Section
501(c)(18), and any employer contributions made on behalf
of a participant for the purchase of an annuity contract
under Code Section 403(b) pursuant to a salary reduction
agreement.
(7) "ELIGIBLE PARTICIPANT" shall mean any employee who is
eligible to make an Employee Contribution, or an Elective
Deferral (if the employer takes such contributions into
account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution
(including forfeitures) or a Qualified Matching
Contribution.
(8) "EXCESS AGGREGATE CONTRIBUTIONS" shall mean, with respect
to any Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of
the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such
Plan Year, over
(b) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of their
Contribution Percentages beginning with the
highest of such percentages).
(9) "EXCESS CONTRIBUTIONS" shall mean, with respect to any
Plan Year, the excess of:
(a) The aggregate amount of employer contributions
actually taken into account in computing the ADP
of Highly Compensated Employees for such Plan
Year, over
(b) The maximum amount of such contributions
permitted by the ADP test (determined by
reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(10) "EXCESS ELECTIVE DEFERRALS" shall mean those Elective
Deferrals that are includible in a participant's gross
income under Section 402(g) of the Code to the extent such
participant's Elective Deferrals for a taxable year
exceed the dollar limitation under such Code section.
Excess Elective Deferrals shall be treated as annual
additions under the plan.
(11) "MATCHING CONTRIBUTION" shall mean an employer
contribution made to this or any other defined
contribution plan on behalf of a participant on account
of an Employee Contribution made by such participant, or
on account of a participant's Elective Deferral, under a
plan maintained by the employer.
(12) "QUALIFIED NONELECTIVE CONTRIBUTIONS" shall mean
contributions (other than Matching Contributions or
Qualified Matching Contributions) made by the employer
and allocated to participants' accounts that the
participants may not elect to receive in cash until
distributed from the plan; that are nonforfeitable when
made; and that are distributable only in accordance with
the distribution provisions that are applicable to
Elective Deferrals and Qualified Matching Contributions.
13.04 "ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION"
No participant shall be permitted to have Elective Deferrals made
under this plan, or any other qualified plan maintained by the
Employer, during any taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect at the beginning of
such taxable year.
13.05 "DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS"
A participant may assign to this plan any Excess Elective Deferrals
made during a taxable year of the participant by notifying the plan
administrator on or before the date specified in the adoption
agreement of the amount of the Excess Elective Deferrals to be
assigned to the plan.
33
<PAGE> 68
Notwithstanding any other provision of the plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any participant to
whose account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such
taxable year.
Determination of income or loss: Excess Elective Deferrals shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Elective Deferrals is the sum of:
(1) income or loss allocable to the participant's Elective Deferral
account for the taxable year multiplied by a fraction, the numerator
of which is such participant's Excess Elective Deferrals for the year
and the denominator is the participant's account balance attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount
determined under (1) multiplied by the number of whole calendar
months between the end of the participant's taxable year and the date
of distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
13.06 "ACTUAL DEFERRAL PERCENTAGE TEST"
The Actual Deferral Percentage (hereinafter "ADP") for participants
who are Highly Compensated Employees for each Plan Year and the ADP
for participants who are Nonhighly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(1) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(2) The ADP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 2.0, provided that the
ADP for participants who are Highly Compensated Employees
does not exceed the ADP for participants who are
Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. The ADP for any participant who is a Highly
Compensated Employee for the Plan Year and who
is eligible to have Elective Deferrals (and
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test)
allocated to his or her accounts under two or
more arrangements described in Section 401(k)
of the Code, that are maintained by the
employer, shall be determined as if such
Elective Deferrals (and, if applicable, such
Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated
Employee participates in two or more cash or
deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending
with or within the same calendar year shall be
treated as a single arrangement.
2. In the event that this plan satisfies the
requirements of Ssections 401(k), 401(a)(4), or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by determin-
ing the ADP of employees as if all such plans
were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year.
3. For purposes of determining the ADP of a
participant who is a five-percent owner or one
of the ten most highly paid Highly Compensated
Employees, the Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) and
Compensation of such participant shall include
the Elective Deferrals (and, if applicable
Qualified Nonelective Contributions and
Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members
(as defined in Section 414(g)(6) of the Code).
Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as
separate employees in determining the ADP both
for participants who are Nonhighly Compensated
Employees and for participants who are Highly
Compensated Employees.
4. For purposes of determining the ADP test,
Elective Deferrals, Qualified Nonelective
Contributions and Qualified Matching
Contributions must be made before the last day
of the twelve-month period immediately following
the Plan Year to which contributions relate.
5. The employer shall maintain records sufficient
to demonstrate satisfaction of the ADP test and
the amount of Qualified Nonelective
Contributions of Qualified Matching
Contributions, or both, used in such test.
6. The determination and treatment of the ADP
amounts of any participant shall satisfy such
other requirements as may be prescribed by the
Secretary of the Treasury.
34
<PAGE> 69
PLAN DOCUMENT
13.07 "DISTRIBUTION OF EXCESS CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the employer maintaining the plan with respect
to such amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such employees. Excess
Contributions shall be allocated to Participants who are subject to
the family member aggregation rules of Section 414(g)(6) of the Code
in the manner prescribed by the regulations.
Excess Contributions (including the amounts recharacterized) shall be
treated as annual additions under the plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions is the sum of: (1)
income or loss allocable to the participant's Elective Deferral
account (and, if applicable, the Qualified Nonelective Contribution
account or the Qualified Matching Contribution account or both) for
the Plan Year multiplied by a fraction, the numerator of which is
such participant's Excess contributions for the year and the
denominator is the participant's account balance attributable to
Elective Deferrals (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Contributions: Excess Contributions shall be
distributed from the participant's Elective Deferral account and
Qualified Matching Contribution account (if applicable) in proportion
to the participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year.
Excess Contributions shall be distributed from the participant's
Qualified Nonelective Contribution account only to the extent that
such Excess Contributions exceed the balance in the participant's
Elective Deferral account and Qualified Matching Contribution
account.
13.08 "MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Matching Contributions to the plan.
13.09 "QUALIFIED MATCHING CONTRIBUTIONS"
If elected by the employer in the adoption agreement, the employer
will make Qualified Matching Contributions to the plan.
13.10 "LIMITATIONS ON MATCHING CONTRIBUTIONS"
The ACP for participants who are Highly Compensated Employees for
each Plan Year and the ACP for participants who are Nonhighly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by 1.25; or
(B) The ACP for participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Nonhighly Compensated Employees for
the same Plan Year multiplied by two (2), provided that
the ACP for participants who are Highly Compensated
Employees does not exceed the ACP for participants who
are Nonhighly Compensated Employees by more than two (2)
percentage points.
SPECIAL RULES:
1. Multiple Use: If one or more Highly Compensated
Employees participate in both a CODA and a plan
subject to the ACP test maintained by the
employer and the sum of the ADP or ACP of those
Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then
the ACP of those Highly Compensated Employees
who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee
whose ACP is the highest) so that the limit is
not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage
Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP or ACP of the
Highly Compensated Employees are determined
after any corrections required to meet the ADP
or ACP tests. Multiple use does not occur if
either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the
ADP or ACP of the Nonhighly Compensated
Employees.
2. For purposes of this Section, the Contribution
Percentage for any participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his
or her account under two or more plans described
in Section 401(a) of the Code, or arrangements
described in Section 401(k) of the Code that are
maintained by the employer, shall be determined
as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more
cash or deferred arrangements that have
different plan years, all cash or deferred
arrangements ending with or within the same
calendar year shall be treated as a single
arrangement.
35
<PAGE> 70
3. In the event that this plan satisfies the
requirements of Sections 401(m), 401(a)(4) or
410(b) of the Code only if aggregated with one
or more other plans, or if one or more other
plans satisfy the requirements of such sections
of the Code only if aggregated with this plan,
then this Section shall be applied by
determining the Contribution Percentage of
employees as if all such plans were a single
plan. For plan years beginning after December
31, 1989, plans may be aggregated in order to
satisfy Section 401(m) of the Code only if they
have the same Plan Year.
4. For purposes of determining the Contribution
percentage of a participant who is a
five-percent owner or one of the most highly
paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation
of such participant shall include the
Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members (as defined
in Section 414(g)(6) of the Code). Family
Members, with respect to Highly Compensated
Employees, shall be disregarded as separate
employees in determining the Contribution
Percentage both for participants who are
Nonhighly Compensated Employees and for
participants who are Highly Compensated
Employees.
5. For purposes of determining the Contribution
Percentage test, Employee Contributions are
considered to have been made in the Plan Year in
which contributed to the trust. Matching
Contributions and Qualified Nonelective
Contributions will be considered made for a Plan
Year if made no later than the end of the
twelve-month period beginning on the day after
the close of the Plan Year.
6. The employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and
the amount of Qualified Nonelective
Contributions or Qualified Matching
Contributions, or both, used in such test.
7. The determination and treatment of the
Contribution Percentage of any participant shall
satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
13.11 "DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS"
Notwithstanding any other provision of this plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan
Year to participants whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to participants who are
subject to the family member aggregation rules of Section 414(g)(6)
of the Code in the manner prescribed by the regulations. If such
Excess Aggregate Contributions are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts
arose, a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess Aggregate
Contributions shall be treated as annual additions under the plan.
Determination of Income or Loss: Excess Aggregate Contributions shall
be adjusted for any income or loss up to the date of distribution.
The income or loss allocable to Excess Aggregate Contributions is the
sum of: (1) income or loss allocable to the participant's Employee
Contribution account, Matching Contribution account (if any, and if
all amounts therein are not used in the ADP test) and, if applicable,
Qualified Nonelective Contribution account and Elective Deferral
account for the Plan Year multiplied by a fraction, the numerator of
which is such participant's Excess Aggregate Contributions for the
year and the denominator is the participant's account balance(s)
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) ten percent
of the amount determined under (1) multiplied by the number of whole
calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
Accounting for Excess Aggregate Contributions: Excess Aggregate
Contributions shall be distributed on a pro rata basis from the
participant's Matching Contribution account and qualified Matching
Contribution account (and, if applicable, the participant's Qualified
Nonelective Contribution account or Elective Deferral account, or
both).
Such determination shall be made after first determining Excess
Elective Deferrals pursuant to Section 13.03(10) and then
determining Excess Contributions pursuant to Section 13.03(9).
13.12 "QUALIFIED NONELECTIVE CONTRIBUTIONS"
The employer may elect to make Qualified Nonelective Contributions
under the plan on behalf of employees as provided in the adoption
agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 13.07 of the plan, or Excess Aggregate Contributions as
provided in Section 13.11 of the plan, and to the extent elected by
the employer in the adoption agreement, the employer may make
Qualified Nonelective Contributions on behalf of Nonhighly
Compensated Employees that are sufficient to satisfy either the
Actual Deferral Percentage test or the Average Contribution
Percentage test, or both, pursuant to regulations under the Code.
36
<PAGE> 71
PLAN DOCUMENT
13.13 "DISTRIBUTION REQUIREMENTS"
Elective Deferrals, Qualified Nonelective Contributions, and
Qualified Matching Contributions, and income allocable to each are
not distributable to a participant or his or her beneficiary or
beneficiaries, in accordance with such participant's or beneficiary
or beneficiaries election, earlier than upon separation from service,
death, or disability.
Such amounts may also be distributed upon:
1. Termination of the plan without the establishment of
another defined contribution plan.
2. The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within
the meaning of Section 409(d)(2) of the Code) used in a
trade or business of such corporation if such corporation
continues to maintain this plan after the disposition,
but only with respect to employees who continue
employment with the corporation acquiring such assets.
3. The disposition by a corporation to an unrelated entity
of such corporation's interest in a subsidiary (within
the meaning of Section 409(d)(3) of the Code) if such
corporation continues to maintain this plan, but only
with respect to employees who continue employment with
such subsidiary.
4. The attainment of age 59-1/2.
All distributions that may be made pursuant to one or
more of the foregoing distributable events are subject to
the spousal and participant consent requirements (if
applicable) contained in Sections 401(a)(11) and 417 of
the Code.
37
<PAGE> 72
IRS Letters
Serial No. D257426a
Serial No. D257427a
Dated: 3/19/91
<PAGE> 73
AMENDATORY AGREEMENT
Adoption of 401(a)(31) Model Amendment (Revenue Procedure 93-12)
Kemper Growth Fund, as Prototype Plan Sponsor ("Sponsor"), makes this
Amendatory Agreement to the Kemper Retirement Plan Prototype.
WITNESSETH
WHEREAS, it is necessary to amend the Prototype Plan basic plan
document to provide plan participants with the option of electing a direct
transfer of any eligible rollover distribution to an eligible retirement plan;
and
WHEREAS, the Prototype Plan gives the Sponsor authority, without the
approval of any adopting employer, to make amendments necessary to conform the
Prototype Plan to any requirement for qualification under the Internal Revenue
Code.
NOW THEREFORE, in consideration of the above premises, the Sponsor as
designated agent for all sponsoring organizations for purposes of making plan
amendments hereby amends the Prototype Plan to include the following amendment,
as an appendix to the basic plan document. This amendment, which is identical
to the model language in the Appendix of Revenue Procedure 93-12, applies to
any plan maintained by an employer under the Prototype Plan.
APPENDIX TO BASIC PLAN DOCUMENT
ARTICLE VI
6.02(C). THIS ARTICLE APPLIES TO DISTRIBUTIONS MADE ON OR AFTER JANUARY 1,
1993.
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a distributee's election under the Article, a Distributee may
elect, at the time and in the manner prescribed by the plan administrator, to
have any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct rollover.
6.02(D). DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is on of a series of substantially equal
periodic payments (not less frequently than annually) make for the life (or
life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(2) ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) DISTRIBUTEE: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(4) DIRECT ROLLOVER: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
With respect to each adopting employer's plan maintained under this Prototype
Plan, this amendment is effective as of January 1, 1993.
IN WITNESS WHEREOF, the Sponsor has executed this Amendatory Agreement on the
20th day of January, 1993.
Kemper Growth Fund
By /s/ Paul Murphy
-----------------------------------------------------------
"Sponsor's" Authorized Representative
<PAGE> 74
APPENDIX ARTICLE B
RESOLVED, that Kemper Growth Fund ("Sponsor"), in its capacity as a prototype
sponsoring organization under IRS Revenue Procedure 89-9, amend the Prototype
Plan basic plan document by adopting Appendix Article B, a copy of which is
attached to this resolution. The amendment will be effective for all adopting
employers of the Prototype Plan for plan years beginning after December 31,
1993.
Adopted this seventeenth day of February, 1994.
Kemper Financial Services, Inc.
By: Paul Murphy
-------------------------------------------
*Sponsor's Authorized Representative
ARTICLE B
APPENDIX TO BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93) and is an integral part of the basic plan
document. Section 11.07 applies to any modification or amendment of this
Article.
In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary, for plan
years beginning on or after January 1, 1994, the annual compensation of each
employee taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference
in this plan to the limitation under Section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first plan year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
<PAGE> 75
Kemper Financial Services, Inc.
120 South LaSalle Street
Chicago, IL 60603
<PAGE> 1
EXHIBIT 99.B14.(b)
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (UNDER SECTION 408(a) OF THE
INTERNAL REVENUE CODE)
KEEP FOR YOUR RECORDS.
FORM 5305 DO NOT FILE WITH
INDIVIDUAL RETIREMENT TRUST ACCOUNT INTERNAL REVENUE
(REV. OCTOBER 1992) SERVICE
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
<TABLE>
<S><C>
State of } SS / / Amendment
----------------------------------------------------------------------------
County of
---------------------------------------------------------------------------
Grantor's name Grantor's date of birth
--------------------------------- --------------------------------------
Grantor's address Grantor's social security number
------------------------------ ----------------------------
Trustee's name INVESTORS FIDUCIARY TRUST COMPANY
------------------------------------------------------------------------------------------------
Trustee's address or principal place of business KANSAS CITY, MISSOURI
--------------------------------------------------------------
</TABLE>
The Grantor whose name appears above is establishing an Individual Retirement
Account under section 408(a) to provide for his or her retirement and for the
support of his or her beneficiaries after death. The Trustee named above has
given the Grantor the disclosure statement required under Regulations section
1.406-6. The Grantor has assigned the trust __________ dollars ($_______) in
cash. The Grantor and the Trustee made the following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover described in
section 402(c) (but only after December 31, 1992), 403(a)(4), 403(b)(8),
408(d)(3), or an employer contribution to a simplified employee pension plan as
described in section 408(1). Rollover contributions before January 1, 1993,
include rollovers described in section 402(a)(5), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3) or an employer contribution to a simplified employee
pension plan described in section 408(k).
ARTICLE II
The Grantor's interest in the balance in the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts, nor
may the assets of the trust account be commingled with other property except in
a common trust fund or common investment fund (within the meaning of section
408(a)(5).
2. No part of the trust funds may be invested in collectibles (within the
meaning of section 408(m).
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1. 401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor and
the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, April 1 following the
calendar year end in which the Grantor reaches age 70 1/2. By that date, the
Grantor may elect, in a manner acceptable to the trustee, to have the balance
in the trust account distributed in:
(A) A single sum payment.
(B) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the grantor.
(C) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Grantor and his or her designated beneficiary.
(D) Equal or substantially equal annual payments over a specified period that
may not be longer than the Grantor's life expectancy.
(E) Equal or substantially equal payments over a specified period that may not
be longer than the joint life and last survivor expectancy of the Grantor and
his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(A) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(B) If the Grantor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Grantor or, if the
Grantor has not so elected, at the election of the beneficiary or
beneficiaries, either
(I) Be distributed by the December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(II) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Grantor's death. If, however,
the beneficiary is the Grantor's surviving spouse, then this distribution is
not required to begin before December 31 of the year in which the Grantor would
have turned age 70 1/2.
(C) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Grantor's required
beginning date, even though payments may actually have been made before that
date.
(D) If the Grantor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Grantor's entire interest in the trust as of the close of business
on December 31 of the preceding year by the life expectancy of the Grantor (or
the joint life and last survivor expectancy of the Grantor and the Grantor's
designated beneficiary, or the life expectancy of the designated beneficiary,
whichever applies). In the case of distributions under paragraph 3, determine
the initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Grantor and designated beneficiary as of their
birthdays in the year the Grantor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
<PAGE> 2
INDIVIDUAL RETIREMENT TRUST ACCOUNT FORM (CONTINUED)
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under section 408(i) and Regulations
1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signature appear below.
ARTICLE VIII
1. DEFINITIONS: "Designated Investment Company" shall mean any Kemper Mutual
Fund, or any other registered investment company with the same investment
advisor or principal underwriter, if certified to the Trustee as being
available for investment pursuant to this trust.
2. INVESTMENT OF ACCOUNT ASSETS: The amount of each contribution shall be
applied to the purchase of shares of a Designated Investment Company at the
price and in the manner in which such shares are then being publicly offered by
such investment company. All dividends and capital gain distributions received
on the shares of a Designated Investment Company other than Kemper Bond
Enhanced Securities Trust shall be reinvested in such shares. Any distributions
from the Kemper Bond Enhanced Securities Trust shall be invested in one of the
other Designated Investment Companies set forth in the prospectus and selected
by the Grantor, or in the absence of a selection will be invested in the Kemper
Money Market Fund-Government Securities Portfolio.
3. DISTRIBUTIONS: Notwithstanding the provisions of Article IV, if the Grantor
or a beneficiary does not choose a method of distribution in accordance with
Article IV, the Trustee is authorized, but is not required, to elect a
distribution option other than a single sum payment, to make distributions
pursuant to such election in kind, and to liquidate sufficient shares of a
Designated Investment Company to withhold federal income tax from distributions
as required by law. Further, the Trustee shall not be responsible for any
distribution or failure to distribute in the absence of written instructions
acceptable to the Trustee from the Trustee from the Grantor or beneficiary in
accordance with Article IV including, but not limited to, any tax or penalty
resulting from such distribution or failure to distribute.
4. AMENDMENT AND TERMINATION: The Grantor may, at any time, and from time to
time, terminate the Trust in whole or in part by delivering to the Trustee a
signed written copy of such termination and the Grantor delegated to the
Trustee the right to amend the Trust (including retroactive amendments) by
written notice to the Grantor mailed to his last address known to the Trustee,
and the Grantor shall be deemed to have consented to any such amendment,
provided that no amendment shall cause or permit any part of the asset of the
Trust Account to be diverted to purposes other than for the exclusive benefit
of the Grantor or beneficiaries, and no amendment shall be made except in
accordance with any applicable laws and regulations affecting this Trust.
5. RESIGNATION OR REMOVAL OF TRUSTEE: The Trustee may resign at any time upon
thirty (30) days of notice in writing to the Grantor, and may be removed by the
Grantor at any time upon thirty (30) days notice in writing to the Trustee.
Upon such resignation or removal, the Grantor shall appoint a successor
Trustee, which successor shall be a "bank" as defined in section 408(n). Upon
receipt by the Trustee of written acceptance of such appointment by the
successor Trustee, the Trustee shall transfer and pay over to such successor
the assets of the Trust Account and all records pertaining thereto. The Trustee
is authorized, however, to reserve such sum of money as it may deem advisable
for payment of all its fees, compensation, costs and expenses, or for payment
of any other liability constituting a charge on or against the assets of the
Trust Account or on or against the Trustee, which any balance of such reserve
remaining after the payment of such items to be paid over to the successor
Trustee. The successor Trustee shall hold the assets paid over to it under
terms similar to those of this Agreement that qualify under the provisions of
the Internal Revenue Code. If within thirty (30) days after the Trustee's
resignation or removal the Grantor has not appointed a successor trustee, which
has accepted with appointment, the Trustee shall appoint such successor itself.
6. TRUSTEE'S ANNUAL FEES: The Grantor shall be charged by the Trustee for its
services here-under in such amount as the Trustee shall establish from time to
time. Sufficient shares may be liquidated from the Trust Account to pay the
fee. The annual fee in effect on the date of this agreement is set forth in the
Application Guide. A different fee may be substituted at any time upon written
notice to the Grantor. A Grantor who does not consent to such new fee should
terminate this agreement pursuant to Paragraph 4 of Article IX within 30 days
of the notice to the new fee. If no such termination is made within 30 days of
the notice of the new fee, the Grantor will be deemed to have consented to the
new fee.
7. STATE LAW REQUIREMENTS: This Trust shall be construed, administered and
enforced according to the laws of the State of Missouri.
8. EXCESS CONTRIBUTIONS: If, because of an erroneous assumption as to earned
income for any other reason, a contribution which is an excess contribution is
made on behalf the Grantor for any year, adjustment of such excess contribution
shall be in accordance with the provisions of this paragraph. The full amount
of such excess contribution and net income attributable thereto shall be
distributed to the Grantor, in cash or kind upon written notice to the Trustee
from the Grantor which states the amount of such excess contribution.
9. INALIENABILITY OF BENEFITS: The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind, and any attempt to cause such benefits to be subjected shall not
be recognized, except to such extent as may be required by law.
10. EXCHANGE PRIVILEGE: With respect to any of the Designated Investment
Company shares, the Grantor may, upon submission of written instructions
acceptable to the Trustee, cause such shares to be exchanged for shares of any
other Designated Investment Company meeting the requirements of this Trust upon
the terms and within the limitations imposed by the then current prospectus of
such investment company.
11. DESIGNATION OF BENEFICIARY: The Grantor shall have the right, by written
notice to the Trustee, to designate or change a beneficiary to receive any
benefit to which such Grantor may be entitled in the event of the Grantor's
death prior to the complete distribution of such benefit. If no such designation
is in effect on a Grantor's death, the beneficiary shall be the Grantor's
estate.
12. RESPONSIBILITY AS TO CONTRIBUTIONS OR DISTRIBUTIONS: Neither the Trustee
nor the Designated Investment Company will under any circumstances be
responsible for the timing, purpose or propriety of any contribution or of any
distribution made hereunder, nor shall the Trustee or the Designated Investment
Company incur any liability or responsibility for any tax imposed account of
any such contribution or distribution. Without limiting the generality of the
foregoing, neither the Trustee nor the Designated Investment Company is
obligated to make any distribution absent a specific direction from the Grantor
or the designated beneficiary to do so.
[KEMPER MUTUAL FUNDS LOGO]
INVESTMENT MANAGER:
Kemper Financial Services, Inc.
PRINCIPAL UNDERWRITER:
Kemper Distributors, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
Trustee Signature INVESTORS FIDUCIARY TRUST COMPANY Grantor's Signature
- --------------------------------------------------------------------------------
IRA-10B 2/95 203932
<PAGE> 3
IRA DISCLOSURE STATEMENT IMPORTANT--PLEASE RETAIN
IRAs: AN INTRODUCTION
WHAT IS AN IRA?
Your Individual Retirement Account (IRA) is a trust created for the exclusive
benefit of you and your beneficiaries. It is created by a written instrument
that meets the following requirements:
- - Contribution restrictions stated in Article I of the trust instrument.
- - Investment restrictions stated in Article III of the trust instrument.
- - Distribution of benefits requirements contained in Article IV of the trust
instrument.
- - The trustee is a bank as defined in the Internal Revenue Code.
- - You will have a non-forfeitable interest in your account.
ESTABLISHING THE PLAN
HOW DO I ESTABLISH MY KEMPER IRA?
Read this disclosure statement and retain it for your files.
Complete and sign the correct application. (2 applications are necessary if
both you and your spouse wish to establish an IRA).
MAKE CHECK PAYABLE TO THE KEMPER FUND OF YOUR CHOICE, AND MAIL COMPLETED
APPLICATION AND CONTRIBUTION TO:
INVESTORS FIDUCIARY TRUST COMPANY (IFTC)
P.O. BOX 419356
KANSAS CITY, MO 64141-6356
MAY I REVOKE MY IRA?
You have the right to revoke your account within seven days of the date on
which your application was signed. To revoke your account write to IFTC at the
address referenced above.
ELIGIBILITY
WHO CAN ADOPT AN IRA?
You may adopt an IRA if you are receiving compensation from employment,
earnings from self-employment or alimony, and have not attained age 70 1/2. You
may also adopt an IRA if you have received a qualifying rollover distribution
from another plan within the preceding 60 days or if you wish to transfer
assets from another IRA. See "Rollover/Transfer of Assets" section on the
following page.
WHAT ABOUT A NON-WORKING SPOUSE?
A spousal IRA allows an individual who qualifies for an IRA and his or her
non-working spouse to set up two IRA accounts: one for each spouse. See
"Contribution Limits" section below.
CONTRIBUTION LIMITS
HOW MUCH CAN I CONTRIBUTE EACH YEAR?
If you are receiving compensation you may contribute the lesser of $2,000 or
100% of your compensation.
For a year in which you are receiving compensation, but your spouse is not, you
can set up an IRA for your spouse and contribute the lesser of: $2,250 or 100%
of your compensation. The maximum contribution must be split between the two
accounts so that no more than $2,000 is placed in either account.
No contribution will be allowed for the year in which you attain age 70 1/2 and
thereafter.
FOR MY IRA, WHAT IS CONSIDERED COMPENSATION?
Compensation is defined as wages, salaries or professional fees, other amounts
received for personal services actually rendered (including income earned from
self-employment), and any taxable alimony received. It does not include earnings
from property such as interest, rents and dividends. If your compensation is
not includable in gross income (such as income earned from sources outside the
United States, it is not treated as compensation in determining the maximum
limitation for the deduction.
WHEN CAN A CONTRIBUTION BE MADE?
Your annual contribution may be made during the taxable year or no later than
the due date for filing your federal income tax return not including extensions.
WHAT HAPPENS IF I OVER-CONTRIBUTE TO MY IRA?
There is a 6% annual excise tax on contributions to an IRA over the annual
contributions limit. However, if you withdraw the excess contribution and
earnings thereon from the IRA before the due date for filing your federal
income tax return (including extensions) for the year of the excess
contribution, the excise tax is not imposed, the withdrawn contribution is not
taxable and the withdrawn earnings are taxable in the year the excess
contribution was made.
If the excess is not withdrawn, you may use the excess as part of next year's
contribution by reducing the next year's contribution by the amount of the
excess. You will, however, be liable for the 6% excise tax on the
over-contributed amount for each year it remains an excess contribution.
HOW DOES MY MARITAL STATUS AFFECT MY IRA?
Since a contribution is available to each eligible individual, both husband
and wife can contribute if each individually is eligible and each adopts a
separate individual retirement savings program. The contribution limitation is
computed separately for each spouse, whether or not they file a joint tax
return.
CAN MY EMPLOYER CONTRIBUTE TO MY IRA?
Yes, but these contributions are included in your gross income as compensation
and must be claimed as a deduction on your federal income tax return, just as
if you had received the money and made the contribution.
DEDUCTION LIMITS
HOW MUCH CAN I DEDUCT EACH YEAR?
If you and your spouse are not covered by a retirement plan at work, the
amount you can deduct is the same as the amount you can contribute (see
"Contribution Limit" above). If you or your spouse are covered by a retirement
plan at work, the $2,000 limit is reduced $10 for each $50 that your adjusted
gross income exceeds:
$40,000 (married filing jointly), $25,000 (single), or $0 (married filing
separately), and the $2,250 limit is reduced $10 for each $44.44 that your
adjusted gross income exceeds $40,000.
DISTRIBUTION FROM YOUR IRA
WHEN CAN I TAKE MONEY OUT OF MY IRA?
You can begin to take money out of your IRA without penalty after age 59 1/2,
but you must begin to take money out by April 1 following the year in which you
attain age 70-1/2.
WHAT IF I TAKE A DISTRIBUTION BEFORE AGE 59 1/2?
There is an additional tax equal to 10% of the taxable amount of a distribution
before age 59 1/2, unless you are disabled or take your distributions as a
series of substantially equal periodic payments over your life or life
expectancy or the joint lives or life expectancies of you and your beneficiary.
The amounts of such periodic payments may not be changed before the later of
five years or at attainment of age 59 1/2.
HOW ARE MY DISTRIBUTIONS TAXED?
The distributions are generally taxed as ordinary income in the year they are
received. Distributions are non-taxable to the extent they represent a return
of non-deductible contributions.
The non-taxable percentage of such a distribution is determined by dividing
the undistributed non-deductible contributions to all your IRAs by the total
value of all your IRAs (including SEPs and rollover IRAs).
DO I HAVE A CHOICE ON HOW TO RECEIVE MY DISTRIBUTIONS UPON RETIREMENT?
Yes, subject to the minimum distribution incidental benefit (MDIB) requirement
described below, distributions may be taken as:
- - Regular payments over the joint lives or life expectancies of you and your
designated beneficiary.
- - An annuity purchased with the money in your IRA payable over the joint lives
or life expectancies of you and your beneficiary.
- - Annuity or regular payments over any period shorter than the above.
- - A lump sum.
WHAT IS THE MINIMUM ANNUAL DISTRIBUTION?
The amount to be distributed for each year (commencing with the year in which
you attain age 70 1/2) must be at least an amount equal to the quotient
obtained by dividing the value of the IRA by your life expectancy or by the
joint and last survivor life expectancy of you and your designated beneficiary,
subject to the MDIB requirement described on the next page. The minimum
distribution for the year in which you attain age 70 1/2 may be deferred until
April 1 of the following year. Note that if you elect to defer the minimum
distribution for the year you attain age 70 1/2 to the following year, you will
be required to take 2 years' minimum distributions in that year. Life expectancy
and joint and last survivor expectancy are computed by use of the tables
contained in IRS Publication 590. For purposes of this computation, the life
expectancy of you or your spouse may be recalculated annually, while the life
expectancy of a nonspouse beneficiary may not be recalculated.
<PAGE> 4
IRA DISCLOSURE STATEMENT (CONTINUED)
WHAT IS THE MINIMUM DISTRIBUTION INCIDENTAL BENEFIT (MDIB) REQUIREMENT?
The MDIB Requirement requires that a death benefit under an IRA be incidental
to the primary purpose of the IRA which is to provide your retirement benefits.
Thus, if your designated beneficiary is more than 10 years younger, you must
assume he or she is exactly 10 years younger than you to determine your joint
and last survivor life expectancy.
WHAT IF I HAVE MORE THAN ONE IRA?
If you have more than one IRA, you may take the total amount of your minimum
distribution amounts from one IRA or you may allocate it among your IRAs.
WHAT IF I TAKE AN AMOUNT LESS THAN DESCRIBED ABOVE?
A 50% excise tax will be imposed on the difference between the minimum payout
required and the amount actually paid, unless the underdistribution was due to
reasonable cause.
WHAT ABOUT FEDERAL INCOME TAX WITHHOLDING?
The Trustee may be required to withhold 10% from any taxable distribution from
an IRA unless you elect no withholding at the time your distributions begin.
Whether or not you allow the Trustee to withhold, you may be required to make
quarterly estimated tax payments.
SPECIAL CONSIDERATIONS
CAN I USE MY IRA AS COLLATERAL FOR A LOAN?
No. If you use any portion of your IRA as security for a loan the portion so
used will be treated as distributed to you.
HAS THIS PLAN BEEN SUBMITTED TO THE IRS FOR APPROVAL?
The use of IRS Form 5305 (included in this packet) makes such submission
unnecessary.
ROLLOVER/TRANSFER OF ASSETS DO DISTRIBUTIONS FROM MY EMPLOYER'S TAX-QUALIFIED
PLAN QUALIFY FOR IRA ROLLOVER TREATMENT?
Yes, part or all of a lump-sum distribution or a series of distributions if
made during one calendar year as the result of termination of employment,
attainment of age 59 1/2, disability, death, or plan termination may be rolled
over into an IRA.
You do not have to roll over the total taxable amount of the distribution, but
whatever portion is not rolled over will be taxed as ordinary income in the
year received and will not qualify for either long-term capital gains or
special averaging. The maximum amount that can be rolled over is the total
distribution minus the dollar amount of any voluntary non-deductible
contributions you made.
Please consult your accountant regarding current IRS regulations on the tax
treatment of rollovers from tax-qualified plans.
WHEN MUST THE ROLLOVER BE COMPLETED?
The check and application must be sent to the IRA trustee within 60 days of
receipt of a qualifying distribution.
CAN I TAKE A TAX DEDUCTION FOR A ROLLOVER?
No. You are not allowed to take a tax deduction for the amount transferred
from a qualified employer's plan or retirement savings program to an IRA.
WHAT IS THE DIFFERENCE BETWEEN A ROLLOVER AND A DIRECT TRANSFER OF ASSETS?
With a rollover, you actually receive the distribution from an IRA or qualified
employer's plan. A direct transfer of assets occurs when the existing trustee or
custodian makes the check payable and sends the distribution directly to the
new trustee or custodian.
A rollover distribution from an IRA may be made to you only once a year. The
one year period begins on the date you receive the IRA distribution. There is
no minimum holding period for a direct transfer of assets from one trustee to
another.
WHAT STEPS DO I NEED TO TAKE TO PROCESS A ROLLOVER OR DIRECT TRANSFER OF
ASSETS?
You can do a rollover by notifying your current IRA trustee or custodian in
writing that you wish to take a distribution from your IRA and roll over to a
new IRA. Once the distribution is received you may either endorse the check over
to the new trustee or deposit the check received and issue a new check for the
amount received to the new trustee and send it along with an IRA Application to
the new trustee.
To accomplish a direct transfer of assets, you simply notify your existing
trustee in writing of your intentions. Then send a copy of the letter along
with an IRA application to the new trustee. Your old trustee will send your
distribution directly to the new trustee.
REPORTING REQUIREMENTS
DOES THE IRA REQUIRE A LOT OF PAPERWORK EACH YEAR?
No, unless you have to pay an excise or penalty tax or you received a
nontaxable distribution or you made a nondeductible contribution (other than a
rollover), no special income tax return is required. If an excise or penalty tax
is due you must file IRS Form 5329 with your Form 1040. If you designate an IRA
contribution as nondeductible you must attach Form 8606 to your 1040 for the
year of the nondeductible contribution and for any year you take a
non-deductible distribution (other than a rollover to another IRA).
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP)
DOES THE KEMPER IRA QUALIFY FOR A SEP?
Yes, but the SEP must be established and maintained by your employer. More
information about establishing a SEP is available from Kemper upon request.
WHAT IS THE MAXIMUM DEDUCTION FOR A SEP-IRA?
The lesser of 15% of your compensation with respect to the sponsoring employer
or $30,000.
FINANCIAL DISCLOSURE
WHAT ELSE DO I NEED TO KNOW ABOUT KEMPER'S IRAs?
Information about the fund or trust you have selected is included in the
appropriate prospectus. The acquisition cost and how the value of your account
changes are described in the prospectus.
A SHARES
If $1,000 is invested in Kemper Technology Fund, Kemper Total Return Fund,
Kemper Growth Fund, Kemper Small Capitalization Equity Fund, Kemper
International Fund or Kemper Blue Chip Fund, the amount of the sales charge
will be $57.50. If $1,000 is invested in Kemper Target Equity Funds, the amount
of the sales charge will be $50. If $1,000 is invested in Kemper High Yield
Fund, Kemper Income and Capital Preservation Fund, Kemper Diversified Income
Fund, Kemper Global Income Fund, Kemper U.S. Mortgage Fund or Kemper U.S.
Government Securities Fund, the amount of the sales charge will be $45. If
$1,000 is invested in Kemper Adjustable Rate U.S. Government Fund or Kemper
Short-Intermediate Government Fund, the amount of the sales charge will be $35.
If $1,000 is invested in Kemper Money Market Fund-Government Securities
Portfolio or Kemper Money Market Fund-Money Market Portfolio, there will be no
sales charge.
B SHARES
If $1,000 is invested in Kemper Mutual Funds B shares, there is no initial
sales charge. B shares are subject to an annual distribution fee and, on
redemption, may be subject to a contingent deferred sales charge and have a
conversion priveledge to A shares after 6 years.
C SHARES
If $1,000 is invested in Kemper Mutual Funds C shares, there is no initial
sales charge. C shares are subject to an annual distribution fee and have no
conversion priveledge.
There is an annual $12 trustee fee for the Kemper Family of Funds. An
individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by IFTC. This fee is subject to
change as provided in Article IX, Paragraph 6 of the trust instrument. These
fees are paid either by a separate check or by the liquidation of sufficient
shares or units. If not paid by a separate check, IFTC will automatically
deduct the annual trustee fee on or about May 1. If an account is opened after
May 1, IFTC will deduct the $12 annual trustee fee on or about December 1 in
the year the account is opened. (See "Application Guide" for more details.)
This fee is subject to change upon notice by IFTC to you as provided in Article
IX, Paragraph 6 of the trust instrument.
The deadline for an IRA contribution is generally April 15 of the year
following the taxable year for which the contribution will apply. IFTC and
Kemper will not be responsible for postal delays or delays resulting from
incomplete applications. Applications received by IFTC postmarked after the
deadline and improperly completed applications will be returned to the sender.
IRA-10A 7/94 [KEMPER MUTUAL FUNDS LOGO]
203921
<PAGE> 5
<TABLE>
<S> <C>
IRA APPLICATION (PLEASE PRINT) FOR ASSISTANCE IN COMPLETING THIS FORM, CALL
KEMPER SHAREHOLDER SERVICES AT 1-800-621-1048.
1. INFORMATION ABOUT YOU For internal use only
Name ___________________________________________________________________________
Address ________________________________________________________________________
City _______________________________ State _____________________ Zip ___________
Daytime Phone Number(_____)_____________________________________________
Social Security Number ________/___________/_________ Date of Birth ____/____/____
2. YOUR BENEFICIARIES (PLEASE INCLUDE SOCIAL SECURITY NUMBERS FOR ALL BENEFICIARIES)
Primary Beneficiary Name _____________________________________ Secondary Beneficiary Name ________________________________________
Address ______________________________________________________ Address ___________________________________________________________
City _____________________________ State __________ Zip ______ City _____________________________ State _______________ Zip ______
Relationship__________________________________________________ Relationship ______________________________________________________
SS#_____________/_____/__________ Date of Birth ____/____/____ SS# _______________ /______ /__________ Date of Birth ____/____/____
3. TYPE OF IRA (CHECK ONLY ONE)
/ / Individual / / Simplified Employee Plan (SEP) / / Spousal
4. TYPE OF TRANSACTION (CHECK ALL BOXES THAT APPLY)
/ / Contribution: (CIRCLE ONE) A. Individual B. Employer (ONLY APPLIES TO SEPS)
/ / Direct Transfer of Assets (PLEASE ATTACH IRA TRANSFER FORM)
/ / Rollover from: (CIRCLE ONE) A. Another Annual B. Another IRA, where the initial contribution C. A Qualified
Contribution IRA was from a qualified retirement plan Retirement Plan
/ / I have reached the age of 59 1/2 and am eligible to take a distribution without tax penalty from my IRA: (CIRCLE ONE)
A. IRA Distribution Form B. Please send my
is attached dividends in cash
5. YOUR INVESTMENT CHOICES ($250 MINIMUM PER FUND TO ESTABLISH AN IRA. $50 IF NUMBER 7 [BANK DIRECT DEPOSIT] SELECTED.)
(SEE FRONT CARD FOR FUND NAMES. NOTE NUMBER 9 BELOW REGARDING RECEIPT OF PROSPECTUS.)
/ / A Shares / / B Shares / / C Shares 199___ 199___
(PLEASE CHOOSE SHARE CLASS) (CIRCLE ONE) (CIRCLE ONE)
Indiv/Employer Indiv/Employer
Contribution Contribution Rollover Transfer
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Fund Name _____________________________ $__________ $__________ $__________ __________%
Trustee Fee (OPTIONAL) $____________
6. TELEPHONE EXCHANGES
I authorize exchanges between Kemper Mutual Funds upon instruction from any person by telephone. / / YES / / NO
NOTE: IF NEITHER BOX IS CHECKED, THE TELEPHONE EXCHANGE PRIVILEGE WILL BE PROVIDED.
7. BANK DIRECT DEPOSIT
I authorize the Fund's agent to draw checks or initiate Automated Clearing House ("ACH") debits against the bank account on the
attached voided check in the amount of $_____ (minimum $50), beginning on the ____ day of _____ month and on the same day of each
month thereafter. If the date falls on a weekend or holiday, funds will be invested on the next business day. The investment will be
applied to the following Fund account(s). A $50 minimum per Fund applies.
Fund Name ______________________________ $_______________ (NOTE: THE BANK ACCOUNT MUST
Fund Name ______________________________ $_______________ HAVE CHECK OR DRAFT WRITING
Fund Name ______________________________ $_______________ PRIVILEGES.)
8. YOUR FINANCIAL REPRESENTATIVE
Representative _____________________________ Name of Firm ________________________________________________________
Address_____________________________________ City __________________________ State __________________ Zip ________
Rep. Daytime Phone (___)___________ Rep.#____________ Dealer #______________ Branch #______________
9. YOUR SIGNATURE BY SIGNING THIS APPLICATION ESTABLISHING AN IRA, THE UNDERSIGNED:
- - Establishes an Individual Retirement Account pursuant to the Employee Retirement Income Security Act of 1974 and in accordance
with all the terms of the Trust Agreement on Form 5305;
- - Appoints Investors Fiduciary Trust Company, or its successors, as Trustee of the account;
- - States that he or she has received, read, accepts and specifically incorporates herein the Trust Agreement on Form 5305 and
Disclosure Statement;
- - Agrees to promptly give instructions to the Trustee necessary to enable the Trustee to carry out its duties under the Trust
Agreement and;
- - Agrees that he or she has received and read the prospectus for the investment(s) selected and that this account will be
subject to the prospectus as amended from time to time.
Under penalties of perjury, I certify that the number shown on this form is my correct social security number, and that I have not
been notified by the IRS that I am subject to back-up withholding. I certify that I have the power and authority to establish this
account and select the privileges requested. Account holders can request the following telephone privilege on this application:
telephone exchange transactions. Please note that the telephone exchange privilege is automatic unless the account holder refuses
it. Neither a Fund nor its agents will be liable for any loss, expense or cost arising out of any telephone request pursuant to
this privilege, including any fraudulent or unauthorized request, and THE ACCOUNT HOLDER WILL BEAR THE RISK OF LOSS, so long as the
Fund or its agent reasonably believes, based upon reasonable verification procedures, that the telephonic instructions are genuine.
The verification procedures include recording instructions, requiring certain identifying information before acting upon
instructions, and sending written confirmations.
Your Signature _________________________________________________ Date ____________________________________________________________
IRA-10 2/95 203911
</TABLE>
<PAGE> 6
IRA APPLICATION GUIDE
1. INFORMATION ABOUT YOU
Fill this section out completely.
2. YOUR BENEFICIARIES
You can change your beneficiaries by writing a letter of instruction to
Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O. Box 419415,
Kansas City, MO 64141-6415. Reference your name, fund, and fund account number.
If you have more than one beneficiary, please identify the primary and
secondary beneficiary.
3. TYPE OF IRA
INDIVIDUAL: A working individual may contribute up to $2,000 or 100% of
compensation, whichever is less.
SIMPLIFIED EMPLOYEE PLAN (SEP): Must be established and maintained by the
employer. The maximum contribution is the lesser of 15% of your compensation
or $30,000. For more information on establishing a SEP, call Kemper
Shareholder Services at 1-800-621-1048.
SPOUSAL: Two applications are necessary if both you and your spouse wish to
establish an IRA. If you're contributing for both you and your non-working
spouse, the maximum contribution is the lesser of 100% of your compensation or
$2,250. The maximum contribution must be split between the two accounts so that
no more than $2,000 is placed in either account.
4. TYPE OF TRANSACTION
DIRECT TRANSFER OF ASSETS: When changing custodians on an existing IRA, the IRA
must be released by the present custodian. To obtain information concerning the
transfer of IRA assets call Kemper Shareholder Services at 1-800-621-1048.
ROLLOVER: With a rollover, you actually receive a distribution from an IRA, or
qualified employer's plan. Once the distribution is received, you may either
endorse the check over to the new trustee or deposit the check received and,
within 60 days of receipt, issue a new check for the amount received to the new
trustee and send it along with an IRA Application to the new trustee.
You may roll over your IRA as many times as you wish. However, each time you do
roll over, the funds must remain with the new trustee for at least 12 months.
(PLEASE NOTE: CONTACT YOUR ACCOUNTANT ABOUT THE TAX CONSEQUENCES OF RECEIVING
A CASH DISTRIBUTION FROM YOUR EMPLOYER'S TAX-QUALIFIED PLAN BEFORE
FORWARDING A CHECK TO KEMPER TO OPEN AN IRA. UNDER CURRENT IRS PROVISIONS, THERE
MAY BE TAX LIABILITY ASSOCIATED WITH TAKING PHYSICAL POSSESSION OF YOUR
DISTRIBUTION, INSTEAD OF AUTOMATICALLY TRANSFERRING YOUR BALANCE INTO A KEMPER
IRA).
5. YOUR INVESTMENT CHOICES
Elect your investment choice(s) from among the Kemper Funds for which you have
received a prospectus. The minimum investment to establish an IRA is $250 per
Fund; the minimum subsequent investment is $50. The minimum initial investment
is $50 per Fund if the Bank Direct Deposit option is selected.
TRUSTEE FEE
There is an annual $12 trustee fee for the Kemper Family of Funds.
An individual holding two or more accounts in Kemper Family of Funds will be
charged a maximum of $24. The fees may be paid either by separate check or will
be automatically deducted from your account by Investors Fiduciary Trust
Company. This fee is subject to change as provided in Article IX of the
Individual Retirement Trust Account Form.
WHEN AND HOW THE $12 FEE IS AUTOMATICALLY DEDUCTED
If the $12 annual trustee fee is not paid by separate check, Investors
Fiduciary Trust Company will automatically deduct the $12 fee from your
account. Annual trustee fees are assessed on a calendar year basis.
If you opened your account prior to May 1st of the calendar year, the fee will
be deducted on May 1st. If you opened your account after May 1st of that
calendar year, the $12 fee will be deducted on December 1st. In every calendar
year after the year in which you opened your account, the fee will be deducted
on May 1st.
WHAT TO DO IF YOU ELECT TO PAY THE $12 ANNUAL FEE DIRECTLY
- - You may pay the first year fee by including $12 with your first contribution
and making the proper entry in Section 5 of the IRA Application.
- - If you elect to send in the $12 annual fee by separate check in subsequent
years, make sure to do so prior to the May 1st automatic deduction. Send a
letter referencing the exact name on your account, the fund name and the
account number. Make your check payable to Investors Fiduciary Trust Company
and mail to Investors Fiduciary Trust Company, c/o Kemper Service Company, P.O.
Box 419356, Kansas City, MO 64141-6356.
6. TELEPHONE EXCHANGES
To make exchanges, call 1-800-621-1048. Please see the prospectus for exchange
privilege limitations. The exchange privilege may be modified, suspended or
terminated by a Fund.
7. BANK DIRECT DEPOSIT
With Bank Direct Deposit, you can make automatic contributions for as little as
$50 from your checking account into your Kemper IRA. There is no service
charge, no checks to write and it's a great way to invest for the future.
8. YOUR FINANCIAL REPRESENTATIVE
You must complete this section if you have a financial representative. The
information is necessary for proper identification of the account and can be
obtained from your representative.
9. YOUR SIGNATURE
Please be sure to sign and date this section.
10. RETURN YOUR APPLICATION
IF NOT A TRANSFER...
Mail the IRA APPLICATION, a check made payable to Kemper Fund of your choice
(and the IRA DISTRIBUTION FORM if applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419356 - KANSAS CITY, MO 64141-6356
FOR TRANSFERS ONLY...
Mail the IRA Application, IRA Transfer Form (and the IRA Distribution form if
applicable) to:
INVESTORS FIDUCIARY TRUST COMPANY - C/O KEMPER SERVICE COMPANY
P.O. BOX 419222 - KANSAS CITY, MO 64141-6222
FOR MORE INFORMATION
If you need further information, please contact your financial representative
directly or call Kemper Shareholder Services at 1-800-621-1048 7:00 a.m. to
6:00 p.m. Central Time (Monday-Friday) and 9:00 a.m. to 2:00 p.m. (Saturday).
If you have tax or legal questions, contact your tax advisor or any district
office of the IRS.
[KEMPER MUTUAL FUNDS LOGO]
<PAGE> 1
EXHIBIT 99.B18
KEMPER MUTUAL FUNDS
MULTI-DISTRIBUTION SYSTEM PLAN
WHEREAS, each investment company adopting this
Multi-Distribution System Plan (each a "Fund" and collectively
the "Funds") is an open-end management investment company
registered under the Investment Company Act of 1940 (the "1940
Act");
WHEREAS, Kemper Financial Services, Inc. ("KFS") and/or
Dreman Value Advisors, Inc. ("DVA") serves as investment adviser
and Kemper Distributors, Inc. ("KDI") serves as principal
underwriter for each Fund;
WHEREAS, each Fund has a non-Rule 12b-1 administrative
services agreement with KDI providing for a service fee at an
annual rate of up to .25% of average daily net assets
("Administrative Plan");
WHEREAS, each Fund has established a Multi-Distribution
System enabling each Fund, as reflected in its prospectus, to
offer investors the option of purchasing shares (a) with a
front-end sales load (which may vary among Funds) and a service
fee (the "Front-End Load Option" or "Class A shares");
(b) without a front-end sales load, but subject to a Contingent
Deferred Sales Charge ("CDSC") (which may vary among Funds), a
Rule 12b-1 plan providing for a distribution fee and a service
fee (the "Deferred Option" or "Class B shares"); (c) without a
front-end sales load or CDSC but subject to a Rule 12b-1 Plan
providing for a distribution fee and to a service fee (the "Level
Load Option" or "Class C shares"); and (d) for certain Funds,
without a front-end load, CDSC, distribution fee or service fee
("Institutional Option" or "Class I shares"); and
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end
management investment companies to issue multiple classes of
voting stock representing interests in the same portfolio
notwithstanding Sections 18(f)(1) and 18(i) under the 1940 Act
if, among other things, such investment companies adopt a written
plan setting forth the separate arrangement and expense
allocation of each class and any related conversion features or
exchange privileges;
NOW, THEREFORE, each Fund, wishing to be governed by Rule
18f-3 under the 1940 Act, hereby adopts this Multi-Distribution
System Plan as follows:
<PAGE> 2
1. Each class of shares will represent interests in the
same portfolio of investments of a Fund (or series), and be
identical in all respects to each other class, except as set
forth below. The only differences among the various classes of
shares of the same Fund (or series) will relate solely to:
(a) different distribution fee payments associated with any Rule
12b-1 Plan for a particular class of shares and any other costs
relating to implementing or amending such Plan (including
obtaining shareholder approval of such Plan or any amendment
thereto), which will be borne solely by shareholders of such
classes; (b) different service fees; (c) different shareholder
servicing fees; (d) different Class Expenses, which will be
limited to the following expenses determined by the Trustees to
be attributable to a specific class of shares: (i) printing and
postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses, and proxy statements
to current shareholders of a specific class; (ii) Securities and
Exchange Commission (the "Commission") registration fees incurred
by a specific class; (iii) litigation or other legal expenses
relating to a specific class; (iv) Trustee fees or expenses
incurred as a result of issues relating to a specific class; and
(v) accounting expenses relating to a specific class; (e) the
voting rights related to any 12b-1 Plan affecting a specific
class of shares; (f) conversion features; (g) exchange
privileges; and (h) class names or designations. Any additional
incremental expenses not specifically identified above that are
subsequently identified and determined to be properly applied to
one class of shares of a Fund (or series) shall be so applied
upon approval by a majority of the Trustees of such Fund,
including a majority of the Trustees who are not interested
persons of the Fund.
2. Under the Multi-Distribution System, certain expenses
may be attributable to a Fund, but not to a particular series or
class thereof. All such expenses will be borne by each class on
the basis of the relative aggregate net assets of the classes,
except in the case of a Fund that has series, in which case they
will first be allocated among series, based upon the relative
aggregate net assets of such series. Expenses that are
attributable to a particular series, but not to a particular
class thereof, will be borne by each class of such series on the
basis of the relative aggregate net assets of the classes.
Notwithstanding the foregoing, the underwriter, the investment
manager or other provider of services to any Fund may waive or
reimburse the expenses of a specific class or classes to the
extent permitted under Rule 18f-3 under the 1940 Act.
A class of shares may be permitted to bear expenses that are
directly attributable to such class including: (a) any
distribution fees associated with any Rule 12b-1 Plan for a
particular class and any other costs relating to implementing or
amending such Plan (including obtaining shareholder approval of
such Plan or any amendment thereto); (b) any service fees
attributable to such class; (c) any shareholder servicing fees
<PAGE> 3
attributable to such class; and (d) any Class Expenses determined
by the Trustees to be attributable to such class.
3. After a shareholder's Class B shares have been
outstanding for six years, they will automatically convert to
Class A shares of the same Fund (or series) at the relative net
asset values of the two classes and will thereafter not be
subject to a Rule 12b-1 Plan; provided, however, that any Class B
Shares issued in exchange for shares originally classified as
Initial Shares of Kemper Portfolios, formerly known as Kemper
Investment Portfolios (KP), whether in connection with a
reorganization with a series of KP or otherwise, shall convert to
Class A shares seven years after issuance of such Initial Shares
if such Initial Shares were issued prior to February 1, 1991.
Class B shares issued upon reinvestment of income and capital
gain dividends and other distributions will be converted to Class
A shares on a pro rata basis with the Class B shares.
4. Any conversion of shares of one class to shares of
another class is subject to the continuing availability of a
ruling of the Internal Revenue Service or an opinion of counsel
to the effect that the conversion of shares does not constitute a
taxable event under federal income tax law. Any such conversion
may be suspended if such a ruling or opinion is no longer
available.
5. To the extent exchanges are permitted, shares of any
class of a Fund will be exchangeable with shares of the same
class of another Fund, or with money market fund shares as
described in the applicable prospectus. Exchanges will comply
with all applicable provisions of Rule 11a-3 under the 1940 Act.
For purposes of calculating the time period remaining on the
conversion of Class B shares to Class A shares, Class B shares
received on exchange retain their original purchase date.
6. Dividends paid by a Fund (or series) as to each class
of its shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day,
and will be in the same amount, except that any distribution
fees, service fees, shareholder servicing fees and Class Expenses
allocated to a class will be borne exclusively by that class.
7. Any distribution arrangement of a Fund, including
distribution fees and front-end and deferred sales loads, will
comply with Article III, Section 26, of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
8. All material amendments to this Plan for a Fund must be
approved by a majority of the members of the Fund's governing
board, including a majority of the board members who are not
interested persons of the Fund.
<PAGE> 4
Any open-end investment company may establish a
Multi-Distribution System and adopt this Multi-Distribution
System Plan by approval of a majority of the members of any such
company's governing board, including a majority of the board
members who are not interested persons of such company.
