As filed with the Securities and Exchange Commission on November 30, 1998
1933 Act Registration No. 33-63467
1940 Act Registration No. 811-7365
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 3
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 5 / /
---
KEMPER HORIZON FUND
-------------------
(Exact name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 781-1121
--------------
Philip J. Collora,
Vice President and Secretary
Kemper Horizon Fund
222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Name and Address of Agent for Service)
With a copy to:
Cathy G. O'Kelly
David A. Sturms
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Chicago, Illinois 60601
-------------------------------------------------
It is proposed that this filing will become effective
/ / immediately upon filing pursuant to paragraph (b)
/ X / on November 30, 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following:
/ X / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
<PAGE>
KEMPER HORIZON FUND
CROSS-REFERENCE SHEET
Between Items Enumerated in Part A
of Form N-1A and Prospectus
---------------------------
<TABLE>
<CAPTION>
PART A
- ------
Item Number Item Caption Prospectus Caption
----------- ------------ ------------------
<S> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis SUMMARY
SUMMARY OF EXPENSES
SUPPLEMENT TO PROSPECTUS
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of SUMMARY
Registrant INVESTMENT OBJECTIVES
POLICIES AND RISK FACTORS
CAPITAL STRUCTURE
5. Management of the Fund SUMMARY
INVESTMENT MANAGER AND UNDERWRITER
5A. Management's Discussion of PERFORMANCE
Financial Performance
6. Capital Stock and Other SUMMARY
Securities DIVIDENDS AND TAXES
PURCHASE OF SHARES
CAPITAL STRUCTURE
7. Purchase of Securities Being SUMMARY
Offered 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
Cross Reference - Page 1
<PAGE>
KEMPER HORIZON FUND
(continued)
Between Items Enumerated in Part B
of Form N-1A and Statement of Additional Information
----------------------------------------------------
PART B
- ------
Caption in Statement of
Item Number Item Caption Additional Information
----------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History INAPPLICABLE
13. Investment Objectives and INVESTMENT RESTRICTIONS
Policies INVESTMENT POLICIES AND TECHNIQUES
14. Management of the Fund INVESTMENT MANAGER AND UNDERWRITER
OFFICERS AND TRUSTEES
15. Control Persons and Principal OFFICERS AND TRUSTEES
Holders of Securities
16. Investment Advisory and Other INVESTMENT MANAGER AND UNDERWRITER
Services OFFICERS AND TRUSTEES
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS
Practices
18. Capital Stock and Other SHAREHOLDER RIGHTS
Securities
19. Purchase, Redemption and PURCHASES AND REDEMPTION OF SHARES
Pricing of Securities Being
Offered
20. Tax Status DIVIDENDS AND TAXES
21. Underwriters INVESTMENT MANAGER AND UNDERWRITER
22. Calculation of Performance Data PERFORMANCE
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 2
<PAGE>
KEMPER HORIZON FUND
PORTFOLIOS
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
SUPPLEMENT TO PROSPECTUS
DATED NOVEMBER 30, 1998
CLASS I SHARES
----------------
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
categories of institutional investors: (1) tax-exempt retirement plans (Profit
Sharing, 401(k), Money Purchase Pension and Defined Benefit Plans) of Scudder
Kemper Investments, Inc. ("Scudder Kemper") and its affiliates and rollover
accounts from those plans; (2) the following investment advisory clients of
Scudder Kemper and its investment advisory affiliates that invest at least $1
million in a Fund: unaffiliated benefit plans, such as qualified retirement
plans (other than individual retirement accounts and self-directed retirement
plans); unaffiliated banks and insurance companies purchasing for their own
accounts; and endowment funds of unaffiliated non-profit organizations; (3)
investment-only accounts for large qualified plans, with at least $50 million in
total plan assets or at least 1000 participants; (4) trust and fiduciary
accounts of trust companies and bank trust departments providing fee based
advisory services that invest at least $1 million in a Fund on behalf of each
trust; and (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a Fund. Class I shares
currently are available for purchase only from Kemper Distributors, Inc.
("KDI"), principal underwriter for the Funds, and, in the case of category 4
above, selected dealers authorized by KDI. 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
<PAGE>
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 typically 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)
CLASS I SHARES
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
Annual Fund Operating Expenses
HORIZON 20+ HORIZON 10+ HORIZON 5
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
Management 0.58% 0.58% 0.58%
Fees
12b-1 Fees None None None
Other Expenses 0.27% 0.41% 0.45%
----- ----- -----
Total
Operating
Expenses 0.85% 0.99% 1.03%
===== ===== =====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ------ ------- ------- --------
Horizon 20+ $9 $27 $47 $105
Horizon 10+ $10 $32 $55 $121
Horizon 5 $11 $33 $57 $126
<PAGE>
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 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.
FINANCIAL HIGHLIGHTS
KEMPER HORIZON 20+ PORTFOLIO
- --------------------------------------------------------------------------
Year ended July 31, April 8 to
1998 1997 July 31, 1996
- --------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period $12.96 9.73 10.03
- --------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.17 0.19 0.07
- --------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 1.09 3.17 (0.37)
- --------------------------------------------------------------------------
Total from investment
operations 1.26 3.36 (0.30)
- --------------------------------------------------------------------------
Less Dividends
Distribution from net
investment income 0.12 0.13 --
- --------------------------------------------------------------------------
Distribution from net
realized gain 0.48 -- --
- --------------------------------------------------------------------------
Total Dividends 0.60 0.13 --
- --------------------------------------------------------------------------
Net asset value, end of period $13.62 12.96 9.73
- --------------------------------------------------------------------------
TOTAL RETURN (NOT
ANNUALIZED): 10.29% 34.84 (2.99)
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET
ASSETS (ANNUALIZED):
Expenses 0.85% 1.04 0.73
- --------------------------------------------------------------------------
Net investment income 1.64% 1.73 2.32
- --------------------------------------------------------------------------
<PAGE>
KEMPER HORIZON 10+ PORTFOLIO
- --------------------------------------------------------------------------
Year ended July 31, April 8 to
1998 1997 July 31, 1996
- --------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $11.97 9.57 9.83
- --------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.35 0.26 0.09
- --------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 0.84 2.40 (0.26)
- --------------------------------------------------------------------------
Total from investment
operations 1.19 2.66 (0.17)
- --------------------------------------------------------------------------
Less Dividends
Distribution from net
investment income 0.29 0.26 0.09
- --------------------------------------------------------------------------
Distribution from net
realized gain 0.41 -- --
- --------------------------------------------------------------------------
Total Dividends 0.70 0.26 0.09
- --------------------------------------------------------------------------
Net asset value,
end of period $12.46 11.97 9.57
- --------------------------------------------------------------------------
TOTAL RETURN
(NOT ANNUALIZED): 10.47% 28.09 (1.74)
- --------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS
(ANNUALIZED):
Expenses 0.99% 1.06 0.73
- --------------------------------------------------------------------------
Net investment
income 2.75% 2.81 3.21
- --------------------------------------------------------------------------
<PAGE>
KEMPER HORIZON 5 PORTFOLIO
- --------------------------------------------------------------------------
Year ended July 31, April 8 to
1998 1997 July 31, 1996
- --------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $11.06 9.58 9.69
- --------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.41 0.32 0.08
- --------------------------------------------------------------------------
Net realized and unrealized
gain (loss) 0.47 1.49 (0.11)
- --------------------------------------------------------------------------
Total from investment
operations 0.88 1.81 (0.03)
- --------------------------------------------------------------------------
Less Dividends
Distribution from net
investment income 0.39 0.33 0.08
- --------------------------------------------------------------------------
Distribution from net
realized gain 0.27 -- --
- --------------------------------------------------------------------------
Total Dividends 0.66 0.33 0.08
- --------------------------------------------------------------------------
Net asset value, end of
period $11.28 11.06 9.58
- --------------------------------------------------------------------------
TOTAL RETURN (NOT
ANNUALIZED): 8.29% 19.27 (0.31)
- --------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS
(ANNUALIZED):
Expenses 1.03% 1.20 0.73
- --------------------------------------------------------------------------
Net investment
income 3.89% 3.61 4.11
- --------------------------------------------------------------------------
NOTES TO ALL PORTFOLIOS: Per share data for the period ended July 31, 1996, was
determined based on average shares outstanding. For the fiscal period ended July
31, 1996, the investment manager agreed to temporarily reduce its management fee
and absorb certain operating expenses of the Portfolios. If these expense
waivers had not been in effect, the expense ratio would have increased by 0.06%
of average net assets for Horizon 20+, 0.04% for Horizon 10+ and 0.05% for
Horizon 5. There would have been a corresponding decrease in the net investment
income ratio for the period. The waivers were discontinued on August 1, 1996.
<PAGE>
SPECIAL FEATURES
Shareholders of a Portfolio's Class I shares may exchange their shares for (i)
shares of Zurich Money Funds--Zurich Money Market Fund if the shareholders of
Class I shares have purchased shares because they are participants in tax-exempt
retirement plans of Scudder Kemper 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 Zurich Money
Funds--Zurich Money Market Fund who have purchased shares because they are
participants in tax-exempt retirement plans of Scudder Kemper 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 asset values of the shares. Exchanges are subject to the
limitations set forth in the prospectus under "Special Features-- Exchange
Privilege-- General."
November 30, 1998
KHF-II
<PAGE>
LONG-TERM
INVESTING
IN A
SHORT-TERM
WORLD(SM)
November 30, 1998
Prospectus
KEMPER ASSET ALLOCATION FUNDS
Kemper Horizon 20+ Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 5 Portfolio
[KEMPER FUNDS LOGO]
[LOGO] KEMPER FUNDS
<PAGE>
[LOGO] KEMPER FUNDS
Kemper Horizon Fund
PROSPECTUS November 30, 1998
KEMPER HORIZON FUND
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
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 November 30, 1998, which is incorporated herein by reference,
has been filed with the Securities and Exchange Commission (the "SEC") and is
available along with other related materials on the SEC's Internet web site
(http://www.sec.gov). It may also be obtained 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.
Kemper Horizon Fund (the "Fund") is designed for investors with different
investment horizons and offers a choice of three investment portfolios.
Kemper Horizon 20+ Portfolio -- seeks growth of capital, with income as a
secondary objective. Under normal conditions, this Portfolio maintains an asset
allocation of approximately 80% equity securities and 20% fixed income
securities.
Kemper Horizon 10+ Portfolio -- seeks a balance between growth of capital and
income, consistent with moderate risk. Under normal conditions, this Portfolio
maintains an asset allocation of approximately 60% equity securities and 40%
fixed income securities.
Kemper Horizon 5 Portfolio -- seeks income consistent with preservation of
capital, with growth as a secondary objective. Under normal conditions, this
Portfolio maintains an asset allocation of approximately 40% equity securities
and 60% fixed income securities. There is no assurance that the objectives of
the Fund's portfolios will be achieved.
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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
<PAGE>
Table of Contents
- ----------------------------------------------------------------------------
Summary 2
- ----------------------------------------------------------------------------
Summary of Expenses 4
- ----------------------------------------------------------------------------
Financial Highlights 7
- ----------------------------------------------------------------------------
Investment Objectives, Policies and Risk Factors 12
- ----------------------------------------------------------------------------
Investment Manager and Underwriter 29
- ----------------------------------------------------------------------------
Dividends and Taxes 34
- ----------------------------------------------------------------------------
Net Asset Value 36
- ----------------------------------------------------------------------------
Purchase of Shares 37
- ----------------------------------------------------------------------------
Redemption or Repurchase of Shares 45
- ----------------------------------------------------------------------------
Special Features 52
- ----------------------------------------------------------------------------
Performance 57
- ----------------------------------------------------------------------------
Capital Structure 59
- ----------------------------------------------------------------------------
<PAGE>
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 collateralized
obligations, 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
2
<PAGE>
interest than higher rated or unrated high quality 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."
Purchases and Redemptions. The Fund provides investors with the option of
purchasing shares in the following ways:
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. 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 if redeemed within one year of purchase
and a 0.50% contingent deferred sales charge if
redeemed during the second year of purchase.
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
sales charge, but subject to a Rule 12b-1
distribution fee and a 1% contingent deferred
sales charge on redemptions made within one year
of purchase. Class C shares do not convert into
another class.
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 to any applicable contingent deferred
sales charge. See "Purchase of Shares" and "Redemption or Repurchase of Shares."
Investment Manager and Underwriter. Scudder Kemper Investments, Inc. ("Scudder
Kemper"), serves as investment manager for the Fund. Scudder Kemper is paid an
investment management fee by each Portfolio based upon average daily net assets
of that Portfolio at an annual rate ranging from 0.58% to 0.42%. Kemper
Distributors, Inc. ("KDI"), a wholly-owned subsidiary of Scudder Kemper, is
principal underwriter and administrator for the Fund. Each Portfolio has adopted
a plan whereby for Class B shares and Class C shares, KDI receives a Rule 12b-1
distribution fee at the annual rate of 0.75% 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
3
<PAGE>
KDI for which KDI receives an administrative services fee at the annual rate of
up to 0.25% of average daily net assets of Class A, B and C shares of each
Portfolio, which KDI, in turn, pays to various broker-dealer firms and other
service or administrative 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."
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
(applicable to all Portfolios)(1) Class A Class B Class 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 proceeds) .. None (3) 4% during the 1% during
first year, 3% the first
during the second year
year and third
years, 2% during
the fourth and
fifth years and
1% in the sixth
year
- -----------
(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their
materials for details. The table does not include the $9.00 quarterly small
account fee. See "Redemption or Repurchase of Shares."
(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 of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% the first year and 0.50% the second year. See "Purchase
of Shares -- Initial Sales Charge Alternative -- Class A Shares."
4
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
The expenses shown are for the most recently completed fiscal year ended July
31, 1998:
Class A Shares Horizon 20+ Horizon 10+ Horizon 5
- -------------- ----------- ----------- ---------
Management Fees .................... 0.58% 0.58% 0.58%
12b-1 Fees ......................... None None None
Other Expenses ..................... 1.42% 0.90% 1.06%
----- ----- -----
Total Operating Expenses ........... 2.00% 1.48% 1.64%
===== ===== =====
Class B Shares Horizon 20+ Horizon 10+ Horizon 5
- -------------- ----------- ----------- ---------
Management Fees .................... 0.58% 0.58% 0.58%
12b-1 Fees (4) ..................... 0.75% 0.75% 0.75%
Other Expenses ..................... 1.46% 1.03% 0.84%
----- ----- -----
Total Operating Expenses ........... 2.79% 2.36% 2.17%
===== ===== =====
Class C Shares Horizon 20+ Horizon 10+ Horizon 5
- -------------- ----------- ----------- ---------
Management Fees .................... 0.58% 0.58% 0.58%
12b-1 Fees (5) ..................... 0.75% 0.75% 0.75%
Other Expenses ..................... 1.70% 1.06% 0.85%
----- ----- -----
Total Operating Expenses ........... 3.03% 2.39% 2.18%
===== ===== =====
- -----------
(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.
5
<PAGE>
Example
Class A Shares (6) Portfolio 1 Year 3 Years 5 Years 10 Years
- ------------------ --------- ------ ------- ------- --------
You would pay the following Horizon 20+ $77 $117 $159 $277
expenses on a $1,000
investment, assuming (1) 5% Horizon 10+ $72 $102 $134 $224
annual return and (2)
redemption at the end of each Horizon 5 $73 $106 $142 $241
time period:
Class B Shares (7)
- ------------------
You would pay the following Horizon 20+ $68 $117 $167 $276
expenses on a $1,000
investment, assuming (1) 5% Horizon 10+ $64 $104 $146 $228
annual return and (2)
redemption at the end of each Horizon 5 $62 $98 $136 $225
time period:
You would pay the following Horizon 20+ $28 $87 $147 $276
expenses on the same
investment, assuming no Horizon 10+ $24 $74 $126 $228
redemption:
Horizon 5 $22 $68 $116 $225
Class C Shares (8)
- ------------------
You would pay the following Horizon 20+ $41 $94 $159 $335
expenses on a $1,000
investment, assuming (1) 5% Horizon 10+ $34 $75 $128 $273
annual return and (2)
redemption at the end of each Horizon 5 $32 $68 $117 $251
time period:
You would pay the following Horizon 20+ $31 $94 $159 $335
expenses on the same
investment, assuming no Horizon 10+ $24 $75 $128 $273
redemption:
Horizon 5 $22 $68 $117 $251
- -----------
(6) Assumes deduction of the 5.75% initial sales charge at the time of purchase
and no deduction of a contingent deferred sales charge at the time of
redemption.
(7) Assumes conversion to Class A shares six years after purchase. The
contingent deferred sales charge was applied as follows: 1 year (4%), 3
years (3%), 5 years (2%) and 10 years (0%). 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.
(8) The contingent deferred sales charge was applied as follows: 1 year (1%), 3
years (0%), 5 years (0%) and 10 years (0%). See "Redemption or Repurchase
of Shares -- Contingent Deferred Sales Charge -- Class C Shares."
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 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.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below show financial information expressed in terms of one share
outstanding throughout the period. The information in the tables is covered by
the report of the Fund's independent auditors. The report is contained in the
Fund's Registration Statement and is available from the Fund. The financial
statements contained in the Fund's 1998 Annual Report to Shareholders are
incorporated herein by reference and may be obtained by writing or calling the
Fund.
KEMPER HORIZON 20+ PORTFOLIO
<TABLE>
<CAPTION>
December
29, 1995
Year Ended Year Ended to July 31,
CLASS A SHARES July 31, 1998 July 31, 1997 1996
- -------------- ------------- ------------- ----
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $12.89 9.72 9.50
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .12 .18
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain 1.07 3.15 .04
- ----------------------------------------------------------------------------------------
Total from investment operations 1.11 3.27 .22
- ----------------------------------------------------------------------------------------
Less Dividends
Distribution from net investment income .04 .10 --
- ----------------------------------------------------------------------------------------
Distribution from net realized gain .48 -- --
- ----------------------------------------------------------------------------------------
Total dividends .52 .10 --
- ----------------------------------------------------------------------------------------
Net asset value, end of period $13.48 12.89 9.72
- ----------------------------------------------------------------------------------------
Total return (not annualized): 9.04% 33.90 2.32
- ----------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Expenses 2.00% 1.69 1.48
- ----------------------------------------------------------------------------------------
Net investment income .49% 1.08 1.51
- ----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
December December
Year Year 29, 1995 Year Year 29, 1995
Ended Ended to Ended Ended to
July 31, July 31, July 31, July 31, July 31, July 31,
CLASS B & C SHARES 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per share operating
performance:
Net asset value,
beginning of period $12.79 9.65 9.50 12.80 9.67 9.50
- ----------------------------------------------------------------------------------
Income from investment operations:
Net investment
income (loss) (.03) .03 .11 (.05) .04 .13
- ----------------------------------------------------------------------------------
Net realized and
unrealized gain 1.00 3.15 .04 1.02 3.13 .04
- ----------------------------------------------------------------------------------
Total from investment
operations .97 3.18 .15 .97 3.17 .17
- ----------------------------------------------------------------------------------
Less dividends
Distribution from net
investment income -- .04 -- -- .04 --
- ----------------------------------------------------------------------------------
Distribution from
net realized gain .48 -- -- .48 -- --
- ----------------------------------------------------------------------------------
Total dividends .48 .04 -- .48 .04 --
- ----------------------------------------------------------------------------------
Net asset value, end
of period $13.28 12.79 9.65 13.29 12.80 9.67
- ----------------------------------------------------------------------------------
Total return
(not annualized): 7.98% 33.01 1.58 7.97 32.80 1.79
- ----------------------------------------------------------------------------------
Ratios to average net
assets (annualized):
Expenses 2.79% 2.47 2.26 3.03 2.48 2.23
- ----------------------------------------------------------------------------------
Net investment
income (.30)% .30 .73 (.54) .29 .76
- ----------------------------------------------------------------------------------
<CAPTION>
Year Ended December 29,
July 31, Year Ended 1995 to
ALL CLASSES 1998 July 31, 1997 July 31, 1996
---- ------------- -------------
<S> <C> <C> <C>
Supplemental Data:
Net assets at end of period (in
thousands) $110,076 62,673 18,251
- -----------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 44% 130 122
- -----------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
KEMPER HORIZON 10+ PORTFOLIO
<TABLE>
<CAPTION>
December 29,
Year Ended Year Ended 1995 to
CLASS A SHARES July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $12.01 9.60 9.50
- ------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .24 .25 .20
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .87 2.36 (.04)
- ------------------------------------------------------------------------------------
Total from investment operations 1.11 2.61 .16
- ------------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .22 .20 .06
- ------------------------------------------------------------------------------------
Distribution from net realized gain .41 -- --
- ------------------------------------------------------------------------------------
Total dividends .63 .20 .06
- ------------------------------------------------------------------------------------
Net asset value, end of period $12.49 12.01 9.60
- ------------------------------------------------------------------------------------
Total return (not annualized): 9.75% 27.43 1.70
- ------------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Expenses 1.48% 1.51 1.48
- ------------------------------------------------------------------------------------
Net investment income 2.26% 2.36 2.40
- ------------------------------------------------------------------------------------
<CAPTION>
Class B Class C
December December
Year Year 29, 1995 Year Year 29, 1995
Ended Ended to Ended Ended to
July 31, July 31, July 31, July 31, July 31, July 31,
CLASS B & C SHARES 1998 1997 1996 1998 1997 1996
---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per share operating
performance:
Net asset value,
beginning of period $12.00 9.60 9.50 11.98 9.60 9.50
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .16 .17 .14 .14 .17
- -------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) .86 2.35 (.04) .87 2.34 (.04)
- -------------------------------------------------------------------------------------
Total from investment
operations 1.01 2.51 .13 1.01 2.48 .13
- -------------------------------------------------------------------------------------
Less dividends
Distribution from
net investment income .12 .11 .03 .14 .10 .03
- -------------------------------------------------------------------------------------
Distribution from
net realized gain .41 -- -- .41 -- --
- -------------------------------------------------------------------------------------
Total dividends .53 .11 .03 .55 .10 .03
- -------------------------------------------------------------------------------------
Net asset value, end
of period $12.48 12.00 9.60 12.44 11.98 9.60
- -------------------------------------------------------------------------------------
Total return
(not annualized): 8.85% 26.25 1.38 8.83 25.97 1.39
- -------------------------------------------------------------------------------------
Ratios to average net
assets (annualized):
Expenses 2.36% 2.36 2.26 2.39 2.61 2.23
- -------------------------------------------------------------------------------------
Net investment income 1.38% 1.51 1.62 1.35 1.26 1.65
- -------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
December 29,
Year Ended Year Ended 1995 to
ALL CLASSES July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- -------------
Supplemental Data:
- --------------------------------------------------------------------------------
Net assets at end of period
(in thousands) $111,687 63,400 18,912
- --------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) 37% 126 87
- --------------------------------------------------------------------------------
KEMPER HORIZON 5 PORTFOLIO
<TABLE>
<CAPTION>
December 29,
Year Ended Year Ended 1995 to
CLASS A SHARES July 31, 1998 July 31, 1997 July 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $11.06 9.57 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment income .35 .34 .25
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) .47 1.45 (.07)
- -----------------------------------------------------------------------------------
Total from investment operations .82 1.79 .18
- -----------------------------------------------------------------------------------
Less dividends
Distribution from net investment income .35 .30 .11
- -----------------------------------------------------------------------------------
Distribution from net realized gain .27 -- --
- -----------------------------------------------------------------------------------
Total dividends .62 .30 .11
- -----------------------------------------------------------------------------------
Net asset value, end of period $11.26 11.06 9.57
- -----------------------------------------------------------------------------------
Total return (not annualized): 7.74% 19.02 1.84
- -----------------------------------------------------------------------------------
Ratios to average net assets (annualized):
Expenses 1.64% 1.51 1.48
- -----------------------------------------------------------------------------------
Net investment income 3.28% 3.30 3.20
- -----------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
December December
Year Year 29, 1995 Year Year 29, 1995
Ended Ended to Ended Ended to
July 31, July 31, July 31, July 31, July 31, July 31,
CLASS B & C SHARES 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value,
beginning of period $11.06 9.57 9.50 11.07 9.57 9.50
- -----------------------------------------------------------------------------------
Income from investment operations:
Net investment
income .30 .27 .21 .28 .28 .21
- -----------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) .47 1.44 (.07) .47 1.43 (.07)
- -----------------------------------------------------------------------------------
Total from investment
operations .77 1.71 .14 .75 1.71 .14
- -----------------------------------------------------------------------------------
Less dividends
Distribution from net
investment income .28 .22 .07 .28 .21 .07
- -----------------------------------------------------------------------------------
Distribution from
net realized gain .27 -- -- .27 -- --
- -----------------------------------------------------------------------------------
Total dividends .55 .22 .07 .55 .21 .07
- -----------------------------------------------------------------------------------
Net asset value, end
of period $11.28 11.06 9.57 11.27 11.07 9.57
- -----------------------------------------------------------------------------------
Total return
(not annualized): 7.27% 18.15 1.44 7.10 18.13 1.45
- -----------------------------------------------------------------------------------
Ratios to average net
assets (annualized):
Expenses 2.17% 2.15 2.26 2.18 2.16 2.23
- -----------------------------------------------------------------------------------
Net investment
income 2.75% 2.66 2.42 2.74 2.65 2.45
- -----------------------------------------------------------------------------------
</TABLE>
Year Ended Year Ended December 29, 1995
ALL CLASSES July 31, 1998 July 31, 1997 to July 31, 1996
------------- ------------- ----------------
Supplemental Data:
Net assets at end of
period (in thousands) $55,335 $30,700 10,831
- --------------------------------------------------------------------------------
Portfolio turnover rate
(annualized) 43% 150 57
- --------------------------------------------------------------------------------
Notes to all Portfolios: Total return does not reflect the effect of any sales
charges. Per share data for the period ended July 31, 1996 was determined based
on average shares outstanding. For the fiscal period ended July 31, 1996, the
investment manager agreed to temporarily reduce its management fee and absorb
certain operating expenses of the Portfolios. If these expense waivers had not
been in effect, the expense ratio of each share class would have increased by
0.06% of average net assets for Horizon 20+, 0.04% for Horizon 10+ and 0.05% for
Horizon 5. There would have been a corresponding decrease in the net investment
income ratio for the period and total return would have also decreased. The
waivers were discontinued on August 1, 1996.
11
<PAGE>
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.
o The Horizon 20+ Portfolio is designed for investors with approximately a
20+ year investment horizon.
o The Horizon 10+ Portfolio is designed for investors with approximately a
10+ year investment horizon.
o The Horizon 5 Portfolio is designed for investors with approximately a 5
year investment horizon.
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.
Horizon 20+ Horizon 10+ Horizon 5
Target Target Target
Allocation Allocation Allocation
---------- ---------- ----------
Equities ................. 80% 60% 40%
Fixed Income ............. 20% 40% 60%
12
<PAGE>
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.
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
13
<PAGE>
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
14
<PAGE>
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.
In managing the growth portion of the portfolio, the investment manager
emphasizes stock selection and fundamental research in seeking to enhance
long-term performance potential. The investment manager 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. In managing the
value portion of the portfolio, the investment manager seeks stocks it believes
to be undervalued. The principal factor considered is P/E ratios. In selecting
among stocks with low P/E ratios, the investment manager 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
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 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
15
<PAGE>
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%.
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
16
<PAGE>
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
17
<PAGE>
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based upon the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
Emerging Markets. While each Portfolio's investments in foreign securities will
principally be in developed countries, a Portfolio may make investments in
developing or "emerging" countries, which involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing or emerging
market country can be considered to be a country that is in the initial stages
of its industrialization cycle. Currently, emerging markets generally include
every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for a Portfolio's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As 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
18
<PAGE>
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
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<PAGE>
approval for the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a deterioration occurs
in an emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
PRIVATIZED ENTERPRISES. Investments in foreign securities may include securities
issued by enterprises that have undergone or are currently undergoing
privatization. The governments of certain foreign countries have, to varying
degrees, embarked upon privatization programs contemplating the sale of all or
part of their interests in state enterprises. A Portfolio's investments in the
securities of privatized enterprises include privately negotiated 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.
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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, and determined to be of comparable quality to such
lower rated securities. 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. These lower rated and non-rated securities, which are
commonly referred to as "junk bonds," have widely varying characteristics and
quality. The market values of such securities tend to reflect individual
corporate developments to a greater extent than do those of higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also are more sensitive to economic
conditions than are higher rated securities. Adverse publicity and investor
perceptions regarding lower rated bonds, whether or not based upon fundamental
analysis, may depress the prices for such securities. These and other factors
adversely affecting the market value of high yield securities will adversely
affect a Portfolio's net asset value. Although some risk is inherent in all
securities ownership, holders of fixed income securities have a claim on the
assets of the issuer prior to the holders of common stock. Therefore, an
investment in fixed income securities generally entails less risk 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.
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<PAGE>
ADDITIONAL INVESTMENT INFORMATION. The portfolio turnover rates for the
Portfolios are listed under "Financial Highlights." 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. 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. If a Portfolio holds a material percentage of its assets in
illiquid securities, there may be a question concerning the ability of the
Portfolio to make payment within seven days of the date its shares are tendered
for redemption. SEC guidelines to Form N-1A provide that the usual limit on
aggregate holdings by an open-end investment company of illiquid assets is 15%
of its net assets. 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.
Investing in Rule 144A securities could have the effect of increasing the level
of illiquidity in the portfolios to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A securities.
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
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<PAGE>
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 deal in options
on securities, securities indexes and foreign currencies, which options may be
listed for trading on a national securities exchange or traded over-the-counter.
Each Portfolio may write (sell) covered call and secured put options on up to
25% of net assets and may purchase put and call options provided that no more
than 5% of its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security or other asset at the exercise price
during the option period. A put option gives the purchaser the right to sell,
and the writer the obligation to buy, the underlying security or other asset at
the exercise price during the option period. The writer of a covered call owns
securities or other assets that are acceptable for escrow and the writer of a
secured put invests an amount not less than the exercise price in eligible
securities or other assets to the extent that it is obligated as a writer. If a
call written by a Portfolio is exercised, the Portfolio foregoes any possible
profit from an increase in the market price of the underlying security or other
asset over the exercise price plus the premium received. In writing puts, there
is a risk that a Portfolio may be required to take delivery of the underlying
security or other asset at a disadvantageous price.
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.
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The Portfolios may engage in financial futures transactions and may use index
options as an attempt to hedge against market risks. For example, when the
near-term market view is bearish but the portfolio composition is judged
satisfactory for the longer term, exposure to temporary declines in the market
may be reduced by entering into futures contracts to sell securities or the cash
value of a securities index. Conversely, where the near-term view is bullish,
but the Portfolio is believed to be well positioned for the longer term with a
high cash position, the Portfolio can hedge against market increases by entering
into futures contracts to buy securities or the cash value of a securities
index. In either case, the use of futures contracts would tend to reduce
portfolio turnover and facilitate the Portfolio's pursuit of its investment
objective.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of interest rates, markets or exchange rates is wrong, the
overall performance may be poorer than if no such contracts had been entered
into. There may be an imperfect correlation between movements in prices of
futures contracts and portfolio assets being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures market could result. Price
distortions also could result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators,
margin requirements in the futures market are less onerous than margin
requirements in the cash market, increased participation by speculators in the
futures market could cause temporary price distortions. Because of the
possibility of price distortions in the futures market, and because of imperfect
correlation between movements in the prices of securities or other assets and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment manager still may not result in a successful hedging
transaction. Any of these factors could cause a Portfolio to lose money on the
financial futures contracts and also on the value of its portfolio assets. The
costs incurred in connection with futures transactions could reduce a
Portfolio's return.
Index options involve risks similar to those risks relating to transactions in
financial futures contracts described above. Also, an option purchased by a
Portfolio may expire worthless, in which case a Portfolio would lose the premium
paid therefor.
A Portfolio may engage in futures transactions only on commodities exchanges or
boards of trade. A Portfolio will not engage in transactions in index options,
financial futures contracts or related options for speculation, but only as an
attempt to hedge against changes in interest rates or market conditions
affecting the values of securities that the Portfolio owns or intends to
purchase.
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FOREIGN CURRENCY TRANSACTIONS. The Portfolios may invest a portion of their
assets in securities denominated in foreign currencies. The Portfolios may
engage in foreign currency transactions in connection with their investments in
foreign securities but will not speculate in foreign currency exchange.
The value of the foreign securities investments of a Portfolio measured in U.S.
Dollars (including ADRs) may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Portfolio may incur costs in connection with conversions between various
currencies. A Portfolio will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. Dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Portfolio is able to protect itself
against a possible loss between trade and settlement dates resulting from an
adverse change in the relationship between the U.S. Dollar and such foreign
currency. However, this tends to limit potential gains that might result from a
positive change in such currency relationships. A Portfolio may also hedge its
foreign currency exchange rate risk by engaging in currency financial futures
and options transactions.
When the investment manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Portfolio's securities denominated in such foreign
currency. The forecasting of short-term currency market movement is extremely
difficult and whether such a short-term hedging strategy will be successful is
highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for a Portfolio to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Portfolio is obligated to deliver
when a decision is made to sell the security and make delivery of the foreign
currency in settlement of a forward contract. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale of
the portfolio
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<PAGE>
security if its market value exceeds the amount of foreign currency the
Portfolio is obligated to deliver.
A Portfolio will not speculate in foreign currency exchange. A Portfolio will
not enter into such forward contracts or maintain a net exposure in such
contracts where the Portfolio would be obligated to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities or other assets
denominated in that currency. The Portfolios do not intend to enter into such
forward contracts if they would have more than 15% of the value of their total
assets committed to forward contracts for the purchase of a foreign currency. A
Portfolio segregates cash or liquid securities to the extent required by
applicable regulation in connection with forward foreign currency exchange
contracts entered into for the purchase of a foreign currency. 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
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<PAGE>
broker-dealers) without limit where such loans are callable at any time and are
continuously secured by segregated collateral (cash or U.S. Government
securities) equal to no less than the market value, determined daily, of the
securities loaned. The Portfolios will receive amounts equal to dividends or
interest on the securities loaned. The Portfolios will also earn income for
having made the loan. Any cash collateral pursuant to these loans will be
invested in short-term money market instruments. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the investment manager to be of good
standing, and when the investment manager believes the potential earnings
justify the attendant risk. Management will limit such lending to not more than
one-third of the value of a Portfolio's total assets.
DELAYED DELIVERY TRANSACTIONS. Each Portfolio may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions arise when securities are purchased by a Portfolio with
payment and delivery to take place in the future in order to secure what is
considered to be an advantageous price and yield to the Portfolio at the time of
entering into the transactions. The value of fixed yield securities to be
delivered in the future will fluctuate as interest rates vary. Because a
Portfolio must set aside cash or liquid high grade securities to satisfy its
commitments to purchase when-issued or delayed delivery securities, flexibility
to manage the Portfolio's investments may be limited if commitments to purchase
when-issued or delayed delivery securities were to exceed 25% of the value of
its assets.
To the extent a Portfolio engages in when-issued or delayed delivery
transactions, it will generally do so for the purpose of actually acquiring
portfolio securities consistent with the Portfolio's investment objective and
policies. A Portfolio reserves the right to sell these securities before the
settlement date if deemed advisable. In some instances, the third-party seller
of when-issued or delayed delivery securities may determine prior to the
settlement date that it will be unable to meet its existing transaction
commitments without borrowing securities. If advantageous from a yield
perspective, a Portfolio may, in that event, agree to resell its purchase
commitment to the third-party seller at the current market price on the date of
sale and concurrently enter into another purchase commitment for such securities
at a later date. As an inducement for a Portfolio to "roll over" its purchase
commitment, the Portfolio may receive a negotiated fee.
REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase agreements, under
which it acquires ownership of a security and a broker-dealer or bank agrees to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the Portfolio's holding period. The investment
manager will evaluate the creditworthiness of all entities with which the Fund
intends to engage in repurchase agreements pursuant to procedures adopted by the
Board of Trustees of the Fund. Maturity of the securities subject to repurchase
may exceed one year. In the event of a bankruptcy or other default
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<PAGE>
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
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provide for interest rate adjustments based upon a multiple of the specified
interest index, which further increases their volatility. The degree of
additional volatility will be directly proportional to the size of the multiple
used in determining interest rate adjustments.
Additional information concerning collateralized obligations is contained in the
Statement of Additional Information under "Investment Policies and Techniques --
Collateralized Obligations."
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is the investment manager of the Fund and
provides each Portfolio with continuous professional investment supervision.
Scudder Kemper has been engaged in the management of investment funds for more
than seventy years and has more than $230 billion in assets under management.
Scudder Kemper is an indirect subsidiary of Zurich Financial Services, Inc., a
newly formed global insurance and financial services company. Zurich Financial
Services, Inc. owns approximately 70% of Scudder Kemper, with the balance owned
by Scudder Kemper's officers and employees.
In connection with the formation of Zurich Financial Services, Inc., each
Portfolio's existing investment management agreement with Scudder Kemper was
deemed to have been assigned and, therefore, terminated. The Board has approved
new investment management agreements with Scudder Kemper, which are
substantially identical to the current investment management agreements except
for the dates of execution and termination. These agreements became effective
upon the termination of the then current investment management agreements and
will be submitted for shareholder approval at a special meeting currently
scheduled to conclude in December 1998.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by
Scudder Kemper. The investment management agreement provides that Scudder Kemper
shall act as the Fund's investment adviser, manage its investments and provide
it with various services and facilities.
Philip S. Fortuna is the lead portfolio manager for the Kemper Horizon Fund. Mr.
Fortuna joined Scudder Kemper in 1986 and is a Managing Director. He served as
Director of Quantitative Services from 1987 to 1993 and Director of Investment
Operations from 1993 to 1995. From 1995 to 1997, he was involved in global
planning and new product development in addition to his portfolio management
responsibilities. Mr. Fortuna currently oversees all of Scudder Kemper's
quantitative activities. Karla D. Grant and Robert D. Tymoczko also serve as
portfolio managers. Karla Grant joined Scudder Kemper in 1997. She began her
investment career in 1990. Prior to joining Scudder Kemper she served as Vice
President for several independent asset management firms. Robert Tymoczko joined
Scudder Kemper in 1997. Prior to
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joining Scudder Kemper he worked as an economic consultant specializing in
quantitative research and econometric consulting. He began his investment career
in 1996.
Scudder Kemper is paid a monthly investment management fee, by each Portfolio,
at the annual rates shown below.
Management
Average Daily Net Assets of a Portfolio Fee Rates
- --------------------------------------- ---------
$0 - $250 million ................................................ 0.58%
$250 million - $1 billion ........................................ 0.55%
$1 billion - $2.5 billion ........................................ 0.53%
$2.5 billion - $5 billion ........................................ 0.51%
$5 billion - $7.5 billion ........................................ 0.48%
$7.5 billion - $10 billion ....................................... 0.46%
$10 billion - $12.5 billion ...................................... 0.44%
Over $12.5 billion ............................................... 0.42%
Fund Accounting Agent. Scudder Fund Accounting ("SFAC"), a subsidiary of Scudder
Kemper, is responsible for determining the net asset value per share of the Fund
and maintaining all accounting records related thereto. Currently, SFAC receives
no fee for its services to the Fund; however, subject to Board approval, at some
time in the future, SFAC may seek payment for its services under this agreement.
Year 2000 Readiness. Like other mutual funds and financial and business
organizations worldwide, the Fund could be adversely affected if computer
systems on which the Fund relies, which primarily include those used by Scudder
Kemper, its affiliates or other service providers, are unable to process
correctly date-related information on and after January 1, 2000. This risk is
commonly called the Year 2000 Issue. Failure to address successfully the Year
2000 Issue could result in interruptions to and other material adverse effects
on the Fund's business and operations. Scudder Kemper has commenced a review of
the Year 2000 Issue as it may affect the Fund and is taking steps it believes
are reasonably designed to address the Year 2000 Issue, although there can be no
assurances that these steps will be sufficient. In addition, there can be no
assurances that the Year 2000 Issue will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies generally.
Euro Conversion. The planned introduction of a new European currency, the Euro,
may result in uncertainties for European securities in the markets in which they
trade and with respect to the operation of the Portfolios. Currently, the Euro
is expected to be introduced on January 1, 1999 by eleven European countries
that are members of the European Economic and Monetary Union ("EMU"). The
introduction of the Euro will require the redenomination of European debt and
equity securities over a period of time, which may result in various accounting
differences and/or tax treatments that otherwise would not
30
<PAGE>
likely occur. Additional questions are raised by the fact that certain other EMU
members, including the United Kingdom, will not officially be implementing the
Euro on January 1, 1999. If the introduction of the Euro does not take place as
planned, there could be negative effects, such as severe currency fluctuations
and market disruptions.
Scudder Kemper is actively working to address Euro-related issues and
understands that other key service providers are taking similar steps. At this
time, however, no one knows precisely what the degree of impact will be. To the
extent that the market impact or effect on a portfolio holding is negative, it
could hurt the portfolio's performance.
PRINCIPAL UNDERWRITER. Pursuant to an underwriting and distribution services
agreement ("distribution agreement") with the Fund, Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, 60606, a wholly-owned
subsidiary of Scudder Kemper, 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 under a Rule 12b-1 Plan, payable monthly, at the
annual rate of 0.75% 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 under a Rule 12b-1 Plan, payable monthly, at the
annual rate of 0.75% 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 advances to firms the first year distribution fee at a rate of
0.75% of
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<PAGE>
the purchase price of such shares. For periods after the first year, KDI
currently intends to pay firms for sales of Class C shares a distribution fee,
payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares maintained and serviced by the firm and the fee continues until
terminated by KDI or the Fund. KDI also receives any contingent deferred sales
charges. See "Redemption or Repurchase of Shares -- Contingent Deferred Sales
Charge -- Class C Shares."
Rule 12b-1 Plan. Each Portfolio has adopted a plan under Rule 12b-1 (the "Rule
12b-1 Plan") that provides for fees payable as an expense of the Class B shares
and Class C shares that are used by KDI to pay for distribution and services for
those classes. Because 12b-1 fees are paid out of Portfolio assets on an ongoing
basis, they will, over time, increase the cost of an investment and may cost
more than other types of sales charges. The table below shows amounts paid in
connection with the Rule 12b-1 Plan for each Portfolio for the fiscal year ended
July 31, 1998.
Distribution Fees Contingent Deferred
Distribution Expenses Paid by Fund to Sales Charge
Incurred By Underwriter Underwriter Paid to Underwriter
----------------------- ----------- -------------------
Portfolio Class B Class C Class B Class C Class B Class C
- --------- ------- ------- ------- ------- ------- -------
Horizon 20+ $1,128,000 $129,000 $305,000 $45,000 $72,000 $1,000
Horizon 10+ $918,000 $154,000 $266,000 $61,000 $49,000 $1,000
Horizon 5 $511,000 $95,000 $150,000 $31,000 $20,000 $1,000
If the Rule 12b-1 Plan (the "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 broker-dealer firms and other service or administrative firms
("firms"), that provide services and facilities for their customers or clients
who are investors 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, the Fund pays KDI a fee,
payable monthly, at an annual rate of up
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<PAGE>
to 0.25% of average daily net assets of Class A, B and C shares of each
Portfolio. KDI then pays each firm a service fee at an annual rate of up to
0.25% of net assets attributable to Class A, B and C shares maintained and
serviced by the firm. Firms to which service fees may be paid include
broker-dealers affiliated with KDI.
CLASS A SHARES. For Class A shares, a firm becomes eligible for the service fee
based on assets in the accounts in the month following the month of purchase and
the fee continues until terminated by KDI or the Fund. The fees are calculated
monthly and normally paid quarterly.
CLASS B AND CLASS C SHARES. KDI currently advances to firms the first year
service fee at a rate of up to 0.25% of the purchase price of such shares. For
periods after the first year, KDI currently intends to pay firms a service fee
at a rate of up to 0.25% (calculated monthly and normally paid quarterly) of the
net assets attributable to Class B and Class C shares maintained and serviced by
the firm. After the first year, a firm will become eligible for the quarterly
service fee and the fee continues until terminated by KDI or the Fund.
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 a firm provides administrative services 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 a firm provides administrative services. In addition,
KDI may, from time to time, from its own resources pay certain firms additional
amounts for ongoing administrative services and assistance provided to their
customers and clients who are shareholders of the Fund.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, 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, 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 ("KSvC"), an affiliate of Scudder
Kemper, 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 transfer agent and shareholder service agent fees, see
"Investment Manager and Underwriter" in the Statement of Additional Information.
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PORTFOLIO TRANSACTIONS. Scudder Kemper places all orders for purchases and sales
of each Portfolio's securities. Subject to seeking best execution of orders,
Scudder Kemper may consider sales of shares of the Fund and other funds managed
by Scudder Kemper or its affiliates 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 proportion for
each class.
Income and capital gain dividends, if any, of a Portfolio will be credited to
shareholder accounts in full and fractional Fund 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
Fund shares of the same class of that same Portfolio. However, upon written
request to the Shareholder Service Agent, a shareholder may elect to have
dividends of a Portfolio invested in shares of the same class of another Kemper
Fund at the net asset value of such class of such other fund. See "Special
Features -- Class A Shares -- Combined Purchases" for a list of such other
Kemper Funds. To use this privilege of investing dividends of a Portfolio in
shares of another Kemper Fund, shareholders must maintain a minimum account
value of $1,000 in the Portfolio distributing the dividends. Each Portfolio will
reinvest dividend checks (and future dividends) in shares of that same Portfolio
and class if checks are returned as undeliverable. Dividends and other
distributions in the aggregate amount of $10 or less are automatically
reinvested in shares of the same Portfolio unless the shareholder requests that
such policy not be applied to the shareholder's account.
TAXES. Dividends derived from net investment income and net short-term capital
gains are taxable to shareholders as ordinary income and long-term
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<PAGE>
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. 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 a Portfolio 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.
Upon a sale or exchange of a Portfolio's shares a shareholder may realize a
capital gain or loss which may be long-term or short-term, depending on the
shareholder's holding period for the shares.
Each Portfolio 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.
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 and periodic investment and
redemption programs. 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. When more
than one shareholder resides at the same address, certain reports and
communications to be delivered to such shareholders may be combined in the same
mailing package, and certain duplicate reports and communications may be
eliminated. Similarly, account statements to be sent to such shareholders may be
combined in the same mailing package or consolidated into a single statement.
However, a shareholder may request that the foregoing policies not be applied to
shareholder's account.
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<PAGE>
NET ASSET VALUE
The net asset value per share of a Portfolio is the value of one share and is
determined separately for each class by dividing the value of a Portfolio's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Portfolio will generally be lower than that of the Class A shares of a
Portfolio because of the higher expenses borne by the Class B and Class C
shares. The net asset value of shares of a Portfolio is computed as of the close
of regular trading (the "value time") on the New York Stock Exchange (the
"Exchange") on each day the Exchange is open for trading. The Exchange is
scheduled to be closed on the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.
With respect to the Portfolios with securities listed primarily on foreign
exchanges, such securities may trade on days when the Portfolios' net asset
value is not computed; and therefore, the net asset value of a Portfolio may be
significantly affected on days when the investor has no access to the Portfolio.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such
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<PAGE>
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate on the
valuation date.
If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Portfolio is
determined in a manner which, in the discretion of the Valuation Committee, most
fairly reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in terms of the
currency in which the market quotation used is expressed ("Local Currency"), the
value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
PURCHASE OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS. Class A shares of the Portfolios 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 charge but are subject to higher
ongoing expenses than Class A shares, are subject to a contingent deferred sales
charge payable upon certain redemptions within the first year following
purchase, 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
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<PAGE>
Expenses." Each class has distinct advantages and disadvantages for different
investors, and investors may choose the class that best suits their
circumstances and objectives.
Annual 12b-1 Fees
(as a % of average
Sales Charge daily net assets) Other Information
------------ ----------------- -----------------
Class A Maximum initial sales None Initial sales charge
charge of 5.75% of the waived or reduced for
public offering price certain purchases
Class B Maximum contingent 0.75% Shares convert to
deferred sales charge of Class A shares six
4% of redemption proceeds; years after issuance
declines to zero after six
years
Class C Contingent deferred sales 0.75% No conversion feature
charge of 1% of redemption
proceeds for redemptions
made during first year
after purchase
The minimum initial investment for each Portfolio is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Share certificates will not be issued unless requested in writing. It is
recommended that investors not request share certificates unless needed for a
specific purpose. You cannot redeem shares by telephone or wire transfer or use
the telephone exchange privilege if share certificates have been issued. A lost
or destroyed certificate is difficult to replace and can be expensive to the
shareholder (a bond worth 2% or more of the certificate value is normally
required).
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.
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Sales Charge
------------
Allowed to
Dealers as a
As a Percentage As a Percentage of Percentage of
Amount of Purchase of Offering Price Net Assets Value* Offering Price
- ------------------ ----------------- ----------------- --------------
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 ...... 0** 0** ***
- -----------
* 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 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 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district, provided in each
case that such plan has not less than 200 eligible employees (the "Large Order
NAV Purchase Privilege"). Redemption within two years of shares purchased under
the Large Order NAV Purchase Privilege may be subject
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<PAGE>
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 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, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, 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 (including the
purchase of Class A shares of the Cash Reserves Fund).
Effective on February 1, 1996, Class A shares of the Portfolios or any other
Kemper Mutual Fund listed under "Special Features -- Class A Shares -- Combined
Purchases" may be purchased at net asset value in any amount by members of the
plaintiff class in the proceeding known as Howard and Audrey Tabankin, et al. v.
Kemper Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This
privilege is generally non-transferrable and continues for the lifetime of
individual class members and for a ten year period for non-individual class
members. To make a purchase at net asset value under this privilege, the
investor must, at the time of purchase, submit a written request that the
purchase be processed at net asset value pursuant to this privilege specifically
identifying the purchaser as a member of the "Tabankin Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares purchased under this privilege. For more details concerning this
privilege, class members should refer to the Notice of (1) Proposed Settlement
with Defendants; and (2) Hearing to Determine Fairness of Proposed Settlement,
dated August 31, 1995, issued in connection with the aforementioned court
proceeding. For sales of Portfolio shares at net asset value pursuant to this
privilege, KDI may at its discretion pay investment dealers and other financial
services firms a concession, payable quarterly, at an annual rate of up to 0.25%
of net assets attributable to such shares maintained and serviced by the firm. A
firm becomes eligible for the concession based upon assets in accounts
attributable to shares purchased under this privilege in the month after the
month of purchase and the concession continues until terminated by KDI. The
privilege of purchasing Class A shares of the Portfolio
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<PAGE>
at net asset value under this privilege is not available if another net asset
value purchase privilege also applies.
Class A shares of the Portfolios may be purchased at net asset value in any
amount by certain professionals who assist in the promotion of Kemper Funds
pursuant to personal services contracts with KDI, for themselves or members of
their families. KDI in its discretion may compensate financial services firms
for sales of Class A shares under this privilege at a commission rate of 0.50%
of the amount of Class A shares purchased.
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
each Portfolio, 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 and officers, directors and employees of service agents of
the Portfolios for themselves or their spouses or dependent children; (c)
shareholders who owned shares of Kemper Value Series, Inc. ("KVS") on September
8, 1995, and have continuously owned shares of KVS (or a Kemper Fund acquired by
exchange of KVS shares) since that date, for themselves or members of their
families; and (d) 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
Portfolios 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 Portfolio 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
Ranson & Associates, Inc. In addition, unitholders of unit investment trusts
sponsored by Ranson & Associates, Inc. or its predecessors may purchase Class A
shares at net asset value through reinvestment programs described in the
prospectuses of such trusts that have such programs. Shares of the Portfolios
may be purchased at net asset value by certain investment advisers registered
under the Investment Advisers Act of 1940 and other financial services firms,
acting solely as agent for their clients, that adhere to certain standards
established by KDI, including a requirement that such shares be purchased for
the benefit of their clients participating in an investment advisory program or
agency commission program under which such clients pay a fee to the investment
adviser or other firm for portfolio management or agency brokerage services.
Such shares are sold for investment purposes and on the condition that they will
not be resold except through redemption or repurchase by the Portfolios. The
Portfolios may also issue Class A shares at net asset value in connection with
the acquisition of the assets of or merger or consolidation with another
investment company, or to shareholders in connection with the investment or
reinvestment of income and capital gain dividends.
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Class A shares of the Portfolios may be purchased at net asset value by persons
who purchase such shares through bank trust departments that process such trades
through an automated, integrated mutual fund clearing program provided by a
third party clearing firm.
Class A shares of the Portfolios may be purchased at net asset value by persons
who purchase shares of the Fund through KDI as part of an automated billing and
wage deduction program administered by RewardsPlus of America for the benefit of
employees of participating employer groups.
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
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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 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. A contingent deferred sales charge may be imposed upon
redemption of Class C shares within one year of purchase. See "Redemption or
Repurchase of Shares -- Contingent Deferred Sales Charge -- Class C Shares." KDI
currently advances to firms the first year distribution fee at a rate of 0.75%
of the purchase price of such shares. For periods after the first year, KDI
currently intends to pay firms for sales of Class C shares a distribution fee,
payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares maintained and serviced by the firm. KDI is compensated by the
Fund for services as distributor and principal underwriter for Class C shares.
See "Investment Manager and Underwriter."
WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge but who plan to redeem
their shares within six years might consider Class C shares. Orders for Class B
shares or Class C shares for $500,000 or more will be declined. Orders for Class
B shares or Class C shares by employer sponsored employee benefit plans using
the subaccount record keeping system made available through the Shareholder
Service Agent will be invested instead in Class A shares at net asset value
where the combined subaccount value in a Portfolio or other Kemper Mutual Funds
listed under "Special Features -- Class A Shares -- Combined Purchases" is in
excess of $5 million including purchases pursuant to the "Combined Purchases,"
"Letter of Intent" and "Cumulative Discount" features described under "Special
Features." For more information about the three sales arrangements, consult your
financial representative or the Shareholder Service Agent. Financial services
firms may receive different compensation depending upon which class of shares
they sell.
GENERAL. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Portfolio for their clients, and KDI may pay them a transaction fee
up to the level of the discount or commission allowable or payable to dealers,
as described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services.
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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.
KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of a Fund sold by the firm under the following conditions: (i) the
purchased shares are held in a Kemper IRA account, (ii) the shares are purchased
as a direct "roll over" of a distribution from a qualified retirement plan
account maintained on a participant subaccount record keeping system provided by
KSvC, (iii) the registered representative placing the trade is a member of
ProStar, a group of persons designated by KDI in acknowledgment of their
dedication to the employee benefit plan area and (iv) the purchase is not
otherwise subject to a commission.
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 ("trade date"). 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
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their customers. In such instances, the Fund's transfer agent will have no
information with respect to or control over the accounts of specific
shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their firm. Certain of these firms
may receive compensation from the Fund through the Shareholder Service Agent for
recordkeeping and other expenses relating to these nominee accounts. In
addition, certain privileges with respect to the purchase and redemption of
shares or the reinvestment of dividends may not be available through such firms.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, transfers of registration
and dividend payee changes; and may perform functions such as generation of
confirmation statements and disbursement of cash dividends. Such firms,
including affiliates of KDI, may receive compensation from the Fund through the
Shareholder Service Agent for these services. This prospectus should be read in
connection with such firms' material regarding their fees and services.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, the Fund
may temporarily suspend the offering of any class of its shares of a Portfolio
to new investors. During the period of such suspension, persons who are already
shareholders of such class of such Portfolio normally are permitted to continue
to purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to KSvC, 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 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.
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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 (i.e., purchases by check, Express-Transfer or
Bank Direct Deposit), 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 10 days from receipt by the Fund of the purchase
amount. The redemption within two years of Class A shares purchased at net asset
value under the Large Order NAV Purchase Privilege may be subject to a
contingent deferred sales charge (see "Purchase of Shares -- Initial Sales
Charge Alternative -- Class A Shares") and the redemption of Class B shares
within six years may be subject to a contingent deferred sales charge (see
"Contingent Deferred Sales Charge -- Class B Shares" below), and the redemption
of Class C shares within the first year following purchase may be subject to a
contingent deferred sales charge (see "Contingent Deferred Sales Charge -- Class
C Shares" below).
Because of the high cost of maintaining small accounts, the Fund may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
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, so long
as reasonable verification procedures are followed. 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 applicable contingent deferred sales charge) are $50,000 or
less and the proceeds are payable to the shareholder of record at the address of
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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, guardian and custodian account
holders, provided the trustee, executor, guardian or custodian is named in the
account registration. Other institutional account holders 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 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 10 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 the investment manager deems it appropriate under then current
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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
10 days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
wire transfer 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 may be imposed upon redemption of Class A
shares that are purchased under the Large Order NAV Purchase Privilege as
follows: 1% if they are redeemed within one year of purchase and 0.50% if they
are redeemed during the second year following 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 or a
participant-directed qualified retirement plan described in Code Section
403(b)(7) which is not sponsored by a K-12 school district; (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); (e)
redemptions under the Fund's Systematic Withdrawal Plan at a maximum of 10% per
year of the net asset value of the account; and (f) redemptions of shares of a
shareholder whose dealer of record at the time of the investment notifies KDI
that the dealer waives the discretionary commission applicable to such Large
Order NAV Purchase.
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
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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.
Contingent Deferred
Year of Redemption After Purchase Sales Charge
- --------------------------------- ------------
First ...................................................... 4%
Second ..................................................... 3%
Third ...................................................... 3%
Fourth ..................................................... 2%
Fifth ...................................................... 2%
Sixth ...................................................... 1%
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:
Contingent Deferred Sales Charge
------------------------------------------
Purchased on Shares Purchased
Year of Redemption or after Before
After Purchase March 1, 1993 March 1, 1993
- -------------- ------------- -------------
First ............................ 4% 3%
Second ........................... 3% 3%
Third ............................ 3% 2%
Fourth ........................... 2% 2%
Fifth ............................ 2% 1%
Sixth ............................ 1% 1%
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
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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.
CONTINGENT DEFERRED SALES CHARGE -- CLASS C SHARES. A contingent deferred sales
charge of 1% may be imposed upon redemption of Class C shares 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 (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 (limited to 10% of the
net asset value of the account during the first year, see "Special Features --
Systematic Withdrawal Plan"), (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, (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), (f) for any participant-directed redemption
of shares held by employer sponsored employee benefit plans maintained on the
subaccount record keeping system made available by the Shareholder Service
Agent, (g) for redemptions pursuant to an employer sponsored employee benefit
plan that offers funds in addition to Kemper Funds and whose dealer of record
has waived the advance of the first year administrative service and distribution
fees applicable to such shares and agrees to receive such fees quarterly, and
(h) for redemptions pursuant to a dealer-sponsored asset allocation program
maintained on an omnibus record-keeping system provided the dealer of record has
waived the advance of the first year administrative services and distribution
fees applicable to such shares and has agreed to receive such fees quarterly.
CONTINGENT DEFERRED SALES CHARGE -- GENERAL. 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 of share appreciation to a total of $12,000. If the
investor were then to redeem the entire $12,000 in share value, the contingent
deferred sales charge would be payable only with respect to $10,000 because
neither the $1,000 of reinvested dividends nor the $1,000
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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 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. In the event no specific order is
requested when redeeming shares subject to a contingent deferred sales charge,
the redemption will be as follows: for Class B shares -- first from shares
representing reinvested dividends and then from the earliest purchase of shares;
for Class C Shares -- first from Class C shares purchased prior to April 1,
1996, then from Class C shares representing reinvested dividends and then from
the earliest purchases of Class C shares made on or after April 1, 1996. KDI
receives any contingent deferred sales charge directly.
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 -- Initial Sales Charge
Alternative -- Class A Shares") or Class B shares or Class C 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, Class B
shares or Class C 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 Mutual
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.
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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 Series,
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 Plus Growth Fund, Kemper Value Series, Inc.,
Kemper Horizon Fund, Kemper Quantitative Equity Fund, Kemper Europe Fund, Kemper
Asian Growth Fund, Kemper Aggressive Growth Fund, Kemper Global/International
Series, Inc., Kemper U.S. Growth and Income Fund, Kemper-Dreman Financial
Services Fund, Kemper Value Fund, Kemper Classic Growth Fund, Kemper Small Cap
Relative Value Fund and Kemper Global Discovery Fund ("Kemper Mutual Funds").
Except as noted below, there is no combined purchase credit for direct purchases
of shares of Zurich Money Funds, Zurich YieldWise Funds, Cash Equivalent Fund,
Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal
Cash 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
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charge than actually paid, the appropriate number of escrowed shares are
redeemed and the proceeds used toward satisfaction of the obligation to pay the
increased sales charge. The Letter for an employer sponsored employee benefit
plan maintained on the subaccount record keeping system available through the
Shareholder Service Agent may have special provisions regarding payment of any
increased sales charge resulting from a failure to complete the intended
purchase under the Letter. A shareholder may include the value (at the maximum
offering price) of all shares of such Kemper Mutual Funds held of record as of
the initial purchase date under the Letter as an "accumulation credit" toward
the completion of the Letter, but no price adjustment will be made on such
shares. Only investments in Class A shares are included in this privilege.
CLASS A SHARES -- CUMULATIVE DISCOUNT. Class A shares may also be purchased at
the rate applicable to the discount bracket attained by adding to the cost of
shares of the Portfolio being purchased, the value of all Class A shares of the
above mentioned Kemper Mutual Funds (computed at the maximum offering price at
the time of the purchase for which the discount is applicable) already owned by
the investor.
CLASS A SHARES -- AVAILABILITY OF QUANTITY DISCOUNTS. An investor or the
investor's dealer or other financial services firm must notify the Shareholder
Service Agent or KDI whenever a quantity discount or reduced sales charge is
applicable to a purchase. Upon such notification, the investor will receive the
lowest applicable sales charge. Quantity discounts described above may be
modified or terminated at any time.
EXCHANGE PRIVILEGE. Shareholders of Class A, Class B and Class C shares may
exchange their shares for shares of the corresponding class of other Kemper
Mutual Funds in accordance with the provisions below.
Class A Shares. Class A shares of the Kemper Mutual Funds and shares of the
Money Market Funds listed under "Special Features -- Class A Shares -- Combined
Purchases" above may be exchanged for each other at their relative net asset
values. Shares of Money Market Funds 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, Investors Municipal
Cash 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
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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 Class B 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.
Class C shares may be exchanged without a contingent deferred sales charge being
imposed at the time of exchange. For determining whether there is a contingent
deferred sales charge that may be imposed upon the redemption of the Class C
shares received by exchange, they retain the cost and purchase date of the
shares that were originally purchased and exchanged.
General. Shares of a Kemper Mutual Fund with a value in excess of $1,000,000
(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 "15 Day Hold Policy"). For purposes of
determining whether the 15 Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, direction, or
advice, including without limitation, accounts administered by a financial
services firm offering market timing, asset allocation or similar services. The
total value of shares being exchanged must at least equal the minimum investment
requirement of the Kemper 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 KSvC, 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
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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 Investors Municipal Cash Fund is available for sale only in
certain states.
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," except that the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange is not applicable. 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 $50,000 from a
shareholder's bank, savings and loan, or credit union account to purchase shares
of the Fund. Shareholders can also redeem shares (minimum $100 and maximum
$50,000) from their Fund account and transfer the proceeds to their bank,
savings and loan, or credit union checking account. Shares purchased by check or
through EXPRESS-Transfer or Bank Direct Deposit may not be redeemed under this
privilege until such shares have been owned for at least 10 days. 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
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 KSvC, 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, investments are made automatically from the shareholder's account at a
bank, savings and loan or credit union into the
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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 KSvC, 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 (and Class A shares purchased under the Large Order NAV
Purchase Privilege and Class C shares in the first year following the purchase)
under a systematic withdrawal plan is 10% of the net asset value of the account.
Shares are redeemed so that the payee will receive payment approximately the
first of the month. Any income and capital gain dividends will be automatically
reinvested at net asset value. A sufficient number of full and fractional shares
will be redeemed to make the designated payment. Depending upon the size of the
payments requested and fluctuations in the net asset value of the shares
redeemed, redemptions for the purpose of making such payments may reduce or even
exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor
will be paying a sales charge on the purchase of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid. Therefore, the Fund will not knowingly permit additional investments of
less than $2,000 if the investor is at the same time making systematic
withdrawals. KDI will waive the contingent deferred sales charge on
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redemptions of Class A shares purchased under the Large Order NAV Purchase
Privilege, Class B shares and Class C 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. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in any of the following types of retirement plans:
o Individual Retirement Accounts ("IRAs") with IFTC as custodian. This
includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), IRA accounts and Simplified Employee Pension Plan ("SEP") IRA
accounts and prototype documents.
o 403(b)(7) Custodial Accounts also with IFTC as custodian. This type of plan
is available to employees of most non-profit organizations.
o 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, SIMPLE 401(k) plans and materials
for establishing them are available from the Shareholder Service Agent upon
request. The brochures for plans with IFTC as custodian, describe the current
fees payable to IFTC for its services as custodian. 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
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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 IndexTM or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
The Fund may depict the historical performance of the securities in which the
Portfolios may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indexes of those investments or economic indicators. The Fund may
also describe each Portfolio's holdings and depict their size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Portfolios. The relative
performance of growth stocks versus value stocks may also be discussed.
Class A shares are sold at net asset value plus a maximum sales charge of 5.75%
of the offering price. While the maximum sales charge is normally reflected in a
Portfolio's Class A performance figures, certain total return calculations may
not include such charge and those results would be reduced if it were included.
Class B shares and Class C shares are sold at net asset value. Redemptions of
Class B shares within the first six years after purchase may be subject to a
contingent deferred sales charge that ranges from 4% during the first year to 0%
after six years. Redemption of Class C shares within the first year after
purchase may be subject to a 1% contingent deferred sales charge. 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 and Class C shares
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that may be imposed at the end of the period in question. Performance figures
for the Class B shares and Class C 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 and
Class C 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 also appears in its Annual Report to Shareholders, which
is 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 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. Class I shares are available for
purchase exclusively by the following categories of institutional investors: (1)
tax-exempt retirement plans (Profit Sharing, 401(k), Money Purchase Pension and
Defined Benefit Plans) of Scudder Kemper Investments, Inc. ("Scudder Kemper")
and its affiliates and rollover accounts from those plans; (2) the following
investment advisory clients of Scudder Kemper and its investment advisory
affiliates that invest at least $1 million in a Fund: unaffiliated benefit
plans, such as qualified retirement plans (other than individual retirement
accounts and self-directed retirement plans); unaffiliated banks and insurance
companies purchasing for their own accounts; and endowment funds of unaffiliated
non-profit organizations; (3) investment-only accounts for large qualified
plans, with at least $50 million in total plan assets or at least 1000
participants; (4) trust and fiduciary accounts of trust companies and bank trust
departments providing fee based advisory services that invest at least $1
million in a Fund on behalf of each trust; and (5) policy holders under
Zurich-American Insurance Group's collateral investment program investing at
least $200,000 in a Fund. Class I shares currently are available for purchase
only from Kemper Distributors, Inc. ("KDI"), principal underwriter for the Fund,
and, in the case of category 4 above, selected dealers authorized by KDI. Share
certificates are not available for Class I shares
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
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noncumulative voting rights except that Class B and Class C shares have separate
and exclusive voting rights with respect to the Rule 12b-1 Plan. Shares of each
class also have equal rights with respect to dividends, assets and liquidation
of a Portfolio subject to any preferences (such as resulting from different Rule
12b-1 distribution fees), rights or privileges of any classes of shares of the
Portfolio. Shares of each Portfolio are fully paid and nonassessable when
issued, are transferable without restriction and have no preemptive or
conversion rights. The Fund is not required to hold annual shareholder meetings
and does not intend to do so. However, it will hold special meetings as required
or deemed desirable for such purposes as electing trustees, changing fundamental
policies or approving an investment management agreement. Subject to the
Agreement and Declaration of Trust of the Fund, shareholders may remove
trustees. Shareholders will vote by Portfolio and not in the aggregate or by
class except when voting in the aggregate is required, under the Investment
Company Act of 1940, such as for the election of trustees or when voting by
class is appropriate.
The Kemper 5 Portfolio and Kemper Horizon 20+ Portfolio may in the future seek
to achieve their respective investment objectives by pooling their assets with
assets of other mutual funds for investment in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as such Portfolios. The purpose of such an arrangement is to
achieve greater operational efficiencies and to reduce costs. It is expected
that any such investment company will be managed by Scudder Kemper in
substantially the same manner as the corresponding Portfolios. Shareholders of
each Portfolio will be given at least 30 days' prior notice of any such
investment, although they will not be entitled to vote on the action. Such
investment would be made only if the Trustees determine it to be in the best
interests of the respective Portfolios and their shareholders.
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KEMPER HORIZON FUND
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1998
Kemper Horizon 20+ Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 5 Portfolio
222 South Riverside Plaza, Chicago, Illinois 60606
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 November 30, 1998. The
prospectus may be obtained without charge from the Fund and is also available
along with other related materials on the SEC's Internet web site
(http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS ......................................................1
INVESTMENT POLICIES AND TECHNIQUES............................................4
PORTFOLIO TRANSACTIONS ......................................................12
INVESTMENT MANAGER AND UNDERWRITER...........................................14
PURCHASE AND REDEMPTION OF SHARES............................................22
DIVIDENDS AND TAXES .........................................................23
PERFORMANCE .................................................................29
OFFICERS AND TRUSTEES .......................................................36
SHAREHOLDER RIGHTS ..........................................................41
APPENDIX -- RATINGS OF FIXED INCOME INVESTMENTS..............................43
The financial statements appearing in the Fund's Annual Report to Shareholders
are incorporated herein by reference. The Report for the Fund accompanies this
document.
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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.
Kemper Horizon 10+ Portfolio may not, 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
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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 the
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.
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 Horizon
10+ Portfolio did not borrow money as permitted by investment restriction number
4 during the last fiscal period, and has no present intention of borrowing
during the current year. The Horizon 10+ Portfolio has adopted the following
non-fundamental restrictions, which may be changed by the Board of Trustees
without shareholder approval. The Horizon 10+ Portfolio may not:
(i) Invest for the purpose of exercising control or management of
another issuer.
(ii) 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.
(iii) Invest more than 15% of its net assets in illiquid securities.
(iv) 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.
Kemper Horizon 5 Portfolio and Kemper Horizon 20+ Portfolio may not, 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*, except that all or substantially all of the
assets of the Portfolio may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Portfolio.
(2) Purchase more than 10% of any class of voting securities of
any issuer, except that all or substantially all of the assets
of the Portfolio may be invested in another registered
investment company having the same investment objective and
substantially similar investment policies as the Portfolio.
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(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*, except that all or
substantially all of the assets of the Portfolio may be
invested in another registered investment company having the
same investment objective and substantially similar investment
policies as the Portfolio.
(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, except that all or substantially all of
the assets of the Portfolio may be invested in another
registered investment company having the same investment
objective and substantially similar investment policies as the
Portfolio.
(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
these Portfolios invest in loan participations, these Portfolios, as a
non-fundamental policy, consider both the lender and the borrower to be an
issuer of such loan participation.
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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 did not borrow money as permitted by investment restriction number 4
during the last fiscal period, and have no present intention of borrowing during
the current year. The Horizon 5 Portfolio and Horizon 20+ Portfolio have adopted
the following non-fundamental restrictions, which may be changed by the Board of
Trustees without shareholder approval. Neither Portfolio may:
(i) Invest for the purpose of exercising control or management of
another issuer.
(ii) 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.
(iii) Invest more than 15% of its net assets in illiquid securities.
(iv) 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.
Master/feeder fund structure. The Board of Trustees of the Kemper Horizon 5
Portfolio and the Kemper Horizon 20+ Portfolio has the discretion to retain the
current distribution arrangement for a Fund while investing in a master fund in
a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
INVESTMENT POLICIES AND TECHNIQUES
GENERAL. Each Portfolio may engage in options transactions and may engage in
financial futures transactions in accordance with its respective investment
objectives and policies. Each Portfolio intends to engage in such transactions
if it appears to the investment manager to be advantageous to do so in order to
pursue its investment objective and also to hedge against the effects of market
risks but not for speculative purposes. The use of futures and options, and
possible benefits and attendant risks, are discussed below along with
information concerning other investment policies and techniques.
OPTIONS ON SECURITIES. Each Portfolio may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying
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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 or at
the end of 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 or at the end of the option period. The premium received
for writing an option will reflect, among other things, the current market price
of the underlying security, the relationship of the exercise price to such
market price, the price volatility of the underlying security, the option
period, supply and demand and interest rates. The Portfolio may write or
purchase spread options, which are options for which the exercise price may be a
fixed dollar spread or yield spread between the security underlying the option
and another security that is used as a bench mark. The exercise price of an
option may be below, equal to or above the current market value of the
underlying security at the time the option is written. The buyer of a put who
also owns the related security is protected by ownership of a put option against
any decline in that security's price below the exercise price less the amount
paid for the option. The ability to purchase put options allows a Portfolio to
protect capital gains in an appreciated security it owns, without being required
to actually sell that security. At times a Portfolio would like to establish a
position in a security upon which call options are available. By purchasing a
call option, a Portfolio is able to fix the cost of acquiring the security, this
being the cost of the call plus the exercise price of the option. This procedure
also provides some protection from an unexpected downturn in the market, because
a Portfolio is only at risk for the amount of the premium paid for the call
option which it can, if it chooses, permit to expire.
During the option period the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain in the amount of the premium received.
If the covered call option writer has to sell the underlying security because of
the exercise of a call option, it realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium.
If a secured put option expires unexercised, the writer realizes a gain from the
amount of the premium, plus the interest income on the eligible securities that
have been segregated. If the secured put writer has to buy the underlying
security because of the exercise of the put option, the secured put writer
incurs an unrealized loss to the extent that the current market value of the
underlying security is less than the exercise price of the put option. However,
this would be offset in whole or in part by gain from the premium received and
any interest income earned on the eligible securities that have been segregated.
OVER-THE-COUNTER OPTIONS. As indicated in the prospectus (see "Investment
Objectives, Policies and Risk Factors"), the Portfolios may deal in
over-the-counter traded options ("OTC options"). OTC options differ from
exchange traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation, and there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise, in which event a Portfolio may experience material losses. However,
in writing options the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities, and a wider range of expiration
dates and exercise prices, than are exchange traded options. Since there is no
exchange, pricing is normally done by reference to information from market
makers, which information is carefully monitored by the investment manager and
verified in appropriate cases.
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A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, a Portfolio may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Portfolio writes an OTC option, it generally can close out
that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Portfolio originally wrote it. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
might also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Fund understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The investment manager
disagrees with this position and has found the dealers with which it engages in
OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Portfolios have adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of the Portfolios. A brief description of such
procedures is set forth below.
A Portfolio will only engage in OTC options transactions with dealers that have
been specifically approved by the investment manager pursuant to procedures
adopted by the Board of Trustees of the Fund. The investment manager believes
that the approved dealers should be able to enter into closing transactions if
necessary and, therefore, present minimal credit risks to a Portfolio. The
investment manager will monitor the credit-worthiness of the approved dealers on
an ongoing basis. A Portfolio currently will not engage in OTC options
transactions if the amount invested by the Portfolio in OTC options, plus a
"liquidity charge" related to OTC options written by the Portfolio, plus the
amount invested by the Portfolio in illiquid securities, would exceed 15% of the
Portfolio's net assets. The "liquidity charge" referred to above is computed as
described below.
The Portfolio anticipates entering into agreements with dealers to which a
Portfolio sells OTC options. Under these agreements the Portfolio would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow a Portfolio to repurchase a specific OTC
option written by the Portfolio, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.
OPTIONS ON SECURITIES INDICES. Each Portfolio may purchase and write, call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Portfolio owns or intends
to purchase, and not for speculation. Through the writing or purchase of index
options, a Portfolio can achieve many of the same objectives as through the use
of options on individual securities. Options on securities indices are similar
to options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to such difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the
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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
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markets could result. Price distortions could also result if investors in
futures contracts decide to make or take delivery of underlying securities or
other assets rather than engage in closing transactions because of the resultant
reduction in the liquidity of the futures market. In addition, because, from the
point of view of speculators, the margin requirements in the futures 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 or liquid securities 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
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owner the right, but not the obligation, to sell the currency. The option seller
(writer) is obligated to fulfill the terms of the option sold if it is
exercised. However, either seller or buyer may close its position during the
option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates. Conversely, a put
rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Portfolio against an adverse movement in
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
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securities to the extent required by applicable regulation in connection with
forward foreign currency exchange contracts entered into for the purchase of a
foreign currency. A Portfolio generally does not enter into a forward contract
with a term longer than one year.
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, but not limited to, deferring realization of loss when
deemed advantageous 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
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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 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 5% 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.
11
<PAGE>
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 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
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Portfolio is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Portfolio to reported commissions paid by
12
<PAGE>
others. The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Portfolios' purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Portfolios. Trading
does, however, involve transaction costs. Transactions with dealers serving as
primary market makers reflect the spread between the bid and asked prices.
Purchases of underwritten issues may be made, which will include an underwriting
fee paid to the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to the
Portfolios. The term "research, market and statistical information" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts. The Adviser is authorized when placing portfolio
transactions for the Portfolios to pay a brokerage commission in excess of that
which another broker might charge for executing the same transaction on account
of execution services and the receipt of research, market or statistical
information. In effecting transactions in over-the-counter securities, orders
are placed with the principal market makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund or Portfolio managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investors Services, Inc.
("SIS"), which is a corporation registered as a broker-dealer and a subsidiary
of the Adviser. SIS will place orders on behalf of the Portfolios with issuers,
underwriters or other brokers and dealers. SIS will not receive any commission,
fee or other remuneration from the Portfolios for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to the Portfolios and to the Adviser, it is the
opinion of the Adviser that such information only supplements the Adviser's own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than the Portfolios, and not all such
information is used by the Adviser in connection with the Portfolios.
Conversely, such information provided to the Adviser by broker/dealers through
whom other clients of the Adviser effect securities transactions may be useful
to the Adviser in providing services to the Portfolios.
The Trustees review from time to time whether the recapture for the benefit of
the Fund of some portion of the brokerage commissions or similar fees paid by
the Portfolios on portfolio transactions is legally permissible and advisable.
13
<PAGE>
The table below shows total brokerage commissions paid by each Portfolio for the
fiscal year ended July 31 1998, July 31, 1997, for the period December 29, 1995
(commencement of operations) to July 31, 1996 and, for the most recent fiscal
year, the percentage thereof that was allocated to firms based upon research
information provided.
<TABLE>
<CAPTION>
Allocated to Firms Based on December 29, 1995
Portfolio Fiscal 1998 Research in Fiscal 1998 Fiscal 1997 to July 31, 1996
--------- ----------- ----------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Horizon 20+ $188,000 91% $137,000 $54,000
Horizon 10+ $141,000 89% $104,000 $40,000
Horizon 5 $52,000 91% $ 43,000 $15,000
</TABLE>
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), 345 Park Avenue, New York, New York, is the Fund's investment
manager. Scudder Kemper is approximately 70% owned by Zurich Financial Services,
Inc., a newly formed global insurance and financial services company. The
balance of the Adviser is owned by its officers and employees. Pursuant to an
investment management agreement, Scudder Kemper acts as the Fund's investment
adviser, manages its investments, administers its business affairs, furnishes
office facilities and equipment, provides clerical, 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 Scudder Kemper), independent auditors, counsel,
custodian and transfer agent and the cost of share
14
<PAGE>
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value and maintaining all
accounting records thereto, 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.
The investment management agreement provides that Scudder Kemper 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
Scudder Kemper 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 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.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich and former investment manager of the Fund, and
Scudder changed it name to Scudder Kemper Investments, Inc. As a result of the
transaction, Zurich owned approximately 70% of the Adviser, with the balance
owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholder initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Upon consummation of this transaction, the Fund's existing investment management
agreement with Scudder Kemper was deemed to have been assigned and, therefore,
terminated. The Board has approved a new investment management agreement with
Scudder Kemper, which is substantially identical to the current investment
management agreement, except for the date of execution and termination. This
agreement became effective upon the termination of the then current investment
management agreement and will be submitted for shareholder approval at a special
meeting currently scheduled to conclude in December 1998.
Scudder Kemper is paid a monthly investment management fee, by each Portfolio,
at the annual rates shown below.
<TABLE>
<CAPTION>
Average Daily Net Assets of a Portfolio Management Fee Rates
--------------------------------------- --------------------
<S> <C>
$0 - $250 million 0.58%
$250 million - $1 billion 0.55%
$1 billion - $2.5 billion 0.53%
$2.5 billion - $5 billion 0.51%
$5 billion - $7.5 billion 0.48%
$7.5 billion - $10 billion 0.46%
$10 billion - $12.5 billion 0.44%
Over $12.5 billion 0.42%
</TABLE>
15
<PAGE>
The table below shows investment management fees paid by each Portfolio for the
fiscal year ended July 31, 1998, July 31 1997, and for the period December 29,
1995 (commencement of operations) to July 31, 1996.
<TABLE>
<CAPTION>
December 29, 1995
Portfolio Fiscal 1998 Fiscal 1997 to July 31, 1996
--------- ----------- ----------- ----------------
<S> <C> <C> <C>
Horizon 20+ $495,000 225,000 26,000
Horizon 10+ $495,000 234,000 27,000
Horizon 5 $242,000 130,000 16,000
</TABLE>
16
<PAGE>
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), a
subsidiary of Scudder Kemper, is responsible for determining the daily net asset
value per share of the Fund and maintaining all accounting records related
thereto. Currently, SFAC receives no fee for its services to the Fund; however,
subject to Board approval, at some time in the future, SFAC may seek payment for
its services under this agreement.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreements ("distribution agreements"), Kemper Distributors, Inc.
("KDI"), a wholly-owned subsidiary of Scudder Kemper, 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 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
17
<PAGE>
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 A Shares. The following information concerns the underwriting commissions
paid in connection with the distribution of each Portfolio's Class A shares for
the fiscal year ended July 31, 1998, July 31, 1997 and for the period December
29, 1995 (commencement of operations) to July 31, 1996.
<TABLE>
<CAPTION>
Commissions Commissions Commissions
Retained KDI Paid Paid to KDI
Portfolio Year by KDI to All Firms Affiliated Firms
--------- ---- ------ ------------ ----------------
<S> <C> <C> <C> <C>
Horizon 20+ 1998 $26,000 303,000 0
1997 $23,000 198,000 0
1996 $ 7,000 160,000 16,000
Horizon 10+ 1998 $30,000 300,000 0
1997 $31,000 219,000 0
1996 $14,000 235,000 21,000
Horizon 5 1998 $13,000 156,000 0
1997 $20,000 127,000 0
1996 $ 7,000 154,000 10,000
</TABLE>
Class B Shares and Class C Shares. Each Portfolio has adopted a plan under Rule
12b-1 (the "Rule 12b-1 Plan") that provides for fees payable as an expense of
the Class B shares and Class C shares that are used by KDI to pay for
distribution and services for those classes. Because 12b-1 fees are paid out of
fund assets on an ongoing basis they will, over time, increase the cost of the
investment and may cost more than other types of sales charges. Expenses of the
Portfolios and of KDI, in connection with the Rule 12b-1 Plans for the Class B
and Class C shares for the fiscal year ended July 31, 1998, July 31, 1997 and
for the period December 29, 1995 (commencement of operations) to July 31, 1996
are set forth below. A portion of the marketing, sales and operating expenses
shown below could be considered overhead expenses.
18
<PAGE>
<TABLE>
<CAPTION>
Portfolio Class B Shares
------------------------
Horizon 20+ Horizon 10+ Horizon 5
----------- ----------- ---------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Fees Paid $305,000 148,000 16,000 265,000 141,000 17,000 150,000 90,000 11,000
by Fund to KDI
Contingent Deferred $73,000 20,000 3,000 49,000 19,000 1,000 20,000 14,000 6,000
Sales Charges to KDI
Total Commissions Paid $689,000 565,000 270,000 555,000 490,000 261,000 312,000 264,000 186,000
by KDI to Firms
Distribution Fees Paid 0 0 32,000 0 0 32,000 0 0 15,000
by KDI to Affiliated
Firms
Advertising and $81,000 106,000 37,000 61,000 90,000 36,000 29000 50,000 28,000
Literature
Other Distribution
Expenses Paid by KDI
Prospectus Printing $6,000 8,000 2,000 5,000 6,000 2,000 2000 4,000 2,000
Marketing and Sales $162,000 260,000 79,000 128,000 223,000 76,000 62000 122,000 57,000
Expenses
Misc. Operating $41,000 43,000 12,000 38,000 38,000 12,000 27000 29,000 10,000
Expenses
Interest Expenses $149,000 80,000 9,000 131,000 75,000 8,000 79000 49,000 6,000
Portfolio Class C Shares
------------------------
Horizon 20+ Horizon 10+ Horizon 5
----------- ----------- ---------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
Distribution Fees Paid $45,000 17,000 2,000 61,000 27,000 2,000 31,000 14,000 1,000
by Fund to KDI
Contingent Deferred $1,000 0 0 1,000 4,000 0 1,000 1,000 0
Sales Charges to KDI
Total Distribution Fees $60,000 22,000 5,000 70,000 24,000 5,000 34,000 15,000 4,000
Paid by KDI to Firms
Distribution Fees Paid 0 0 0 0 0 0 0 0 0
by KDI to Affiliated
Firms
Advertising and $19,000 18,000 5,000 20,000 24,000 5,000 11,000 12,000 4,000
Literature
Other Distribution
Expenses Paid by KDI
Prospectus Printing $1,000 1,000 0 1,000 2,000 0 1,000 1,000 0
19
<PAGE>
Marketing and Sales $27,000 44,000 9,000 40,000 58,000 10,000 22,000 28,000 8,000
Expenses
Misc. Operating $7,000 15,000 2,000 10,000 16,000 1,000 19,000 14,000 1,000
Expenses
Interest Expenses $12,000 5,000 0 13,000 6,000 0 8,000 4,000 0
</TABLE>
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 0.25% of average daily net assets of the Class A, B and C shares
of each Portfolio.
KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms"), that provide services and
facilities for their customers or clients who are investors 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 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 administrative services as may be
agreed upon from time to time and permitted by applicable statute, rule or
regulation. For Class A shares, KDI pays each firm a service fee, normally
payable quarterly, at an annual rate of up to 0.25% of the net assets in each
Portfolio account that it maintains and services attributable to Class A shares,
commencing with the month after investment. For Class B and Class C shares, KDI
currently advances to firms the first-year service fee at a rate of up to 0.25%
of the purchase price of such shares. For periods after the first year, KDI
currently intends to pay firms a service fee at a rate of up to 0.25%
(calculated monthly and normally paid quarterly) of the net assets attributable
to Class B and Class C shares maintained and serviced by the firm. After the
first year, a firm becomes eligible for the quarterly service fee and the fee
continues until terminated by KDI or the Fund. Firms to which service fees may
be paid include broker-dealers affiliated with KDI.
20
<PAGE>
The following information concerns the administrative services fee paid by each
Portfolio for the fiscal year ended July 31, 1998, July 31, 1997 and the period
December 29, 1995 (commencement of operations) to July 31, 1996.
<TABLE>
<CAPTION>
Service Fees Service Fees
Paid by Paid by KDI to
Portfolio Year Administrative Service Fees Paid by Fund KDI to Firms Affiliated Firms
--------- ---- ---------------------------------------- ------------ ----------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Horizon 20+ 1998 $86,000 103,000 15,000 213,000 0
1997 $34,000 49,000 5,000 96,000 0
1996 $ 4,000 5,000 1,000 25,000 3,000
Horizon 10+ 1998 $98,000 88,000 20,000 212,000 0
1997 $40,000 47,000 9,000 100,000 0
1996 $ 4,000 6,000 1,000 26,000 3,000
Horizon 5 1998 $41,000 50,000 10,000 109,000 0
1997 $19,000 30,000 5,000 57,000 0
1996 $ 2,000 4,000 0 17,000 1,000
</TABLE>
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 a firm provides administrative services 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 a firm of record provides administrative services. The
Board of Trustees, in its discretion, may approve basing the fee to KDI on all
Portfolio assets in the future.
Certain trustees or officers of the Fund are also directors or officers of
Scudder Kemper or KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 801 Pennsylvania Avenue, 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, 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 Scudder
Kemper, serves as "Shareholder Service Agent" of the Fund and, as such, performs
all of IFTC's duties as transfer agent and dividend paying agent. 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. Effective January 1, 1999 IFTC will receive as transfer agent and
will pay to KSvC annual account fees of $10 ($18 for retirement plans) for set
up
21
<PAGE>
charges and annual fees associated with the contingent deferred sales charge and
an asset-based fee of 0.08% plus an out of pocket expense reimbursement.
The following shows for each Portfolio, for the fiscal year ended July 31, 1998,
July 31, 1997 and for the period December 29, 1995 (commencement of operations)
to July 31, 1996, the shareholder service fees IFTC remitted to KSvC.
<TABLE>
<CAPTION>
December 29, 1995
Fiscal 1998 Fiscal 1997 to July 31, 1996
Portfolio Fees IFTC Paid to KSvC Fees IFTC Paid to KSvC Fees IFTC Paid to KSvC
--------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Horizon 20+ $756,000 224,000 20,000
Horizon 10+ $441,000 179,000 12,000
Horizon 5 $167,000 65,000 5,000
</TABLE>
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.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
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.
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 or Class C 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 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.
22
<PAGE>
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.
The Fund has authorized certain members of the National Association of
Securities Dealers, Inc. ("NASD"), other than Kemper Distributors, Inc. ("KDI")
to accept purchase and redemption orders for the Fund's shares. Those brokers
may also designate other parties to accept purchase and redemption orders on the
Fund's behalf. Orders for purchase or redemption will be deemed to have been
received by the Fund when such brokers or their authorized designees accept the
orders. Subject to the terms of the contract between the Fund and the broker,
ordinarily orders will be priced as the Fund's net asset value next computed
after acceptance by such brokers or their authorized designees. Further, if
purchases or redemptions of the Fund's shares are arranged and settlement is
made at an investor's election through any other authorized NASD member, that
member may, at its discretion, charge a fee for that service. The Board of
Trustees or Directors as the case may be ("Board") of the Fund and KDI each has
the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Board and KDI may suspend or terminate the offering of shares of the
Fund at any time for any reason.
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
proportion for each class.
TAXES. Each Portfolio intends to continue to qualify as a regulated investment
company under Subchapter M of the Code and, if so qualified, a Portfolio
generally will not be liable for federal income taxes to the extent its earnings
are distributed.
23
<PAGE>
To so qualify, each Portfolio must satisfy certain income and asset
diversification requirements, and must distribute to its shareholders at least
90% of its investment company taxable income (including net short-term capital
gain).
Each Portfolio is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires
payment to shareholders during a calendar year of distributions representing at
least 98% of the each Portfolio's ordinary income for each calendar year, at
least 98% of the excess of its capital gains over capital losses (adjusted for
certain ordinary losses) realized during the one-year period ending October 31
during such year, and all ordinary income and capital gains for prior years that
were not previously distributed.
Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Portfolios.
If any net realized long-term capital gains in excess of net realized short-term
capital losses are retained by a Portfolio for reinvestment, requiring federal
income taxes to be paid thereon by the Portfolio, the Portfolios intend to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Portfolio on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on Portfolio
shares by the difference between a pro rata share of such gains owned and the
individual tax credit.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Properly designated distributions of the excess of net long-term capital gain
over net short-term capital loss are taxable to shareholders as long-term
capital gains, regardless of the length of time the shares of the Portfolio have
been held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long- term capital gain during such six-month period.
Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder Kemper
fund, may result in tax consequences (gain or loss) to the shareholder and are
also subject to these reporting requirements.
A qualifying individual may make a deductible IRA contribution for any taxable
year only if (i) the individual is not an active participant in an employer's
retirement plan, or (ii) if the individual is an active participant in an
employee retirement plan and the individual has an adjusted gross income below a
certain level ($50,000 for married individuals filing a joint return, with a
phase-out of the deduction for adjusted gross income between $50,000 and
$60,000; $30,000 for a single individual, with a phase-out for adjusted gross
income between $30,000 and $40,000). An individual is not considered an active
participant in an employer's retirement plan if the individual's spouse is an
active participant in such a plan. However, in the case of a joint return, the
amount of the deductible contribution by the individual who is not an active
participant (but whose spouse is) is phased out for adjusted gross income
between $150,000 and $160,000. However, an individual not permitted to make a
deductible contribution to an IRA for any such taxable year may nonetheless make
nondeductible contributions up to $2,000 to an IRA (up to $2,000 per individual
for married couples if only
24
<PAGE>
one spouse has earned income) for that year. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both deductible
and nondeductible amounts. In general, a proportionate amount of each withdrawal
will be deemed to be made from nondeductible contributions; amounts treated as a
return of nondeductible contributions will not be taxable. Also, annual
contributions may be made to a spousal IRA even if the spouse has earnings in a
given year if the spouse elects to be treated as having no earnings (for IRA
contribution purposes) for the year.
If shares are held in a tax-deferred account, such as a retirement plan, income
and gain will not be taxable each year. Instead, the taxable portion of amounts
held in a tax-deferred account generally will be subject to tax as ordinary
income only when distributed from that account.
Distributions by a Portfolio result in a reduction in the net asset value of the
Portfolio's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Dividend and interest income received by the Portfolios from sources outside the
U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
The Portfolios may invest in shares of certain foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). If
a Portfolio receives a so-called "excess distribution" with respect to PFIC
stock, the Portfolio itself may be subject to a tax on a portion of the excess
distribution. Certain distributions from a PFIC as well as gains from the sale
of the PFIC shares are treated as "excess distributions." In general, under the
PFIC rules, an excess distribution is treated as having been realized ratably
over the period during which the Portfolio held the PFIC shares. The Portfolio
will be subject to tax on the portion, if any, of an excess distribution that is
allocated to prior Portfolio taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Portfolios may make an election to mark to market its shares of these
foreign investment companies in lieu of being subject to U.S. federal income
taxation. At the end of each taxable year to which the election applies, a
Portfolio would report as ordinary income the amount by which the fair market
value of the foreign company's stock exceeds the Portfolio's adjusted basis in
these shares; any mark to market losses and any loss from an actual disposition
of shares would be deductible as ordinary loss to the extent of any net mark to
market gains included in income in prior years. The effect of the election would
be to treat excess distributions and gain on dispositions as ordinary income
which is not subject to the Portfolio level tax when distributed to shareholders
as a dividend. Alternatively, the Portfolios may elect to include as income and
gain its share of the ordinary earnings and net capital gain of certain foreign
investment companies in lieu of being taxed in the manner described above.
Equity options (including covered call options on portfolio stock) written or
purchased by the Portfolios will be subject to tax under Section 1234 of the
Code. In general, no loss is recognized by a Portfolio upon payment of a premium
in connection with the purchase of a put or call option. The character of any
gain or loss recognized (i.e., long-term or short-term) will generally depend,
in the case of a lapse or sale of the option, on the Portfolio's holding period
for the option and, in the case of an exercise of the option, on the Portfolio's
holding period for the underlying security. The purchase of a put option may
constitute a short sale for federal income tax purposes, causing an adjustment
in the holding period of the underlying security or substantially identical
security in the Portfolio's portfolio. If a Portfolio writes a call option, no
gain is recognized upon its receipt of a premium. If the option lapses or is
closed out, any gain or loss is treated as a short-term capital gain or loss. If
a call option is exercised, any resulting gain or loss is short-term or
long-term
25
<PAGE>
capital gain or loss depending on the holding period of the underlying security.
The exercise of a put option written by a Portfolio is not a taxable transaction
for the Portfolio.
Many futures and forward contracts entered into by a Portfolio and all listed
nonequity options written or purchased by a Portfolio (including covered call
options written on debt securities and options purchased or written on futures
contracts) will be governed by Section 1256 of the Code. Absent a tax election
to the contrary, gain or loss attributable to the lapse, exercise or closing out
of any such position will be treated as 60% long-term and 40% short-term, and on
the last trading day of the Portfolio's fiscal year (and generally, on October
31 for purposes of the 4% excise tax), all outstanding Section 1256 positions
will be marked-to-market (i.e., treated as if such positions were closed out at
their closing price on such day), with any resulting gain or loss recognized as
60% long-term and 40% short-term. Under Section 988 of the Code, discussed
below, foreign currency gain or loss from foreign currency-related forward
contracts, certain futures and options and similar financial instruments entered
into or acquired by a Portfolio will be treated as ordinary income or loss.
Under certain circumstances, entry into a futures contract to sell a security
may constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or a substantially
identical security in the Portfolio's portfolio.
Positions of the Portfolios consisting of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Portfolios' risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Portfolio.
Positions of a Portfolio consisting of at least one position not governed by
Section 1256 and at least one future, forward, or nonequity option contract
which is governed by Section 1256 which substantially diminishes the Portfolio's
risk of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. Each Portfolio will monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
Notwithstanding any of the foregoing, recent tax law changes may require a
Portfolio to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if a Portfolio enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Portfolio's taxable year, if
certain conditions are met.
Similarly, if a Portfolio enters into a short sale of property that becomes
substantially worthless, the Portfolio will be required to recognize gain at
that time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Portfolio accrues receivables or liabilities
denominated in a foreign currency and the time the Portfolio actually collects
such receivables or pays such liabilities generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, and on disposition of certain futures,
forward or options contracts, gains or losses attributable to fluctuations in
the value of foreign currency between the date of acquisition of the security or
contracts and the date of disposition are also treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "Section 988" gains or
losses, may increase or decrease the amount of a Portfolio's investment company
taxable income to be distributed to its shareholders as ordinary income.
If a Portfolio holds zero coupon securities or other securities which are issued
at a discount a portion of the difference between the issue price and the face
value of such securities ("original issue discount") will be treated as income
to the Portfolio each year, even though the Portfolio will not receive cash
interest payments
26
<PAGE>
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the Portfolio which
must be distributed to shareholders in order to maintain the qualification of
the Portfolio as a regulated investment company and to avoid federal income tax
at the Portfolio level. In addition, if a Portfolio invests in certain high
yield original issue discount obligations issued by corporations, a portion of
the original issue discount accruing on the obligation may be eligible for the
deduction for dividends received by corporations. In such an event, properly
designated dividends of investment company taxable income received from the
Portfolio by its corporate shareholders, to the extent attributable to such
portion of the accrued original issue discount, may be eligible for the
deduction received by corporations.
If a Portfolio acquires a debt instrument at a market discount, a portion of the
gain recognized (if any) on disposition of such instrument may be treated as
ordinary income.
The Portfolios will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Portfolio shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Portfolios are notified by the IRS or a broker that the taxpayer identification
number furnished by the shareholder is incorrect or that the shareholder has
previously failed to report interest or dividend income. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld.
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 any other Kemper Mutual Fund listed in the
prospectus under "Special Features-Class A Shares-Combined Purchases" (other
than shares of Kemper Cash Reserves Fund not acquired by exchange from another
Kemper Mutual Fund) may reinvest the amount redeemed at net asset value at the
time of the reinvestment in shares of a Portfolio or in shares of the other
Kemper Mutual Funds within six months of the redemption as described in the
prospectus under "Redemption or Repurchase of Shares-Reinvestment Privilege." If
redeemed shares were held less than 91 days, then the lesser of (a) the sales
charge waived on the reinvested shares, or (b) the sales charge incurred on the
redeemed shares, is included in the basis of the reinvested shares and is not
included in the basis of the redeemed shares. If a shareholder realizes a loss
on the redemption or exchange of a Portfolio's shares and reinvests in shares of
another Portfolio within 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.
Shareholders of each Portfolio may be subject to state and local taxes on
distributions received from the Portfolio and on redemptions of the Portfolio's
shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Portfolios issue to
each shareholder a statement of the federal income tax status of all
distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of a Portfolio, including the possibility that such a shareholder may
be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under
an applicable income tax treaty) on amounts constituting ordinary income
received by him or her, where such amounts are treated as income from U.S.
sources under the Code.
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<PAGE>
Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.
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 or Class C 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 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.
<TABLE>
<CAPTION>
Average Annual Total Return for the year ended July 31, 1998
------------------------------------------------------------
(Adjusted for the maximum sales charge)
---------------------------------------
1-Year Life of
------ Fund*
-------
<S> <C> <C> <C>
Horizon 20+ Class A 2.75% 14.12%
Class B 4.98 14.78
Class C 7.97 15.72
Horizon 10+ Class A 3.46 11.98
Class B 5.85 12.70
Class C 8.83 13.55
Horizon 5 Class A 1.59 8.35
Class B 4.27 9.19
Class C 7.10 10.12
* Since 12/29/95.
</TABLE>
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 and Class C 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
28
<PAGE>
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 and Class C shares would be reduced if such charges
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. Redemption of Class C shares may be
subject to a 1% contingent deferred sales charge in the first year following
purchase. 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.
29
<PAGE>
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 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
30
<PAGE>
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.
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.
From time to time the Portfolios may include in their sales communications,
ranking and rating information received from various organizations, to include
but not be limited to ratings from Morningstar, Inc. and rankings from Lipper
Analytical Services, Inc. ("Lipper"), New York, New York, which is a mutual fund
reporting service.
The following tables compare the performance of the Class A shares of each
Portfolio over various periods with that of other mutual funds within the
categories described below according to data reported by Lipper . Lipper
performance figures are based on changes in net asset value, with all income and
capital gain dividends reinvested. Such calculations do not include the effect
of any sales charges. Future performance cannot be guaranteed. Lipper publishes
performance analyses on a regular basis. Each category includes funds with a
variety of objectives, policies and market and credit risks that should be
considered in reviewing these rankings.
<TABLE>
<CAPTION>
Lipper Perfomance Analysis
Horizon 20+ A Shares Flexible Portfolio Funds
-------------------- ------------------------
<S> <C> <C> <C>
One year (period ended 7/31/98) 117 of 204
Lipper Perfomance Analysis
Horizon 10+ A Shares Balanced Portfolio Funds
-------------------- ------------------------
One year (period ended 7/31/98) 188 of 379
Lipper Perfomance Analysis
Horizon 5 A Shares Income Portfolio Funds
------------------ ----------------------
One year (period ended 7/31/98) 42 of 78
</TABLE>
31
<PAGE>
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI are listed
below:
JAMES E. AKINS (10/15/26), Trustee, 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, 1973-76.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee, 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; formerly, Illinois State Senator;
formerly, Vice President, The Reuben H. Donnelly Corp.
FREDERICK T. KELSEY (4/25/27), Trustee, 4010 Arbor Lane, Unit 402, Northfield,
Illinois; 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 Funds; formerly, Trustee of
the Pilot Funds.
DANIEL PIERCE (3/18/34), Trustee and Chairman*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
FRED B. RENWICK (2/1/30), Trustee, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Investment Program, Inc.; Director, the Wartburg Home Foundation; Chairman,
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment Committee; formerly, member of the Investment Committee
of Atlanta University Board of Trustees; formerly, Director of Board of Pensions
Evangelical Lutheran Church of America.
JOHN B. TINGLEFF (5/4/35), Trustee, 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.
EDMOND D. VILLANI (3/4/47), Trustee*, 345 Park Avenue, New York, New York;
President, Chief Executive Officer and Managing Director, Adviser.
JOHN G. WEITHERS (8/8/33), Trustee, 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; Director, Systems
Imagineering, Inc.
32
<PAGE>
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, Scudder Kemper.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Scudder Kemper; Vice President and Director
of State Registrations, KDI.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; Head of Broker Dealer Division of an
unaffiliated investment management firm during 1997; prior thereto, President of
Client Management Services of an unaffiliated investment management firm from
1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63) Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
MARK S. CASADY (9/21/60), President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Institutional Sales Manager
of an unaffiliated mutual fund distributor.
PHILIP S. FORTUNA (11/30/57), Vice President*, 101 California Street, San
Francisco, California; Managing Director, Adviser.
33
<PAGE>
* "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. The table below shows amounts estimated
to be paid or accrued to those trustees who are not designated "interested
persons" during the Fund's 1998 fiscal year and the total compensation that the
Kemper funds paid to such trustees during the calendar year 1997.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation Kemper Funds Paid
Name of Board Member from Fund to Board Members(2)
- -------------------- --------- -------------------
<S> <C> <C>
James E. Akins $5,400 $106,300
Arthur R. Gottschalk(1) $5,900 $121,100
Frederick T. Kelsey $5,400 $111,300
Fred B. Renwick $5,400 $106,300
John B. Tingleff $5,400 $106,300
John G. Weithers $5,400 $106,300
</TABLE>
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest monthly
at a rate equal to the yield of Zurich Money Funds -- Zurich Money Market Fund.
Total deferred fees and interest accrued for the latest and prior fiscal years
for this Fund are $10,400 for Mr. Gottschalk.
(2) Includes compensation for service on the Boards of 13 Kemper funds, with 36
fund portfolios. Each trustee currently serves as a board member of 15 Kemper
Funds with 51 fund portfolios. Total compensation does not reflect amounts paid
by Scudder Kemper Investments, Inc. to the board members for meetings regarding
the combination of Scudder and Zurich Kemper Investments, Inc. Such amounts
totaled $42,800, $40,100, $39,000, $42,900, $42,900 and $42,900 for Messrs.
Akins, Gorrschalk, Kelsey, Renwick, Tingleff and Weithers, respectively.
As of November 2, 1998, the officers and trustees of the Fund as a group owned
less than 1% of each Portfolio.
Principal Holders of Securities
As of October 30, 1998 the following owned of record more than 5% of the
outstanding stock of the Portfolios as set forth below.
<TABLE>
<CAPTION>
HORIZON 20+
-----------
Name and Address Class Percentage
- ---------------- ----- ----------
<S> <C> <C>
National Financial Svcs Corp. B 6.68
200 Liberty Street
New York, NY 10281
Scudder Kemper Investments, Inc. I 13.41
Money Purchase Plan #62524
Attn: Peter Drexler
345 Park Avenue
New York, NY 10154
Scudder Kemper Investments, Inc. I 84.59
Profit Sharing Plan #61486
Attn: Peter Drexler
345 Park Avenue
34
<PAGE>
New York, NY 10154
HORIZON 10+
- -----------
Name and Address Class Percentage
- ---------------- ----- ----------
Prudential Trust FBO A 12.51
Defined Contribution
Plan Customers
30 Scranton Office Park
Scranton, PA 18507
National Financial Svcs Corp. B 11.85
200 Liberty Street
New York, NY 10281
Scudder Kemper Investments, Inc. I 7.70
Money Purchase Plan #62524
Attn: Peter Drexler
345 Park Avenue
New York, NY 10154
ZKI Inc. NON-QUA DEF C I 27.58
Lasalle National Bank TTEE
222 S. Riverside Plaza 24th FL
Chicago, IL 60606
Scudder Kemper Investments, Inc. I 63.93
Profit Sharing Plan #61486
Attn: Peter Drexler
345 Park Avenue
New York, NY 10154
HORIZON 5+
- ----------
Name and Address Class Percentage
- ---------------- ----- ----------
National Financial Svcs Corp., A 5.70
200 Liberty Street
New York, NY 10281
National Financial Svcs Corp., B 8.85
200 Liberty Street
New York, NY 10281
Everen Clearing Corp. B 5.25
Attn: Chris Scotto
111 E. Kilbourn Ave.
Milwaukee, WI 53202
Investors Fiduciary Trust (IFTC) C 5.16
811 Main Street
35
<PAGE>
Kansas City, MO 64105
Rogers Petroleum Company C 5.67
8511 141st Street CT W
Saint Paul, MN 55124
Donaldson Lufkin Jenrette C 6.44
Securities Corp. Inc.
PO Box 2052
Jersey City, NJ 07303
Scudder Kemper Investments, Inc. I 6.59
Money Purchase Plan #62524
Attn: Peter Drexler
345 Park Avenue
New York, NY 10154
ZKI Inc. NON-QUA DEF C I 35.01
Lasalle National Bank TTEE
222 S. Riverside Plaza 24th FL
Chicago, IL 60606
Scudder Kemper Investments, Inc. I 58.35
Profit Sharing Plan #61486
Attn: Peter Drexler
345 Park Avenue
New York, NY 10154
</TABLE>
36
<PAGE>
* Record and beneficial owner.
** Record owner only.
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
37
<PAGE>
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, 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
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 Scudder Kemper 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.
38
<PAGE>
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.
39
<PAGE>
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.
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.
40
<PAGE>
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.
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.
41
<PAGE>
KEMPER HORIZON FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements
(i) Financial Statements and Financial Highlights included in
the Annual Report, for Kemper Horizon Fund for the fiscal year ended
July 31, 1998, are incorporated herein by reference to the fund's
Statement of Additional Information and were filed on October 6, 1998,
(No. 33-63467) pursuant to Rule 30d-1 under the Investment Company Act
of 1940 and are incorporated herein by reference.
Schedules II, III, IV and V are omitted as the required
information is not present.
Schedule I has been omitted as the required information is
presented in the portfolio of investments.
<TABLE>
<CAPTION>
<S> <C> <C>
b. 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.B4(e). Amended and Restated Written Instrument Establishing and
Designating Separate Classes of Shares.****
99.B5(a). Investment Management Agreement.****
99.B5(b). Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 20+ Fund. Filed herein.
99.B5(c). Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 10+ Fund. Filed herein.
99.B5(d). Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 5 Fund. Filed herein.
99.B5(e). Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 20+ Fund. Filed herein.
99.B5(f). Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 10+ Fund. Filed herein.
99.B5(g). Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 5 Fund. Filed herein.
Part C - Page 1
<PAGE>
99.B5(h). Sub-Advisory Agreement.****
99.B6(a). Underwriting and Distribution Services Agreement.***
99.B6(b) Underwriting and Distribution Services Agreement dated January 20,
1998 on behalf of Kemper Horizon Fund. Filed herein.
99.B6(c). Underwriting and Distribution Services Agreement dated August 1,
1998 on behalf of Kemper Horizon Fund. Filed herein.
99.B6(d). Underwriting and Distribution Services Agreement dated September
7, 1998 on behalf of Kemper Horizon Fund. Filed herein.
99.B6(e). Form of Selling Group Agreement.**
99.B6(f). Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 20+ Portfolio. Filed herein.
99.B6(g). Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 10+ Portfolio. Filed herein.
99.B6(h). Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 5 Portfolio. Filed herein.
99.B7. Inapplicable.
99.B8(a). Custody Agreement.**
99.B8(b). Foreign Custody Agreement.**
99.B9(a). Agency Agreement.**
99.B9(b). Administrative Services Agreement.***
99.B9(c). Supplement to Agency Agreement.***
99.B10. Inapplicable.
99.B11. Consent and Report of Independent Auditors. Filed herein.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14(a). Kemper Retirement Plan Prototype.**
99.B14(b). Model Individual Retirement Account.**
99.B15(a). Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 20+ Fund. Filed herein.
99.B15(b). Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 20+ Fund. Filed herein.
99.B15(c). Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 10+ Fund. Filed herein.
99.B15(d) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 10+ Fund. Filed herein.
Part C - Page 2
<PAGE>
99.B15(e) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 5 Fund. Filed herein.
99.B.15(f) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 5 Fund. Filed herein.
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.****
27 Financial Data Schedule. Filed herein.
Powers of Attorney for the following Trustees are incorporated by
reference to Post Effective Amendment No. 2 to the Registration
Statement:
James E. Atkins, Arthur R. Gottschalk, Frederick T. Kelsey,
Frederick B. Renwick, John B. Tingleff, and John G. Weithers.
Powers of Attorney for the following Trustees are filed herein:
Daniel Pierce and Edmond D. Villani
* Incorporated by reference to Registrant's Registration Statement on Form N-1A which was filed on
October 17, 1995.
** Incorporated by reference to Pre-effective Amendment No. 2 to Registrant's Registration Statement on
Form N-1A filed on December 14, 1995.
*** Incorporated by reference to Post Effective Amendment No. 2 to Registrant's Registration Statement on
Form N-1A filed on November 17, 1997.
**** Incorporated herein by reference to the Amendment to Registrant's Registration Statement on Form N-1A
identified below:
</TABLE>
<TABLE>
<CAPTION>
Post-Effective
Exhibit No. Amendment No. Date of Filing
----------- ------------- --------------
<S> <C> <C>
B4(e), B5(a), B5(h), B6(a), B18 1 8/29/96
and B24
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
Inapplicable.
Item 26. Number of Holders of Securities
- -------- -------------------------------
As of October 29, 1998, there were the following number of
holders of securities:
<TABLE>
<CAPTION>
Portfolio Classes of Shares
--------- -----------------
A B C I
- - - -
<S> <C> <C> <C> <C>
Horizon 20+ 9,588 10,499 2,657 8
Horizon 10+ 6,126 5,945 1,856 8
Horizon 5 3,198 2,141 727 7
</TABLE>
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.
Part C - Page 3
<PAGE>
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.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI
Holding Corp. ("ZKIH"), Zurich Kemper Investments, Inc.
("ZKI"), Scudder, Stevens & Clark, Inc. ("Scudder") and the
representatives of the beneficial owners of the capital stock
of Scudder ("Scudder Representatives") entered into a
transaction agreement ("Transaction Agreement") pursuant to
which Zurich became the majority stockholder in Scudder with
an approximately 70% interest, and ZKI was combined with
Scudder ("Transaction"). In connection with the trustees'
evaluation of the Transaction, Zurich agreed to indemnify the
Registrant and the trustees who were not interested persons of
ZKI or Scudder (the "Independent Trustees") for and against
any liability and expenses based upon any action or omission
by the Independent Trustees in connection with their
consideration of and action with respect to the Transaction.
In addition, Scudder has agreed to indemnify the Registrant
and the Independent Trustees for and against any liability and
expenses based upon any misstatements or omissions by Scudder
to the Independent Trustees in connection with their
consideration of the Transaction.
Item 28. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
Scudder Kemper Investments, Inc. has stockholders and
employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not
considered officers for the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investements, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
Part C - Page 4
<PAGE>
CEO/Branch Offices, Zurich Life Insurance Company##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director , Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</TABLE>
Part C - Page 5
<PAGE>
Item 29. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper
Funds.
(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 222 South Riverside Plaza, Chicago,
Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer & Vice President
James J. McGovern Chief Financial Officer and Vice None
President
Linda J. Wondrack Vice President and Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
(c) Not applicable
</TABLE>
Part C - Page 6
<PAGE>
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, Scudder Kemper Investments, Inc. and the principal
underwriter, Scudder Kemper Distributors, Inc., 222 South
Riverside Plaza, Chicago, Illinois 60603, at the offices of
the custodian and transfer agent, Investors Fiduciary Trust
Company, 801 Pennsylvania Avenue, 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) Not applicable.
(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.
Part C - Page 7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 27th day
of November, 1998
By:/s/Mark S. Casady
---------------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on November 27, 1998
on behalf of the following persons in the capacities indicated.
SIGNATURE TITLE
- --------- -----
/s/Mark S. Casady President
- --------------------------------------
Mark S. Casady
/s/Daniel Pierce* Chairman and Trustee
- --------------------------------------
/s/James E. Akins* Trustee
- --------------------------------------
/s/Arthur R. Gottschalk* Trustee
- --------------------------------------
/s/Frederick T. Kelsey* Trustee
- --------------------------------------
/s/Fred B. Renwick* Trustee
- --------------------------------------
/s/John B. Tingleff* Trustee
- --------------------------------------
/s/Edmond D. Villani* Trustee
- --------------------------------------
/s/ John G. Weithers* Trustee
- -------------------------------------
Treasurer (Principal Financial and
/s/John R. Hebble Accounting Officer)
- --------------------------------------
John R. Hebble
* Philip J. Collora signs this document pursuant to powers of attorney
filed herewith or incorporated by reference
By:/s/Philip J. Collora
-------------------------------
Philip J. Collora
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Edmond D. Villani Trustee 7/15/98
- ---------------------
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L. Quirk,
Caroline Pearson, and Philip J. Collora and each of them, any of whom may act
without the joinder of the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity stated below such
registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Kemper Horizon Fund.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Daniel Pierce Managing Director/Trustee 7/15/98
- -----------------
</TABLE>
<PAGE>
KEMPER HORIZON FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
<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.B4(e). Amended and Restated Written Instrument Establishing and Designating Separate Classes
of Shares.****
99.B5(a). Investment Management Agreement.****
99.B5(b) Investment Management Agreement dated December 31, 1997 on behalf of Kemper Horizon
20+ Fund. Filed herein.
99.B5(c) Investment Management Agreement dated December 31, 1997 on behalf of Kemper Horizon
10+ Fund. Filed herein.
99.B5(d) Investment Management Agreement dated December 31, on behalf of Kemper Horizon 5 Fund. Filed herein.
99.B5(e) Investment Management Agreement dated September 7, 1998 on behalf of Kemper Horizon
20+ Fund. Filed herein.
99.B5(f) Investment Management Agreement dated September 7, 1998 on behalf of Kemper Horizon
10+ Fund. Filed herein.
99.B5(g) Investment Management Agreement dated September 7, 1998 on behalf of Kemper Horizon 5
Fund. Filed herein.
99.B5(h). Sub-Advisory Agreement.****
99.B6(a). Underwriting and Distribution Services Agreement.***
99.B6(b) Underwriting and Distribution Services Agreement dated January 20, 1998 on behalf of
Kemper Horizon Fund. Filed herein.
99.B6(c) Underwriting and Distribution Services Agreement dated August 1, 1998 on behalf of
Kemper Horizon Fund. Filed herein.
99.B6(d) Underwriting and Distribution Services Agreement dated September 7, 1998 on behalf of
Kemper Horizon Fund. Filed herein.
99.B6(e). Form of Selling Group Agreement.**
99.B6(f). Fund Accounting Services Agreement dated December 31, 1997, on behalf of Kemper
Horizon 20+ Portfolio. Filed herein.
99.B6(g). Fund Accounting Services Agreement dated December 31, 1997, on behalf of Kemper
Horizon 10+ Portfolio. Filed herein.
99.B6(h). Fund Accounting Services Agreement dated December 31, 1997, on behalf of Kemper
Horizon 5 Portfolio. Filed herein.
99.B7. Inapplicable.
99.B8(a). Custody Agreement.**
99.B8(b). Foreign Custody Agreement.**
99.B9(a). Agency Agreement.**
99.B9(b). Administrative Services Agreement.***
99.B9(c). Supplement to Agency Agreement.***
99.B10. Inapplicable.
99.B11. Consent and Report of Independent Auditors. Filed herein.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14(a). Kemper Retirement Plan Prototype.**
99.B14(b). Model Individual Retirement Account.**
99.B15(a). Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf of Horizon 20+ Fund.
Filed herein.
99.B15(b) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf of Horizon 20+ Fund.
Filed herein.
99.B15(c) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf of Horizon 10+ Fund.
Filed herein.
99.B15(d) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf of Horizon 10+ Fund.
Filed herein.
99.B15(e) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf of Horizon 5 Fund.
Filed herein.
99.B15(f) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf of Horizon 5 Fund.
Filed herein.
99.B16. Inapplicable.
99.B18. Multi-Distribution System Plan.****
27 Financial Data Schedule.
</TABLE>
* Incorporated by reference to Registrant's Registration Statement on
Form N-1A which was filed on October 17, 1995.
<PAGE>
** Incorporated by reference to Pre-effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed on December 14,
1995.
*** Incorporated by reference to Post Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed on November 17,
1997.
**** Incorporated herein by reference to the Amendment to Registrant's
Registration Statement on Form N-1A identified below:
<TABLE>
<CAPTION>
Post-Effective
Exhibit No. Amendment No. Date of Filing
----------- ------------- --------------
<S> <C> <C>
B4(e), B5(a), B5(b), B6(a), B18 1 8/29/96
and B24
</TABLE>
B5(b)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 20+ Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 20+ Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth.
Accordingly, the Trust on behalf of the Fund agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
a) The Declaration, as amended to date.
b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and
<PAGE>
instructions adopted by the Trust's Board of Trustees. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
2
<PAGE>
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the
Trust on behalf of the Fund shall pay you in United States Dollars on the last
day of each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
.58 of 1 percent of the average daily net assets as defined below of the Fund
for such month; provided that, for any calendar month during which the average
of such values exceeds $250,000,000 the fee payable for that month based on the
portion of the average of such values in excess of $250,000,000 shall be 1/12 of
.55 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1,000,000,000, the fee payable for
that month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based
3
<PAGE>
on the portion of the average of such values in excess of $12,500,000,000 shall
be 1/12 of .42 of 1 percent of such portion; over (b) any compensation waived by
you from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain
in force until April 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
4
<PAGE>
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
5
<PAGE>
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 20+ Portfolio
By:/s/John E. Neal
-----------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/L.S. Birdsong
-----------------------------------
Vice President
6
<PAGE>
B5(c)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 10+ Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 10+ Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
a) The Declaration, as amended to date.
b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and
<PAGE>
instructions adopted by the Trust's Board of Trustees. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share
2
<PAGE>
of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the
Trust on behalf of the Fund shall pay you in United States Dollars on the last
day of each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
.58 of 1 percent of the average daily net assets as defined below of the Fund
for such month; provided that, for any calendar month during which the average
of such values exceeds $250,000,000 the fee payable for that month based on the
portion of the average of such values in excess of $250,000,000 shall be 1/12 of
.55 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1,000,000,000, the fee payable for
that month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based
3
<PAGE>
on the portion of the average of such values in excess of $12,500,000,000 shall
be 1/12 of .42 of 1 percent of such portion; over (b) any compensation waived by
you from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain
in force until April 1, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
4
<PAGE>
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
5
<PAGE>
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 10+ Portfolio
By:/s/John E. Neal
-----------------------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/L.S. Birdsong
----------------------------------
Vice President
6
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
December 31, 1997
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 5 Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 5 Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
a) The Declaration, as amended to date.
b) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this Agreement.
d) Establishment and Designation of Series of Shares of Beneficial Interest
relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and
<PAGE>
instructions adopted by the Trust's Board of Trustees. In connection therewith,
you shall use reasonable efforts to manage the Fund so that it will qualify as a
regulated investment company under Subchapter M of the Code and regulations
issued thereunder. The Fund shall have the benefit of the investment analysis
and research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share
2
<PAGE>
of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .58 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .55 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based
3
<PAGE>
on the portion of the average of such values in excess of $12,500,000,000 shall
be 1/12 of .42 of 1 percent of such portion; over (b) any compensation waived by
you from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until April 1, 1998, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
4
<PAGE>
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
5
<PAGE>
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 5 Portfolio
By:/s/John E. Neal
--------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/Lynn S. Birdsong
--------------------
Vice President
6
B5(e)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 20+ Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 20+ Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and
<PAGE>
all other applicable federal and state laws and regulations of which you have
knowledge; subject always to policies and instructions adopted by the Trust's
Board of Trustees. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's
2
<PAGE>
Board of Trustees. Nothing in this Agreement shall be deemed to shift to you or
to diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .58 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .55 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .42 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
4
<PAGE>
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until April 1, 1998, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any
5
<PAGE>
shareholder of the Fund or any other series of the Trust, or from any Trustee,
officer, employee or agent of the Trust. You understand that the rights and
obligations of each Fund, or series, under the Declaration are separate and
distinct from those of any and all other series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 20+ Portfolio
By: /s/Mark S. Casady
------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/S. R. Beckwith
-----------------
Treasurer
6
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 10+ Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 10+ Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and
<PAGE>
all other applicable federal and state laws and regulations of which you have
knowledge; subject always to policies and instructions adopted by the Trust's
Board of Trustees. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's
2
<PAGE>
Board of Trustees. Nothing in this Agreement shall be deemed to shift to you or
to diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .58 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .55 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .42 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
4
<PAGE>
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until April 1, 1998, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any
5
<PAGE>
shareholder of the Fund or any other series of the Trust, or from any Trustee,
officer, employee or agent of the Trust. You understand that the rights and
obligations of each Fund, or series, under the Declaration are separate and
distinct from those of any and all other series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 10+ Portfolio
By:/s/Mark S. Casady
--------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/S.R. Beckwith
--------------------
Treasurer
6
INVESTMENT MANAGEMENT AGREEMENT
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Horizon 5 Portfolio
Ladies and Gentlemen:
KEMPER HORIZON FUND (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Kemper Horizon 5 Portfolio (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By- Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and
<PAGE>
all other applicable federal and state laws and regulations of which you have
knowledge; subject always to policies and instructions adopted by the Trust's
Board of Trustees. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's
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<PAGE>
Board of Trustees. Nothing in this Agreement shall be deemed to shift to you or
to diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
3
<PAGE>
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .58 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .55 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .53 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .51 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .48 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .46 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds 10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be 1/12
of .44 of 1 percent of such portion; and provided that, for any calendar month
during which the average of such values exceeds 12,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .42 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
4
<PAGE>
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until April 1, 1998, and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund 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 the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any
5
<PAGE>
shareholder of the Fund or any other series of the Trust, or from any Trustee,
officer, employee or agent of the Trust. You understand that the rights and
obligations of each Fund, or series, under the Declaration are separate and
distinct from those of any and all other series.
11. Miscellaneous. 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. 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.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER HORIZON FUND, on behalf of
Kemper Horizon 5 Portfolio
By:/s/Mark S. Casady
--------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:/s/S.R. Beckwith
--------------------
Treasurer
6
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 20th day of January, 1998, 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 services contemplated hereunder directly to or
for the benefit of existing and potential shareholders who may be clients of
such
<PAGE>
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.
2
<PAGE>
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein 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
3
<PAGE>
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 time in any way require, limit,
restrict, prohibit or otherwise regulate any action on 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
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<PAGE>
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 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.
5
<PAGE>
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
until April 1, 1998; 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.
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.
6
<PAGE>
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 the laws of the Commonwealth of Massachusetts.
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.
7
<PAGE>
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:/s/John E. Neal
-------------------------
Title: Vice President
----------------------
ATTEST:
/s/Philip J. Collora
- ---------------------------
Title: Secretary
---------------------
KEMPER DISTRIBUTORS, INC.
By:/s/James L. Greenawalt
-------------------------
Title: President
----------------------
ATTEST:
/s/Charles R. Manzoni
- ---------------------------
Title: Secretary
---------------------
8
<PAGE>
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 1st day of August, 1998, 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 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 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
<PAGE>
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 Fund's
organizational documents.
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
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, any 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 the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
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 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.
<PAGE>
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 Board member or officer of the Fund or to
any officer or Board member 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 Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on 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 or the Plan. 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
<PAGE>
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 or 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. This Agreement shall become effective on the date hereof and shall
continue until April 1, 1999; 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.
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 members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
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.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
9. 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.
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
<PAGE>
mailed, postage prepaid, to the other party at such address as such other party
may designate for the receipt of such notice.
12. 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.
13. ______ This Agreement shall be construed in accordance with
applicable federal law and with the laws of The Commonwealth of Massachusetts.
14. ______ 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.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
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:/s/Mark S. Casady
-------------------------
Title: President
----------------------
ATTEST:
/s/Maureen Kane
- ---------------------------
Title: Ass't. Secretary
-----------------
KEMPER DISTRIBUTORS, INC.
By:/s/James L. Greenawalt
-------------------------
Title: President
----------------------
ATTEST:
/s/Joan V. Pearson
- ---------------------------
Title: Executive Assistant
---------------------
<PAGE>
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 7th day of September, 1998, 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 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 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
<PAGE>
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 Fund's
organizational documents.
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
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, any 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 the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
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 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.
<PAGE>
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 Board member or officer of the Fund or to
any officer or Board member 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 Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on 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 or the Plan. 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
<PAGE>
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 or 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. This Agreement shall become effective on the date hereof and shall
continue until April 1, 1999; 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.
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 members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
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.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
9. 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.
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
<PAGE>
mailed, postage prepaid, to the other party at such address as such other party
may designate for the receipt of such notice.
12. 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.
13. This Agreement shall be construed in accordance with applicable
federal law and with the laws of The Commonwealth of Massachusetts.
14. 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.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
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:/s/Mark S. Casady
-------------------------
Title: President
----------------------
ATTEST:
/s/Maureen Kane
- ---------------------------
Title: Ass't. Secretary
----------------
KEMPER DISTRIBUTORS, INC.
By:/s/James L. Greenawalt
-------------------------
Title: President
----------------------
ATTEST:
/s/Joan V. Pearson
- ---------------------------
Title: Executive Assistant
---------------------
<PAGE>
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Kemper Horizon
Fund (the "Fund"), on behalf of Kemper Horizon 20+ Portfolio (hereinafter called
the "Portfolio"), a registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its principal place of
business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled
2
<PAGE>
to receive, and may rely upon, information furnished it by means of
Proper Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
3
<PAGE>
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred,
4
<PAGE>
including, without limitation, reasonable attorneys' fees and
reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
5
<PAGE>
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] KEMPER HORIZON FUND
on behalf of Kemper Horizon 20+
Portfolio
By:/s/Mark S. Casady
-------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:/s/John R. Hebble
-------------------------
Vice President
8
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Kemper Horizon
Fund (the "Fund"), on behalf of Kemper Horizon 10+ Portfolio (hereinafter called
the "Portfolio"), a registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its principal place of
business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled
2
<PAGE>
to receive, and may rely upon, information furnished it by means of
Proper Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
3
<PAGE>
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred,
4
<PAGE>
including, without limitation, reasonable attorneys' fees and
reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
5
<PAGE>
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] KEMPER HORIZON FUND
on behalf of Kemper Horizon 10+
Portfolio
By:/s/Mark S. Casady
--------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:/s/John R. Hebble
--------------------------------
Vice President
8
<PAGE>
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 31st day of December, 1997 between Kemper Horizon
Fund (the "Fund"), on behalf of Kemper Horizon 5 Portfolio (hereinafter called
the "Portfolio"), a registered open-end management investment company with its
principal place of business in 222 South Riverside Plaza, Chicago, Illinois
60606 and Scudder Fund Accounting Corporation, with its principal place of
business in Boston, Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
<PAGE>
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset value per share, the public offering price
and/or its daily dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled
2
<PAGE>
to receive, and may rely upon, information furnished it by means of
Proper Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
3
<PAGE>
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred,
4
<PAGE>
including, without limitation, reasonable attorneys' fees and
reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by mutual agreement
of the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, as amended to
date (the "Declaration"), a copy of which, together with all amendments
thereto, is on file in the Office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name "Kemper Horizon
Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder
of the Fund or the Portfolio, or Trustee, officer, employee or agent of
the Fund shall be subject to claims against or obligations of the Trust
or of the Portfolio to any extent whatsoever, but that the Trust estate
only shall be liable.
5
<PAGE>
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of the
Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Kemper Horizon Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Attn: President, Secretary
or Treasurer
6
<PAGE>
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed hereto, but no such provisions shall be deemed to be an
amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] KEMPER HORIZON FUND
on behalf of Kemper Horizon 5
Portfolio
By:/s/Mark S. Casady
-------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By:/s/John R. Hebble
-------------------------
Vice President
8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated September 17, 1998 in the Registration Statement (Form
N-1A) of Kemper Horizon Fund and its incorporation by reference in the related
Prospectus and Statement of Additional Information filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 3 to the Registration
Statement under the Securities Act of 1933 (File No. 33-63467) and in this
Amendment No. 5 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-7365).
ERNST & YOUNG LLP
Chicago, Illinois
November 23, 1998
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 20+ Portfolio (the "Series")
----------------------------
Class: Class B (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund, on behalf of the Series, for the Class (all as noted
and defined above) by a majority of the members of the Fund's Board (the
"Board"), including a majority of the Board members who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan (the
"Qualified Board Members") at a meeting called for the purpose of voting on this
Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 20+ Portfolio (the "Series")
----------------------------
Class: Class C (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund, on behalf of the Series, for the Class (all as noted
and defined above) by a majority of the members of the Fund's Board (the
"Board"), including a majority of the Board members who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan (the
"Qualified Board Members") at a meeting called for the purpose of voting on this
Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 10+ Portfolio (the "Series")
----------------------------
Class: Class B (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund, on behalf of the Series, for the Class (all as noted
and defined above) by a majority of the members of the Fund's Board (the
"Board"), including a majority of the Board members who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan (the
"Qualified Board Members") at a meeting called for the purpose of voting on this
Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 10+ Portfolio (the "Series")
----------------------------
Class: Class C (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund, on behalf of the Series, for the Class (all as noted
and defined above) by a majority of the members of the Fund's Board (the
"Board"), including a majority of the Board members who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan (the
"Qualified Board Members") at a meeting called for the purpose of voting on this
Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 5 Portfolio (the "Series")
--------------------------
Class: Class B (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company Act
of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has been
adopted for the Fund, on behalf of the Series, for the Class (all as noted and
defined above) by a majority of the members of the Fund's Board (the "Board"),
including a majority of the Board members who are not "interested persons" of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan (the "Qualified Board
Members") at a meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely, provided
that such continuance is approved at least annually by a vote of a majority of
the Board, and of the Qualified Board Members, cast in person at a meeting
called for such purpose or by vote of at least a majority of the outstanding
voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is in
effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall be
binding only upon the assets of the Class and shall not be binding on any Board
member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the Act
and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall be
held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
Fund: Kemper Horizon Fund (the "Fund")
-------------------
Series: Kemper Horizon 5 Portfolio (the "Series")
--------------------------
Class: Class C (the "Class")
-------
AMENDED AND RESTATED 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Amended and Restated 12b-1 Plan (the "Plan") has
been adopted for the Fund, on behalf of the Series, for the Class (all as noted
and defined above) by a majority of the members of the Fund's Board (the
"Board"), including a majority of the Board members who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan (the
"Qualified Board Members") at a meeting called for the purpose of voting on this
Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("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
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee 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. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services 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.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
(Amended and restated August 1, 1998)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> KEMPER HORIZON 20+ PORTFOLIO - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 94,000
<INVESTMENTS-AT-VALUE> 109,261
<RECEIVABLES> 1,213
<ASSETS-OTHER> 119
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,593
<PAYABLE-FOR-SECURITIES> 47
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470
<TOTAL-LIABILITIES> 517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,215
<SHARES-COMMON-STOCK> 3,656
<SHARES-COMMON-PRIOR> 1,994
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (401)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,261
<NET-ASSETS> 110,076
<DIVIDEND-INCOME> 863
<INTEREST-INCOME> 1,267
<OTHER-INCOME> 0
<EXPENSES-NET> (2,082)
<NET-INVESTMENT-INCOME> 48
<REALIZED-GAINS-CURRENT> 679
<APPREC-INCREASE-CURRENT> 6,055
<NET-CHANGE-FROM-OPS> 6,782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (116)
<DISTRIBUTIONS-OF-GAINS> (1,368)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,172
<NUMBER-OF-SHARES-REDEEMED> (630)
<SHARES-REINVESTED> 120
<NET-CHANGE-IN-ASSETS> 47,403
<ACCUMULATED-NII-PRIOR> 356
<ACCUMULATED-GAINS-PRIOR> 1,830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082
<AVERAGE-NET-ASSETS> 84,650
<PER-SHARE-NAV-BEGIN> 12.89
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> (.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.48
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> KEMPER HORIZON 20+ PORTFOLIO - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 94,000
<INVESTMENTS-AT-VALUE> 109,261
<RECEIVABLES> 1,213
<ASSETS-OTHER> 119
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,593
<PAYABLE-FOR-SECURITIES> 47
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470
<TOTAL-LIABILITIES> 517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,215
<SHARES-COMMON-STOCK> 3,784
<SHARES-COMMON-PRIOR> 2,515
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (401)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,261
<NET-ASSETS> 110,076
<DIVIDEND-INCOME> 863
<INTEREST-INCOME> 1,267
<OTHER-INCOME> 0
<EXPENSES-NET> (2,082)
<NET-INVESTMENT-INCOME> 48
<REALIZED-GAINS-CURRENT> 679
<APPREC-INCREASE-CURRENT> 6,055
<NET-CHANGE-FROM-OPS> 6,782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,362)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,757
<NUMBER-OF-SHARES-REDEEMED> (598)
<SHARES-REINVESTED> 110
<NET-CHANGE-IN-ASSETS> 47,403
<ACCUMULATED-NII-PRIOR> 356
<ACCUMULATED-GAINS-PRIOR> 1,830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082
<AVERAGE-NET-ASSETS> 84,650
<PER-SHARE-NAV-BEGIN> 12.79
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.28
<EXPENSE-RATIO> 2.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> KEMPER HORIZON 20+ PORTFOLIO - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 94,000
<INVESTMENTS-AT-VALUE> 109,261
<RECEIVABLES> 1,213
<ASSETS-OTHER> 119
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,593
<PAYABLE-FOR-SECURITIES> 47
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470
<TOTAL-LIABILITIES> 517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,215
<SHARES-COMMON-STOCK> 700
<SHARES-COMMON-PRIOR> 308
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (401)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,261
<NET-ASSETS> 110,076
<DIVIDEND-INCOME> 863
<INTEREST-INCOME> 1,267
<OTHER-INCOME> 0
<EXPENSES-NET> (2,082)
<NET-INVESTMENT-INCOME> 48
<REALIZED-GAINS-CURRENT> 679
<APPREC-INCREASE-CURRENT> 6,055
<NET-CHANGE-FROM-OPS> 6,782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (181)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 460
<NUMBER-OF-SHARES-REDEEMED> (82)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 47,403
<ACCUMULATED-NII-PRIOR> 356
<ACCUMULATED-GAINS-PRIOR> 1,830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082
<AVERAGE-NET-ASSETS> 84,650
<PER-SHARE-NAV-BEGIN> 12.80
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.29
<EXPENSE-RATIO> 3.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 014
<NAME> KEMPER HORIZON 20+ PORTFOLIO - CLASS I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 94,000
<INVESTMENTS-AT-VALUE> 109,261
<RECEIVABLES> 1,213
<ASSETS-OTHER> 119
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,593
<PAYABLE-FOR-SECURITIES> 47
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 470
<TOTAL-LIABILITIES> 517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,215
<SHARES-COMMON-STOCK> 91
<SHARES-COMMON-PRIOR> 67
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (401)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,261
<NET-ASSETS> 110,076
<DIVIDEND-INCOME> 863
<INTEREST-INCOME> 1,267
<OTHER-INCOME> 0
<EXPENSES-NET> (2,082)
<NET-INVESTMENT-INCOME> 48
<REALIZED-GAINS-CURRENT> 679
<APPREC-INCREASE-CURRENT> 6,055
<NET-CHANGE-FROM-OPS> 6,782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8)
<DISTRIBUTIONS-OF-GAINS> (33)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111
<NUMBER-OF-SHARES-REDEEMED> (90)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 47,403
<ACCUMULATED-NII-PRIOR> 356
<ACCUMULATED-GAINS-PRIOR> 1,830
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082
<AVERAGE-NET-ASSETS> 84,650
<PER-SHARE-NAV-BEGIN> 12.96
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> (.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.62
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001001983
<NAME> KEMPER HORIZON FUND
<SERIES>
<NUMBER> 021
<NAME> KEMPER HORIZON 10+ PORTFOLIO - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 97,593
<INVESTMENTS-AT-VALUE> 110,188
<RECEIVABLES> 1,374
<ASSETS-OTHER> 489
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,051
<PAYABLE-FOR-SECURITIES> 35
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329
<TOTAL-LIABILITIES> 364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,201
<SHARES-COMMON-STOCK> 4,653
<SHARES-COMMON-PRIOR> 2,288
<ACCUMULATED-NII-CURRENT> 132
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,595
<NET-ASSETS> 111,687
<DIVIDEND-INCOME> 660
<INTEREST-INCOME> 2,539
<OTHER-INCOME> 0
<EXPENSES-NET> (1,646)
<NET-INVESTMENT-INCOME> 1,553
<REALIZED-GAINS-CURRENT> 1,335
<APPREC-INCREASE-CURRENT> 5,063
<NET-CHANGE-FROM-OPS> 7,951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (753)
<DISTRIBUTIONS-OF-GAINS> (1,098)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,925
<NUMBER-OF-SHARES-REDEEMED> (717)
<SHARES-REINVESTED> 157
<NET-CHANGE-IN-ASSETS> 48,287
<ACCUMULATED-NII-PRIOR> 606
<ACCUMULATED-GAINS-PRIOR> 1,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,646
<AVERAGE-NET-ASSETS> 84,981
<PER-SHARE-NAV-BEGIN> 12.01
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> .87
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.49
<EXPENSE-RATIO> 1.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> KEMPER HORIZON 10+ PORTFOLIO - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 97,593
<INVESTMENTS-AT-VALUE> 110,188
<RECEIVABLES> 1,374
<ASSETS-OTHER> 489
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,051
<PAYABLE-FOR-SECURITIES> 35
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329
<TOTAL-LIABILITIES> 364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,201
<SHARES-COMMON-STOCK> 3,408
<SHARES-COMMON-PRIOR> 2,466
<ACCUMULATED-NII-CURRENT> 132
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,595
<NET-ASSETS> 111,687
<DIVIDEND-INCOME> 660
<INTEREST-INCOME> 2,539
<OTHER-INCOME> 0
<EXPENSES-NET> (1,646)
<NET-INVESTMENT-INCOME> 1,553
<REALIZED-GAINS-CURRENT> 1,335
<APPREC-INCREASE-CURRENT> 5,063
<NET-CHANGE-FROM-OPS> 7,951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (355)
<DISTRIBUTIONS-OF-GAINS> (1,115)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,763
<NUMBER-OF-SHARES-REDEEMED> (945)
<SHARES-REINVESTED> 124
<NET-CHANGE-IN-ASSETS> 48,287
<ACCUMULATED-NII-PRIOR> 606
<ACCUMULATED-GAINS-PRIOR> 1,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,646
<AVERAGE-NET-ASSETS> 84,981
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .86
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> (.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.48
<EXPENSE-RATIO> 2.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> KEMPER HORIZON 10+ PORTFOLIO - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 97,593
<INVESTMENTS-AT-VALUE> 110,188
<RECEIVABLES> 1,374
<ASSETS-OTHER> 489
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,051
<PAYABLE-FOR-SECURITIES> 35
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329
<TOTAL-LIABILITIES> 364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,201
<SHARES-COMMON-STOCK> 860
<SHARES-COMMON-PRIOR> 494
<ACCUMULATED-NII-CURRENT> 132
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,595
<NET-ASSETS> 111,687
<DIVIDEND-INCOME> 660
<INTEREST-INCOME> 2,539
<OTHER-INCOME> 0
<EXPENSES-NET> (1,646)
<NET-INVESTMENT-INCOME> 1,553
<REALIZED-GAINS-CURRENT> 1,335
<APPREC-INCREASE-CURRENT> 5,063
<NET-CHANGE-FROM-OPS> 7,951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (100)
<DISTRIBUTIONS-OF-GAINS> (250)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 505
<NUMBER-OF-SHARES-REDEEMED> (168)
<SHARES-REINVESTED> 29
<NET-CHANGE-IN-ASSETS> 48,287
<ACCUMULATED-NII-PRIOR> 606
<ACCUMULATED-GAINS-PRIOR> 1,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,646
<AVERAGE-NET-ASSETS> 84,981
<PER-SHARE-NAV-BEGIN> 11.98
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> .87
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> (.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.44
<EXPENSE-RATIO> 2.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 024
<NAME> KEMPER HORIZON 10+ PORTFOLIO - CLASS I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 97,593
<INVESTMENTS-AT-VALUE> 110,188
<RECEIVABLES> 1,374
<ASSETS-OTHER> 489
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112,051
<PAYABLE-FOR-SECURITIES> 33
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329
<TOTAL-LIABILITIES> 364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,201
<SHARES-COMMON-STOCK> 29
<SHARES-COMMON-PRIOR> 33
<ACCUMULATED-NII-CURRENT> 132
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 759
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,595
<NET-ASSETS> 111,687
<DIVIDEND-INCOME> 660
<INTEREST-INCOME> 2,539
<OTHER-INCOME> 0
<EXPENSES-NET> (1,646)
<NET-INVESTMENT-INCOME> 1,553
<REALIZED-GAINS-CURRENT> 1,335
<APPREC-INCREASE-CURRENT> 5,063
<NET-CHANGE-FROM-OPS> 7,951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9)
<DISTRIBUTIONS-OF-GAINS> (14)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33
<NUMBER-OF-SHARES-REDEEMED> (39)
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 48,287
<ACCUMULATED-NII-PRIOR> 606
<ACCUMULATED-GAINS-PRIOR> 1,481
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 495
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,646
<AVERAGE-NET-ASSETS> 84,981
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> .84
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> (.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.46
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> KEMPER HORIZON 5 PORTFOLIO - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 50,439
<INVESTMENTS-AT-VALUE> 54,213
<RECEIVABLES> 842
<ASSETS-OTHER> 427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,482
<PAYABLE-FOR-SECURITIES> 16
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131
<TOTAL-LIABILITIES> 147
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,096
<SHARES-COMMON-STOCK> 2,349
<SHARES-COMMON-PRIOR> 1,070
<ACCUMULATED-NII-CURRENT> 237
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,774
<NET-ASSETS> 55,335
<DIVIDEND-INCOME> 221
<INTEREST-INCOME> 1,836
<OTHER-INCOME> 0
<EXPENSES-NET> (812)
<NET-INVESTMENT-INCOME> 1,245
<REALIZED-GAINS-CURRENT> 528
<APPREC-INCREASE-CURRENT> 1,289
<NET-CHANGE-FROM-OPS> 3,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (527)
<DISTRIBUTIONS-OF-GAINS> (358)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,059
<NUMBER-OF-SHARES-REDEEMED> (858)
<SHARES-REINVESTED> 78
<NET-CHANGE-IN-ASSETS> 24,635
<ACCUMULATED-NII-PRIOR> 311
<ACCUMULATED-GAINS-PRIOR> 619
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 812
<AVERAGE-NET-ASSETS> 41,640
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> .35
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.35)
<PER-SHARE-DISTRIBUTIONS> (.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.26
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> KEMPER HORIZON 5 PORTFOLIO - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 50,439
<INVESTMENTS-AT-VALUE> 54,213
<RECEIVABLES> 842
<ASSETS-OTHER> 427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,482
<PAYABLE-FOR-SECURITIES> 16
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131
<TOTAL-LIABILITIES> 147
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,096
<SHARES-COMMON-STOCK> 2,099
<SHARES-COMMON-PRIOR> 1,413
<ACCUMULATED-NII-CURRENT> 237
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,774
<NET-ASSETS> 55,335
<DIVIDEND-INCOME> 221
<INTEREST-INCOME> 1,836
<OTHER-INCOME> 0
<EXPENSES-NET> (812)
<NET-INVESTMENT-INCOME> 1,245
<REALIZED-GAINS-CURRENT> 528
<APPREC-INCREASE-CURRENT> 1,289
<NET-CHANGE-FROM-OPS> 3,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (484)
<DISTRIBUTIONS-OF-GAINS> (464)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,414
<NUMBER-OF-SHARES-REDEEMED> (812)
<SHARES-REINVESTED> 84
<NET-CHANGE-IN-ASSETS> 24,635
<ACCUMULATED-NII-PRIOR> 311
<ACCUMULATED-GAINS-PRIOR> 619
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 812
<AVERAGE-NET-ASSETS> 41,640
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> (.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.28
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> KEMPER HORIZON 5 PORTFOLIO - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 50,439
<INVESTMENTS-AT-VALUE> 54,213
<RECEIVABLES> 842
<ASSETS-OTHER> 427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,482
<PAYABLE-FOR-SECURITIES> 16
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131
<TOTAL-LIABILITIES> 147
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,096
<SHARES-COMMON-STOCK> 444
<SHARES-COMMON-PRIOR> 281
<ACCUMULATED-NII-CURRENT> 237
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,774
<NET-ASSETS> 55,335
<DIVIDEND-INCOME> 221
<INTEREST-INCOME> 1,836
<OTHER-INCOME> 0
<EXPENSES-NET> (812)
<NET-INVESTMENT-INCOME> 1,245
<REALIZED-GAINS-CURRENT> 528
<APPREC-INCREASE-CURRENT> 1,289
<NET-CHANGE-FROM-OPS> 3,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (107)
<DISTRIBUTIONS-OF-GAINS> (95)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 242
<NUMBER-OF-SHARES-REDEEMED> (97)
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> 24,635
<ACCUMULATED-NII-PRIOR> 311
<ACCUMULATED-GAINS-PRIOR> 619
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 812
<AVERAGE-NET-ASSETS> 41,640
<PER-SHARE-NAV-BEGIN> 11.07
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> (.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.27
<EXPENSE-RATIO> 2.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1998 ANNUAL REPORT TO SHAREHOLDERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 034
<NAME> KEMPER HORIZON 5 PORTFOLIO - CLASS I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 50,439
<INVESTMENTS-AT-VALUE> 54,213
<RECEIVABLES> 842
<ASSETS-OTHER> 427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,482
<PAYABLE-FOR-SECURITIES> 16
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131
<TOTAL-LIABILITIES> 147
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,096
<SHARES-COMMON-STOCK> 19
<SHARES-COMMON-PRIOR> 12
<ACCUMULATED-NII-CURRENT> 237
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,774
<NET-ASSETS> 55,335
<DIVIDEND-INCOME> 221
<INTEREST-INCOME> 1,836
<OTHER-INCOME> 0
<EXPENSES-NET> (812)
<NET-INVESTMENT-INCOME> 1,245
<REALIZED-GAINS-CURRENT> 528
<APPREC-INCREASE-CURRENT> 1,289
<NET-CHANGE-FROM-OPS> 3,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6)
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 24,635
<ACCUMULATED-NII-PRIOR> 311
<ACCUMULATED-GAINS-PRIOR> 619
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 812
<AVERAGE-NET-ASSETS> 41,640
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.39)
<PER-SHARE-DISTRIBUTIONS> (.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.28
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
