As filed with the Securities and Exchange Commission on
September 30, 1999
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. 4
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 6
--- / /
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)
--------
on (date) pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
--------
X on December 1, 1999 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:
this post-effective amendment designates a new effective date for
a previously filed post- effective amendment
<PAGE>
KEMPER HORIZON FUNDS
SUPPLEMENT TO PROSPECTUS
DATED DECEMBER 1, 1999
------------------------
CLASS I SHARES
------------------------
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
------------------------
The above funds currently offer 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 funds' prospectus, and Class I shares, which are
described in the prospectus as supplemented hereby. When placing purchase
orders, investors must specify whether the order is for Class A, Class B, Class
C or 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; (5) policy holders under Zurich-American Insurance Group's collateral
investment program investing at least $200,000 in a Fund; and (6) investment
companies managed by Scudder Kemper that invest primarily in other investment
companies.
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 each Fund's 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
<PAGE>
distribution fees. Class I shares are offered at net asset value without an
initial sales charge and are not subject to a contingent deferred sales charge
or a Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Class I shares. As a result of the relatively lower expenses for
Class I shares, the level of income dividends per share (as a percentage of net
asset value) and, therefore, the overall investment return, typically will be
higher for Class I shares than for Class A, Class B and Class C shares.
The following information supplements the indicated sections of the prospectus.
Expense Information
The sales charge on purchases is deducted from your investment, and is shown as
a percentage of the offering price. The contingent deferred sales charge is
deducted from the proceeds when you sell, and is figured as a percentage of your
initial cost or the value at the time you sell, whichever is less. The funds
also have annual operating expenses, and as a shareholder, you pay them
directly.
Shareholder fees: Fees paid directly from your investment.
Maximum Maximum
Sales Deferred
Charge on Maximum Sales
Purchases Sales Charge
(as a % of Charge on (as a % of
offering Reinvested Redemption Exchange redemption
price) Dividends Fee Fee proceeds)
------ --------- --- --- ---------
Kemper None None None None None
Horizon 20+
Portfolio
Kemper None None None None None
Horizon 10+
Portfolio
Kemper None None None None None
Horizon 5
Portfolio
<PAGE>
Annual fund operating expenses: Expenses that are deducted from fund assets.
Investment Rule Other Total fund
management fee 12b-1 fees expenses operating expenses
-------------- ---------- -------- ------------------
Kemper
Horizon 20+
Portfolio None
Kemper
Horizon 10+
Portfolio None
Kemper
Horizon 5
Portfolio None
Example
This example is to help you compare the cost of investing in a fund with the
cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
Fees and expenses if you sold shares after:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Kemper $ $ $ $
Horizon 20+
Portfolio
Kemper $ $ $ $
Horizon 10+
Portfolio
Kemper $ $ $ $
Horizon 5
Portfolio
<PAGE>
FINANCIAL HIGHLIGHTS
To be updated.
SPECIAL FEATURES
Shareholders of a Fund'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 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.
December 1, 1999
<PAGE>
Long-Term Investing
In A
Short-Term
World(SM)
December 1, 1999
Prospectus
KEMPER ASSET ALLOCATION FUNDS
Kemper Horizon 20+ Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 5 Portfolio
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
[LOGO]
<PAGE>
How The
funds Work
2 Kemper Horizon 20+ Portfolio
8 Kemper Horizon 10+ Portfolio
14 Kemper Horizon 5 Portfolio
20 Other Policies
And Risks
21 Financial Highlights
Investing in
the funds
31 Choosing A
Share Class
36 How To Buy Shares
37 How To Exchange
Or Sell Shares
38 Policies You Should Know About
44 Understanding Distributions
And Taxes
<PAGE>
How The Funds Work
The three funds in this prospectus use an asset allocation strategy. All three
funds invest in stocks and bonds, but in different proportions. As their names
suggest, each fund is designed for investors with a particular time horizon in
mind, from relatively short-term to relatively long-term.
Remember that mutual funds are investments, not bank deposits. They're not
guaranteed or insured by the FDIC or any other government agency. Their share
prices will go up and down, so be aware that you could lose money.
<PAGE>
Ticker Symbols Class: A) XXXXX B) XXXXX C) XXXXX
Kemper
Horizon 20+ Portfolio
The fund seeks growth of capital, with income a secondary goal. The fund's
neutral allocation is shown below.
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE,
ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
20% Net assets in fixed-income
securities
80% Net assets in equity securities:
20% in large cap US growth
20% in large cap US value
8% in small cap US growth
8% in small cap US value
24% in foreign
2 | Kemper Horizon 20+ Portfolio
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Strategy
Equity portion. This portion, most of which is normally invested in common
stocks, is divided into U.S. and foreign allocations. The neutral mix is 70
percent in U.S. securities, 30 percent in foreign. The fund's U.S. equities are
further divided into sub-allocations, as shown on the facing page.
The managers use bottom-up analysis to choose individual stocks, looking
primarily at growth factors for growth stocks (such as above-average rates of
return on equity and earnings growth) and value factors for value stocks (such
as below-average price-to-earnings ratios).
In choosing foreign stocks, the managers generally focus on established
companies in countries with developed economies, although the fund can invest in
stocks of any size and from any country.
Fixed-income portion. This portion is divided among government and agency
securities, corporate securities, bank obligations and cash equivalents. All of
the fund's fixed-income securities must be denominated in U.S. dollars, and 90%
of them must be in the top four credit grades.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rates), they generally intend to keep it between 1.5 and 3.5 years.
- --------------------------------------------------------------------------------
ALLOCATION ADJUSTMENTS
In seeking to take advantage of current or expected market conditions or to
manage risk, the managers may adjust any of the fund's allocations, relying in
part on a proprietary computer model that measures macro-economic factors. The
managers expect that, over time, the fund's actual allocations will average out
to be similar to those described here, but at any given time may be different.
Kemper Horizon 20+ Portfolio | 3
<PAGE>
- --------------------------------------------------------------------------------
The Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor is how stock markets perform -- something that depends
on many influences, including economic, political and demographic trends. When
stock prices fall, the value of your investment is likely to fall as well.
Because a stock represents ownership in its issuer, stock prices can be hurt by
poor management, shrinking product demand and other business risks. Stock risks
tend to be greater with smaller companies, which often don't have the broad
business lines or financial resources to weather hard times.
Foreign stocks tend to be more volatile than their American counterparts, for
reasons ranging from political and economic uncertainties to a higher risk that
essential information may be incomplete or wrong. In addition, there is the risk
with foreign investments that changing currency rates could add to market losses
or reduce market gains. These risks tend to be greater in emerging markets.
Because the fund invests some of its assets in bonds, it may perform less well
in the long run than a fund investing entirely in stocks. At the same time, the
fund's bond component means that its performance could be hurt somewhat by poor
performance in the bond market or from the particular bonds it owns.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies, the relative attractiveness of asset
classes or other matters
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING SIX PARAGRAPHS.
- --------------------------------------------------------------------------------
This fund may make sense for investors with a time horizon of 20 years or longer
who want an investment that uses an asset allocation strategy to pursue growth
and manage risk.
- --------------------------------------------------------------------------------
4 | Kemper Horizon 20+ Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. (The chart doesn't
include sales charges, which would reduce returns.) The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 1990 YTD return as of 9/30/1999: 0.00%
Worst quarter: -0.00%, Q0 1990
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1998
- --------------------------------------------------------------------------------
Since Since
Since Since 6/30/92 Since 12/31/70
12/31/97 12/31/93 Life of 12/31/88 Life of
1 Year 5 Years Class B/C 10 Years Class A
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% -- 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00% -- --
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00 -- --
- --------------------------------------------------------------------------------
Russell 1000 Growth Index, an unmanaged capitalization-weighted index containing
the growth stocks in the Russell 1000 Index.
- --------------------------------------------------------------------------------
00.00% 00.00% 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio | 5
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
The sales charge on purchases is deducted from your investment, and is shown as
a percentage of the offering price. The contingent deferred sales charge is
deducted from the proceeds when you sell, and is figured as a percentage of your
initial cost or the value at the time you sell, whichever is less. The fund also
has annual operating expenses, and as a shareholder, you pay them directly.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge On Purchases 5.75% None None
- --------------------------------------------------------------------------------
Maximum Contingent Deferred Sales Charge 1.00%* 4.00% 1.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares".
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
- --------------------------------------------------------------------------------
The Investment Advisor
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 70 years
of experience managing mutual funds and currently has more than $280 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.00 percent of its average daily net assets.
6 | Kemper Horizon 20+ Portfolio
<PAGE>
Based on the figures at left (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes you invested $10,000, earned
5 percent annual returns and reinvested all dividends and distributions. This is
only an example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund Managers
Below are the people who handle the fund's day-to-day management:
Robert D. Tymoczko
Lead Portfolio Manager
o Began investment career in 1996
o Joined the advisor in 1997
o Joined the fund team in 19__
Shahram Tajbakhsh
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Almond G. Goduti
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Josephine Chu
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING LIST OF FUND MANAGAERS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio | 7
<PAGE>
Ticker Symbols CLASS: A) XXXXX B) XXXXX C) XXXXX
Kemper
Horizon 10+ Portfolio
The fund seeks a balance between growth of capital and income, consistent with
moderate risk. The fund's neutral allocation is shown below.
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE,
ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
40% Net assets in fixed-income
securities
60% Net assets in equity securities:
15% in large cap US growth
15% in large cap US value
6% in small cap US growth
6% in small cap US value
18% in foreign
8 | Kemper Horizon 10+ Portfolio
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Strategy
Equity portion. This portion, most of which is normally invested in common
stocks, is divided into U.S. and foreign allocations. The neutral mix is 70
percent in U.S. securities, 30 percent in foreign. The fund's U.S. equities are
further divided into sub-allocations, as shown on the facing page.
The managers use bottom-up analysis to choose individual stocks, looking
primarily at growth factors for growth stocks (such as above-average rates of
return on equity and earnings growth) and value factors for value stocks (such
as below-average price-to-earnings ratios).
In choosing foreign stocks, the managers generally focus on established
companies in countries with developed economies, although the fund can invest in
stocks of any size and from any country.
Fixed-income portion. This portion is divided among government and agency
securities, corporate securities, bank obligations and cash equivalents. All of
the fund's fixed-income securities must be denominated in U.S. dollars, and 90%
of them must be in the top four credit grades.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rates), they generally intend to keep it between 1.5 and 3.5 years.
- --------------------------------------------------------------------------------
ALLOCATION ADJUSTMENTS
In seeking to take advantage of current or expected market conditions or to
manage risk, the managers may adjust any of the fund's allocations, relying in
part on a proprietary computer model that measures macro-economic factors. The
managers expect that, over time, the fund's actual allocations will average out
to be similar to those described here, but at any given time may be different.
Kemper Horizon 10+ Portfolio | 9
<PAGE>
- --------------------------------------------------------------------------------
The Risks Of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
The most important factor is how stock markets perform -- something that depends
on many influences, including economic, political and demographic trends. When
stock prices fall, the value of your investment is likely to fall as well. Stock
prices can be hurt by poor management, shrinking product demand and other
business risks. Stock risks tend to be greater with smaller companies.
Foreign stocks tend to be more volatile than their American counterparts. There
is also the risk with foreign investments that changing currency rates could add
to market losses or reduce market gains. These risks tend to be greater in
emerging markets.
The fund is also affected by how bond markets perform. Bonds could be hurt by
rises in market interest rates. A rise in interest rates generally means a fall
in bond prices and, in turn, a fall in the value of your investment. Some bonds
could be paid off earlier than expected, which would hurt the fund's
performance; with mortgage- or asset-backed securities, any unexpected behavior
in interest rates could increase the volatility of the fund's share price and
yield. Corporate bonds could perform less well than other types of bonds in a
weak economy.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies, the relative attractiveness of asset
classes or other matters
o a bond could fall in credit quality or go into default
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING SIX PARAGRAPHS.
- --------------------------------------------------------------------------------
Investors who are looking for a balanced portfolio of stock and bond investments
and whose time horizon is approximately ten or more years may be interested in
this fund.
- --------------------------------------------------------------------------------
10 | Kemper Horizon 10+ Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk.(The chart doesn't
include sales charges, which would reduce returns.) The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 1990 YTD return as of 9/30/1999: 0.00%
Worst quarter: -0.00%, Q0 1990
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1998
- --------------------------------------------------------------------------------
Since Since
Since Since 6/30/92 Since 12/31/70
12/31/97 12/31/93 Life of 12/31/88 Life of
1 Year 5 Years Class B/C 10 Years Class A
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% -- 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00% -- --
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00 -- --
- --------------------------------------------------------------------------------
Russell 1000 Growth Index, an unmanaged capitalization-weighted index containing
the growth stocks in the Russell 1000 Index.
- --------------------------------------------------------------------------------
00.00% 00.00% 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Kemper Horizon 10+ Portfolio | 11
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
The sales charge on purchases is deducted from your investment, and is shown as
a percentage of the offering price. The contingent deferred sales charge is
deducted from the proceeds when you sell, and is figured as a percentage of your
initial cost or the value at the time you sell, whichever is less. The fund also
has annual operating expenses, and as a shareholder, you pay them directly.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge On Purchases 5.75% None None
- --------------------------------------------------------------------------------
Maximum Contingent Deferred Sales Charge 1.00%* 4.00% 1.00%
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares".
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
- --------------------------------------------------------------------------------
The Investment Advisor
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 70 years
of experience managing mutual funds and currently has more than $280 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.00 percent of its average daily net assets.
12 | Kemper Horizon 10+ Portfolio
<PAGE>
Based on the figures at left (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes you invested $10,000, earned
5 percent annual returns and reinvested all dividends and distributions. This is
only an example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund Managers
Below are the people who handle the fund's day-to-day management:
Robert D. Tymoczko
Lead Portfolio Manager
o Began investment career in 1996
o Joined the advisor in 1997
o Joined the fund team in 19__
Shahram Tajbakhsh
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Almond G. Goduti
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Josephine Chu
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING LIST OF FUND MANAGAERS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
- --------------------------------------------------------------------------------
Kemper Horizon 10+ Portfolio | 13
<PAGE>
Ticker Symbols Class: A) XXXXX B) XXXXX C) XXXXX
Kemper
Horizon 5 Portfolio
The fund seeks income consistent with capital preservation; growth of capital is
a secondary goal. The fund's neutral allocation is shown below.
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE,
ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
40% Net assets in equity securities:
10% in large cap US growth
10% in large cap US value
4% in small cap US growth
4% in small cap US value
12% in foreign
60% Net assets in fixed-income
securities
14 | Kemper Horizon 5 Portfolio
<PAGE>
- --------------------------------------------------------------------------------
The Fund's Strategy
Fixed-income portion. This portion is divided among government and agency
securities, corporate securities, bank obligations and cash equivalents. All of
the fund's fixed-income securities must be denominated in U.S. dollars, and 90%
of them must be in the top four credit grades.
Although the managers may adjust the fund's duration (a measure of sensitivity
to interest rates), they generally intend to keep it between 1.5 and 3.5 years.
Equity portion. This portion, most of which is normally invested in common
stocks, is divided into U.S. and foreign allocations. The neutral mix is 70
percent in U.S. securities, 30 percent in foreign. The fund's U.S. equities are
further divided into sub-allocations, as shown on the facing page.
The managers use bottom-up analysis to choose individual stocks, looking
primarily at growth factors for growth stocks (such as above-average rates of
return on equity and earnings growth) and value factors for value stocks (such
as below-average price-to-earnings ratios).
In choosing foreign stocks, the managers generally focus on established
companies in countries with developed economies, although the fund can invest in
stocks of any size and from any country.
- --------------------------------------------------------------------------------
ALLOCATION ADJUSTMENTS
In seeking to take advantage of current or expected market conditions or to
manage risk, the managers may adjust any of the fund's allocations, relying in
part on a proprietary computer model that measures macro-economic factors. The
managers expect that, over time, the fund's actual allocations will average out
to be similar to those described here, but at any given time may be different.
Kemper Horizon 5 Portfolio | 15
<PAGE>
- --------------------------------------------------------------------------------
The Risks of Investing In The Fund
There are several factors that could hurt fund performance, cause you to lose
money or make the fund perform less well than other investments.
One factor with this fund is how bond markets perform. Bonds could be hurt by
rises in market interest rates. A rise in interest rates generally means a fall
in bond prices and, in turn, a fall in the value of your investment. Some bonds
could be paid off earlier than expected, which would hurt the fund's
performance. With mortgage- or asset-backed securities, any unexpected behavior
in interest rates could increase the volatility of the fund's share price and
yield. Corporate bonds could perform less well than other types of bonds in a
weak economy.
The fund is also affected by how stock markets perform -- something that depends
on many influences, including economic, political and demographic trends. When
stock prices fall, the value of your investment is likely to fall as well. Stock
prices can be hurt by poor management, shrinking product demand and other
business risks. Stock risks tend to be greater with smaller companies.
Foreign stocks tend to be more volatile than their American counterparts. There
is also the risk with foreign investments that changing currency rates could add
to market losses or reduce market gains. These risks tend to be greater in
emerging markets.
Other factors that could affect performance include:
o the managers could be wrong in their analysis of economic trends,
countries, industries, companies, the relative attractiveness of asset
classes or other matters
o a bond could fall in credit quality or go into default
o derivatives could produce disproportionate losses
o at times, it could be hard to value some investments or to get an
attractive price for them
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING SEVEN PARAGRAPHS.
- --------------------------------------------------------------------------------
Investors who are about five years away from their financial goals, or who want
a fund that takes a more conservative asset allocation, may want to consider
this fund.
- --------------------------------------------------------------------------------
16 | Kemper Horizon 5 Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Performance
The bar chart shows how the total returns for the fund's Class A shares have
varied from year to year, which may give some idea of risk. (The chart doesn't
include sales charges, which would reduce returns.) The table shows how the
fund's returns over different periods average out.
For context, the table has a broad-based market index (which, unlike the fund,
has no fees or expenses). All figures on this page assume reinvestment of
dividends and distributions. As always, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class A shares
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Best quarter: 0.00%, Q0 1990 YTD return as of 9/30/1999: 0.00%
Worst quarter: -0.00%, Q0 1990
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/1998
- --------------------------------------------------------------------------------
Since Since
Since Since 6/30/92 Since 12/31/70
12/31/97 12/31/93 Life of 12/31/88 Life of
1 Year 5 Years Class B/C 10 Years Class A
- --------------------------------------------------------------------------------
Class A 00.00% 00.00% -- 00.00% 00.00%
- --------------------------------------------------------------------------------
Class B 00.00 00.00 00.00% -- --
- --------------------------------------------------------------------------------
Class C 00.00 00.00 00.00 -- --
- --------------------------------------------------------------------------------
Russell 1000 Growth Index, an unmanaged capitalization-weighted index containing
the growth stocks in the Russell 1000 Index.
- --------------------------------------------------------------------------------
00.00% 00.00% 00.00% 00.00% 00.00%
- --------------------------------------------------------------------------------
Kemper Horizon 5 Portfolio | 17
<PAGE>
- --------------------------------------------------------------------------------
How Much Investors Pay
The sales charge on purchases is deducted from your investment, and is shown as
a percentage of the offering price. The contingent deferred sales charge is
deducted from the proceeds when you sell, and is figured as a percentage of your
initial cost or the value at the time you sell, whichever is less. The fund also
has annual operating expenses, and as a shareholder, you pay them directly.
- --------------------------------------------------------------------------------
Fee Table Class A Class B Class C
- --------------------------------------------------------------------------------
Shareholder Fees, paid directly from your investment
- --------------------------------------------------------------------------------
Maximum Sales Charge On Purchases 5.75% None None
- --------------------------------------------------------------------------------
Maximum Contingent Deferred Sales Charge 1.00%* 4.00% 1.00%
- --------------------------------------------------------------------------------
Annual Operating Expenses, deducted from fund assets
- --------------------------------------------------------------------------------
Management Fee 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None 0.00 0.00
- --------------------------------------------------------------------------------
Other Expenses** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Net Annual Operating Expenses*** 0.00 0.00 0.00
- --------------------------------------------------------------------------------
* Only on shares bought without sales charge and sold within a year. See
"Choosing A Share Class, Class A Shares".
** Includes costs of shareholder servicing, custody, accounting services and
similar expenses, which may vary with fund size and other factors.
*** By contract, total operating expenses are capped at 0.00% through
00/00/0000.
- --------------------------------------------------------------------------------
The Investment Advisor
The fund's investment advisor is Scudder Kemper Investments, Inc., located at
345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more than 70 years
of experience managing mutual funds and currently has more than $280 billion in
assets under management.
Scudder Kemper takes a team approach, bringing together professionals from many
investment disciplines. Supporting each team are Scudder Kemper's many
economists, research analysts, traders and other investment specialists, located
across the United States and around the world.
For serving as the fund's investment advisor, Scudder Kemper receives a
management fee. For the most recent fiscal year, the actual amount the fund paid
in management fees was 0.00 percent of its average daily net assets.
18 | Kemper Horizon 5 Portfolio
<PAGE>
Based on the figures at left (including one year of capped expenses in each
period), this example is designed to help you compare the expenses of each share
class to those of other funds. The example assumes you invested $10,000, earned
5 percent annual returns and reinvested all dividends and distributions. This is
only an example; actual expenses will be different.
- --------------------------------------------------------------------------------
Example 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Expenses, assuming you sold your shares at the end of each period
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Expenses, assuming you kept your shares
- --------------------------------------------------------------------------------
Class A shares $0,000 $0,000 $0,000 $0,000
- --------------------------------------------------------------------------------
Class B shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Class C shares 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------
Fund Managers
Below are the people who handle the fund's day-to-day management:
Robert D. Tymoczko
Lead Portfolio Manager
o Began investment career in 1996
o Joined the advisor in 1997
o Joined the fund team in 19__
Shahram Tajbakhsh
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Almond G. Goduti
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
Josephine Chu
o Began investment career in 19__
o Joined the advisor in 19__
o Joined the fund team in 19__
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING LIST OF FUND MANAGERS.
- --------------------------------------------------------------------------------
The fund is managed by a team of investment professionals who work together to
develop the fund's investment strategies.
Kemper Horizon 5 Portfolio | 19
<PAGE>
- --------------------------------------------------------------------------------
Other Policies And Risks
While the previous pages describe the main points of each fund's strategy and
risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder approval.
o As a temporary defensive measure, any of these funds could shift up to 100%
of assets into investments such as money market securities. This could
prevent losses, but would mean that the fund would not be pursuing its
goal.
o Scudder Kemper establishes a security's credit grade when it buys the
security, using independent ratings or, for unrated securities, its own
credit analysis. When ratings don't agree, a fund may use the higher
rating. If a security's credit quality falls, the advisor will determine
whether selling it would be in the shareholders' best interests.
o Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, commodities,
currencies or securities), the managers don't intend to use them as
principal investments.
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
Year 2000 and euro readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. Also, because they invest in
foreign securities, the funds could be affected by accounting differences,
changes in tax treatment or other issues related to the conversion of certain
European currencies into the euro, which is already underway. Scudder Kemper has
readiness programs designed to address these problems, and is also researching
the readiness of suppliers and business partners as well as issuers of
securities the funds own. Still, there's some risk that one or both of these
problems could materially affect a fund's operations (such as its ability to
calculate net asset value and to handle purchases and redemptions), its
investments or securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING FIVE PARAGRAPHS.
- --------------------------------------------------------------------------------
This prospectus doesn't tell you about every policy or risk of investing in a
fund. For more information, you may want to request a copy of the SAI (the back
cover has additional information on how to do this).
- --------------------------------------------------------------------------------
20 | Other Policies and Risks
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by Ernst & Young LLP, whose report, along with each fund's financial statements,
is included in that fund's annual report (see "Shareholder reports" on the back
cover).
Kemper Horizon 20+ Portfolio
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio Financial Highlights | 21
<PAGE>
Class B Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
22 | Financial Highlights Kemper Horizon 20+ Portfolio
<PAGE>
Class C Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
Kemper Horizon 20+ Portfolio Financial Highlights | 23
<PAGE>
Kemper Horizon 10+ Portfolio
Class A Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
24 | Financial Highlights Kemper Horizon 10+ Portfolio
<PAGE>
Class B Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
Kemper Horizon 10+ Portfolio Financial Highlights | 25
<PAGE>
Class C Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
26 | Financial Highlights Kemper Horizon 10+ Portfolio
<PAGE>
Kemper Horizon 5 Portfolio
Class A Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
Kemper Horizon 5 Portfolio Financial Highlights | 27
<PAGE>
Class B Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
28 | Financial Highlights Kemper Horizon 5 Portfolio
<PAGE>
Class C Shares
- --------------------------------------------------------------------------------------------------
Years ended Month 00, 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of period $00.00 $00.00 $00.00 $00.00 $00.00 $00.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
- --------------------------------------------------------------------------------------------------
Net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total from investment transactions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------
From net investment income .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
From tax return of capital (.00) (.00) (.00) (.00) (.00) (.00)
- --------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Net asset value, end of period 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Net investment income 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Total return 00.00 00.00 00.00 00.00 00.00 00.00
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($millions) 0,000 0,000 0,000 0,000 0,000 0,000
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses net to
average daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average
daily net assets (%) .00 .00 .00 .00 .00 .00
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to
average daily net assets (%) 0.00 0.00 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 00.0 00.0 00.0 00.0 00.0 00.0
- --------------------------------------------------------------------------------------------------
</TABLE>
Kemper Horizon 5 Portfolio Financial Highlights | 29
<PAGE>
Investing In The Funds
The following pages tell you about many of the services, choices and benefits of
being a Kemper Funds shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.
You can find out more about the topics covered here by speaking with your
financial representative or other investment provider, such as a workplace
retirement plan.
<PAGE>
- --------------------------------------------------------------------------------
Choosing A Share Class
In this prospectus, there are three share classes for each fund. Each class has
its own fees and expenses, offering you a choice of cost structures.
Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you.
You may want to ask your financial representative to help you with this
decision.
We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Classes and features Points to help you compare
- --------------------------------------------------------------------------------------
Class A
<S> <C>
o Sales charges of up to 5.75%, o Some investors may be able to
charged when you buy shares reduce or eliminate their sales
charges; see next page
o In most cases, no charges when
you sell shares o Annual expenses are lower than
those for Class B or Class C
o No marketing/distribution fee
- --------------------------------------------------------------------------------------
Class B
o No charges when you buy shares o The deferred sales charge rate falls
to zero after six years
o Deferred sales charge of up to
4.00%, charged when you sell shares you o Shares automatically convert to Class
bought within the last six years A after six years, which means lower
annual expenses going forward
o 0.75% marketing and distribution fee
- --------------------------------------------------------------------------------------
Class C
o No charges when you buy shares o The deferred sales charge rate is
lower, but your shares never convert
o Deferred sales charge of 1.00%, to Class A, so annual expenses
charged when you sell shares you remain higher
bought within the last year
o 0.75% marketing and distribution fee
</TABLE>
Choosinhg A Share Class | 31
<PAGE>
Class A shares
Class A shares have a sales charge that varies with the amount you invest:
Sales charge Sales charge
as a percent of as a percent of
Your investment offering price your investment
- -----------------------------------------------------------
Up to $50,000 5.75% 6.10%
- -----------------------------------------------------------
$50,000 - $99,999 4.50 4.71
- -----------------------------------------------------------
$100,000 - $249,999 3.50 3.63
- -----------------------------------------------------------
$250,000 - $499,999 2.60 2.67
- -----------------------------------------------------------
$500,000 - $999,999 2.00 2.04
- -----------------------------------------------------------
$1 million or more See below and next page
- -----------------------------------------------------------
You may be able to lower your Class A sales charges if:
o you plan to invest at least $50,000 over the next 24 months ("letter of
intent")
o the amount of Kemper shares you already own (including shares in certain
other Kemper funds) plus the amount you're investing now is at least
$50,000 ("cumulative discount")
o you are investing a total of $50,000 or more in several Kemper funds at
once ("combined purchases")
The point of these three features is to let you count investments made at other
times for purposes of calculating your present sales charge. Any time you can
use the privileges to "move" your investment into a lower sales charge category
in the table above, it's generally beneficial for you to do so. You can take
advantage of these methods by filling in the appropriate sections of your
application or by speaking with your financial representative.
32 | Choosing A Share Class
<PAGE>
You may be able to buy Class A shares without sales charges when you are:
o reinvesting dividends or distributions
o investing through certain workplace retirement plans
o participating in an investment advisory program under which you pay a fee
to an investment adviser or other firm for portfolio management services
There are a number of additional provisions that apply in order to be eligible
for a sales charge waiver. The fund may waive the sales charges for investors in
other situations as well. Your financial representative or Kemper can answer
your questions and help you determine if you are eligible.
If you're investing $1 million or more, either as a lump sum or through one of
the sales charge reduction features described on the previous page, you may be
eligible to buy Class A shares without sales charges. However, you may be
charged a contingent deferred sales charge (CDSC) of 1.00 percent on any shares
you sell within the first year of owning them, and a similar charge of 0.50
percent on shares you sell within the second year of owning them.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING TWO PARAGRAPHS.
- --------------------------------------------------------------------------------
Class A shares may make sense for long-term investors, especially those who are
eligible for reduced or eliminated sales charges.
- --------------------------------------------------------------------------------
Choosing A Share Class | 33
<PAGE>
Class B shares
With Class B shares, you pay no up-front sales charges to the fund. Class B
shares do have a 12b-1 plan, under which they charge an annual marketing/
distribution fee of 0.75 percent. This means the annual expenses for Class B
shares are somewhat higher (and their performance correspondingly lower)
compared to Class A shares, which don't have a 12b-1 fee. After six years, Class
B shares automatically convert to Class A, which has the net effect of lowering
the annual expenses from the seventh year on.
Class B shares have a contingent deferred sales charge (CDSC). This charge
declines over the years you own shares, and disappears completely after six
years of ownership. But for any shares you sell within those six years, you may
be charged as follows:
Year after you bought shares CDSC on shares you sell
- -----------------------------------------------------------
First year 4.00%
- -----------------------------------------------------------
Second or third year 3.00
- -----------------------------------------------------------
Fourth or fifth year 2.00
- -----------------------------------------------------------
Sixth year 1.00
- -----------------------------------------------------------
Seventh year and later None (automatic conversion
to Class A)
- -----------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class B shares don't have any front-end sales charges, their higher annual
expenses mean that over the years you could end up paying more than the
equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING THREE PARAGRAPHS.
- --------------------------------------------------------------------------------
Class B shares can be a logical choice for long-term investors who'd prefer to
see all of their investment go to work right away, and can accept somewhat
higher annual expenses in exchange
- --------------------------------------------------------------------------------
34 | Choosing A Share Class
<PAGE>
Class C shares
Like Class B shares, Class C shares have no up-front sales charges and have a
12b-1 plan that allows them to charge an annual marketing/ distribution fee of
0.75 percent. Because of this fee, the annual expenses for Class C shares are
similar to those of Class B shares, but higher than those for Class A shares
(and the performance of Class C shares is correspondingly lower than that of
Class A).
Unlike Class B shares, Class C shares do NOT automatically convert to Class A
after six years, so they continue to have higher annual expenses.
Class C shares have a contingent deferred sales charge (CDSC), but only on
shares you sell within one year of buying them:
Year after you bought shares CDSC on shares you sell
- --------------------------------------------------------
First year 1.00%
- --------------------------------------------------------
Second year and later None
- --------------------------------------------------------
This CDSC is waived under certain circumstances (see "Policies You Should Know
About"). Your financial representative or Kemper can answer your questions and
help you determine if you're eligible.
While Class C shares don't have any front-end sales charges, their higher annual
expenses mean that over the years you could end up paying more than the
equivalent of the maximum allowable front-end sales charge.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING THREE PARAGRAPHS.
- --------------------------------------------------------------------------------
Class C shares may appeal to investors who plan to sell some or all shares
within six years of buying them, or who aren't certain of their investment time
horizon.
Choosing A Share Class | 35
<PAGE>
- --------------------------------------------------------------------------------
How To Buy Shares
Once you've chosen a share class, use these instructions to make investments.
Make out any checks to "Kemper Funds."
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
First investment Additional Investments
- -------------------------------------------------------------------------------------
<S> <C>
$1,000 or more for regular accounts $100 or more for regular accounts
$250 or more for IRAs
$50 or more for IRAs
$50 or more with an Automatic
Investment Plan
- -------------------------------------------------------------------------------------
Through a financial representative
o Contact your representative using o Contact your representative using
the method that's most convenient the method that's most convenient
for you for you
- -------------------------------------------------------------------------------------
By mail or express mail (see below) o Send a check and a Kemper investment
slip to us at the appropriate address
o Fill out and sign an application below
o Send it to us at the appropriate o If you don't have an investment slip,
address, along with an investment simply include a letter with your
check name, account number, the full name
of the fund and the share class and your
investment instructions
- -------------------------------------------------------------------------------------
By wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- -------------------------------------------------------------------------------------
By phone
- -- o Call (800) 621-1048 for instructions
- -------------------------------------------------------------------------------------
With an automatic investment plan
- -- o To set up regular investments, call
(800) 621-1048
- -------------------------------------------------------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
</TABLE>
Regular mail: Kemper Funds, PO Box 219415, Kansas City, MO 64121-9415
Express, registered or certified mail: Kemper Service Company, 811 Main Street,
Kansas City, MO 64105-2005
Fax number: (800) 818-7526 (for exchanging and selling only)
36 | How To Buy Shares
<PAGE>
- --------------------------------------------------------------------------------
How To Exchange Or Sell Shares
Use these instructions to exchange or sell shares in your account.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Exchanging into another fund Selling shares
- -----------------------------------------------------------------------------------
<S> <C>
$1,000 or more to open a new account Some transactions, including most for
over $50,000, can only be ordered in
$100 or more for exchanges between writing with a signature guarantee;
existing accounts if you're in doubt, see page 00
- -----------------------------------------------------------------------------------
Through a financial representative
o Contact your representative by the o Contact your representative by the
method that's most convenient for method that's most convenient for
you you
- -----------------------------------------------------------------------------------
By phone or wire
o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions
- -----------------------------------------------------------------------------------
By mail, express mail or fax
(see previous page)
Write a letter that includes: Write a letter that includes:
o the fund, class and account number o the fund, class and account number
you're exchanging out of from which you want to sell shares
o the dollar amount or number of o the dollar amount or number of
shares you want to exchange shares you want to sell
o the name and class of the o your name(s), signature(s) and
fund you want to exchange into address, as they appear on your
account
o your name(s), signature(s) and
address, as they appear on your o a daytime telephone number
account
o a daytime telephone number
- -----------------------------------------------------------------------------------
With a systematic exchange plan With a systematic withdrawal plan
o To set up regular exchanges from o To set up regular cash payments
a Kemper fund account, call (800) from a Kemper fund account, call
621-1048 (800) 621-1048
- -----------------------------------------------------------------------------------
On the internet
o Follow the instructions at o Follow the instructions at
www.kemper.com www.kemper.com
- -----------------------------------------------------------------------------------
</TABLE>
How to Exchange Or Sell Shares | 37
<PAGE>
- --------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The funds are open for business whenever the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 3 p.m. Central time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Kemper Service Company, and they have determined that it is a "good
order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representive of your investment provider should be able to tell you when your
order will be processed.
KemperACCESS, the Kemper Automated Information Line, is available 24 hours a day
by calling (800) 972-3060. You can use Kemper ACCESS to get information on
Kemper funds generally and on accounts held directly at Kemper. You can also use
it to make exchanges and sell shares.
38 | Policies You Should Know About
<PAGE>
EXPRESS-Transfer lets you set up a link between a Kemper account and a bank
account. Once this link is in place, you can move money between the two with a
phone call. You'll need to make sure your bank has Automated Clearing House
(ACH) services. Transactions take two to three days to be completed, and there
is a $100 minimum. To set up EXPRESS-Transfer on a new account, see the account
application; to add it to an existing account, call (800) 621-1048.
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
When you call us to sell shares, we may record the call, ask you for certain
information or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The fund can only send or
accept wires of $1,000 or more.
Exchanges among Kemper funds are an option for most shareholders. Exchanges are
a shareholder privilege, not a right: we may reject any exchange order,
particularly when there appears to be a pattern of "market timing" or other
frequent purchases and sales. We may also reject purchase orders, for these or
other reasons.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING THREE PARAGRAPHS.
- --------------------------------------------------------------------------------
The Kemper Web site can be a valuable resource for shareholders with Internet
access. Go to www. kemper.com to get up-to-date information, review balances or
even place orders for exchanges.
- --------------------------------------------------------------------------------
Policies You Should Know About | 39
<PAGE>
When you want to sell more than $50,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers and
most banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
When you sell shares that have a contingent deferred sales charge (CDSC), we
calculate the CDSC as a percentage of what you paid for the shares or what you
are selling them for -- whichever results in the lowest charge to you. In
processing orders to sell shares, we turn to the shares with the lowest CSDC
first. Exchanges from one Kemper fund into another don't affect CDSCs: for each
investment you make, the date you first bought Kemper shares is the date we use
to calculate a CDSC on that particular investment.
There are certain cases in which you may be exempt from a CDSC. These include:
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING TWO PARAGRAPHS.
- --------------------------------------------------------------------------------
If you ever have difficulty placing an order by phone or fax, you can always
send us your order in writing.
- --------------------------------------------------------------------------------
o the death or disability of an account owner (including a joint owner)
o withdrawals made through a systematic withdrawal plan
o withdrawals related to certain retirement or benefit plans
o redemptions for certain loan advances, hardship provisions or returns of
excess contributions from retirement plans
40 | Policies You Should Know About
<PAGE>
In each of these cases, there are a number of additional provisions that apply
in order to be eligible for a CDSC waiver. Your financial representative or
Kemper can answer your questions and help you determine if you are eligible.
If you sell shares in a Kemper fund and then decide to invest with Kemper again
within six months, you can take of advantage of the "reinstatement feature."
With this feature, you can put your money back into the same class of a Kemper
fund at its current NAV and for purposes of sales charges it will be treated as
if it had never left Kemper. You'll be reimbursed (in the form of fund shares)
for any CDSC you paid when you sold. Future CDSC calculations will be based on
your original investment date, rather than your reinstatement date. There is
also an option that lets investors who sold Class B shares buy Class A shares
with no sales charge, although they won't be reimbursed for any CSDC they paid.
You can only use the reinstatement feature once for any given group of shares.
To take advantage of this feature, contact Kemper or your financial
representative.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 10 days) or when unusual circumstances prompt the
SEC to allow further delays. Certain expedited redemption processes may also be
delayed when you are selling recently purchased shares.
Policies You Should Know About | 41
<PAGE>
How the funds calculate share price
For each fund in this prospectus, the price at which you buy shares is as
follows:
Class A shares -- net asset value per share, or NAV, adjusted to allow for any
applicable sales charges (see "Choosing A Share Class")
Class B and Class C shares -- net asset value per share, or NAV
To calculate NAV, each share class of each fund uses the following equation:
Total assets - total liabilities
---------------------------------- = NAV
Total Number of shares outstanding
For each fund and share class in this prospectus, the price at which you sell
shares is also the NAV, although for Class B and Class C investors a contingent
deferred sales charge may be taken out of the proceeds (see "Choosing A Share
Class").
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
42 | Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31 percent of your distributions as federal income tax if you have
been notified by the IRS that you are subject to backup withholding, or if
you fail to provide us with a correct taxpayer ID number or certification
that you are exempt from backup withholding
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o charge you $9 each calendar quarter if your account balance is below $1,000
for the entire quarter; this policy doesn't apply to most retirement
accounts or if you have an automatic investment plan
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; in most cases, a fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1 percent of the fund's assets, whichever is less
o calculate NAV more than once a day
o change, add or withdraw various services, fees and account policies (for
example, we may change or terminate the exchange privilege at any time)
Policies You Should Know About | 43
<PAGE>
- --------------------------------------------------------------------------------
Understanding Distributions And Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The funds have regular schedules for paying out any earnings to shareholders:
o income and short-term capital gains: declared and paid annually by Horizon
20+ Portfolio, semi-annually by Horizon 10+ Portfolio and quarterly by
Horizon 5 Portfolio
o long-term capital gains: December, or otherwise as noted
The funds may make additional distributions for tax purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares (at NAV), all sent to you by
check, have one type reinvested and the other sent to you by check or have them
invested in a different fund. Tell us your preference on your application. If
you don't indicate a preference, your dividends and distributions will all be
reinvested without sales charges. For retirement plans, reinvestment is the only
option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING THREE PARAGRAPHS.
- --------------------------------------------------------------------------------
Because each shareholder's tax situation is unique, it's always a good idea to
ask your tax professional about the tax consequences of your investments,
including any state and local tax consequences.
44 | Understanding Distributions and Taxes
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
- -------------------------------------------------------------------
o short-term capital gains from selling fund shares
- -------------------------------------------------------------------
o income dividends you receive from a fund
- -------------------------------------------------------------------
o short-term capital gains distributions received from a fund
- -------------------------------------------------------------------
Generally taxed at capital gains rates
- -------------------------------------------------------------------
o long-term capital gains from selling fund shares
- -------------------------------------------------------------------
o long-term capital gains distributions received from a fund
- -------------------------------------------------------------------
You may be able to claim a tax credit or deduction for your share of any foreign
taxes your fund pays.
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before the fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends-received deduction for a portion of
income dividends they receive.
Understanding Distributions and Taxes | 45
<PAGE>
9/26/99
To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call (800) 621-1048.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Kemper or the SEC (see below). Materials you
get from Kemper are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC
450 Fifth Street, N.W.
Washington, DC 20549-6009
www.sec.gov
Tel (800) SEC-0330
Kemper Funds
222 South Riverside Plaza
Chicago, IL 60606-5808
www.kemper.com
Tel (800) 621-1048
SEC File Numbers
Kemper Horizon 20+ Portfolio 000-000
Kemper Horizon 10+ Portfolio 000-000
Kemper Horizon 5 Portfolio 000-000
PRINCIPAL UNDERWRITER
Kemper Distributors, Inc.
222 South Riverside Plaza Chicago, IL 60606-5808
www.kemper.com E-mail
[email protected]
Tel (800) 621-1048
XXXX-0 (12/1/99) 000000
[KEMPER LOGO]
Long-Term investing in a short-term world(SM)
<PAGE>
KEMPER HORIZON FUND
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
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 December 1, 1999. 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.......................................................2
INVESTMENT POLICIES AND TECHNIQUES............................................3
INVESTMENT MANAGER AND UNDERWRITER...........................................15
PORTFOLIO TRANSACTIONS.......................................................21
PURCHASE AND REDEMPTION OF SHARES............................................22
DIVIDENDS AND TAXES..........................................................23
NET ASSET VALUE..............................................................28
PERFORMANCE..................................................................29
OFFICERS AND TRUSTEES........................................................31
SHAREHOLDER RIGHTS...........................................................34
APPENDIX -- RATINGS OF FIXED INCOME INVESTMENTS..............................36
The financial statements appearing in the Portfolios' Annual Reports to
Shareholders are incorporated herein by reference. The Reports for the Fund
accompany this document, and may be obtained without charge by calling
1-800-231-8568.
<PAGE>
INVESTMENT RESTRICTIONS
Each Portfolio has adopted certain fundamental investment restrictions that
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, as
amended (the "1940 Act"), 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. Although purchases of fund shares should be
made for long-term investment purposes only, (in the case of Kemper Horizon 20+
Portfolio) or for intermediate-term investment purposes only (in the case of
Kemper Horizon 10+ Portfolio), the Board of Trustees may terminate, liquidate or
merge a portfolio out of existence when it determines that it is in the best
interests of the portfolio's shareholders to do so. In such a case, the
portfolio may not achieve its investment objective, and it may be possible to
lose money invested in the portfolio.
contracts.Each Portfolio may not, as a fundamental policy:
(1) borrow money, except as permitted under the 1940 Act, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
(2) issuer senior securities, except as permitted under the 1940 Act, and
as interpreted or modified by regulatory having jurisdiction, from time
to time;
(3) concentrate its investments in a particular industry, as the term is
used in 1940 Act, and as interpreted or modified by regulatory having
jurisdiction, from time to time;
(4) engage in the business of underwriting securities issued by others,
except to the extent that a Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities;
(5) purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interest therein, except that the Fund reserves the
freedom of action to hold and to sell real estate acquired as a result
of the Fund's ownership of securities;
(6) purchase physical commodities or contracts relating to physical
commodities;
(7) make loans except as permitted under the 1940 Act, and as interpreted
or modified by regulatory having jurisdiction, from time to time.
The following policies are non-fundamental, and may be changed or eliminated for
each Portfolio by its Board without a vote of the shareholders:
(1) purchase securities of any issuer (other than obligation of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of the total value of its assests would
be invested in securities of that issuer. To the extent a Portfolio
invests in loan participations, the Portfolio, as a non-fundamental
policy, considers both the lender and the borrower to be an issuer of
such loan participation;
(2) purchase more than 10% of any class of voting securities of any issuer;
(3) pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure permitted borrowings. (The
collateral arrangements with respect
2
<PAGE>
to the options, financial futures and delayed delivery transactions and
any margin payments in connection therewith are not deemed to be
pledges or encumbrances);
(4) 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;
(5) 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 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;
(6) invest in real estate limited partnerships.
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 1
during the last fiscal period, and have no present intention of borrowing during
the current year.
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 those Portfolios 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
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. 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.
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.
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Dollar denominated American Depository Receipts ("ADRs"), which are bought and
sold in the United States. For purposes of the allocation between U.S. and
foreign 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 below.
Foreign securities involve currency risks. The U.S. Dollar value of a foreign
security tends to decrease when the value of the U.S. Dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the U.S. Dollar falls against such currency. Fluctuations in
exchange rates may also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be repatriated
based upon the exchange rate at the time of disbursement or payment, and
restrictions on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies.
Foreign securities may be subject to foreign government taxes that reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possible imposition of exchange controls.
The prices of such securities may be more volatile than those of domestic
securities and the markets for such securities may be less liquid. In addition,
there may be less publicly available information about foreign issuers than
about domestic issuers. Many foreign issuers are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic issuers. There is generally less regulation of stock
exchanges, brokers, banks and listed companies abroad than in the United States.
With respect to certain foreign countries, there is a possibility of
expropriation or diplomatic developments that could affect investment in these
countries.
Emerging Markets. While each Portfolio's investments in foreign securities will
principally be in developed countries, a Portfolio may make investments in
developing or "emerging" countries, which involve exposure to economic
structures that are generally less diverse and mature than in the United States,
and to political systems that may be less stable. A developing or emerging
market country can be considered to be a country that is in the initial stages
of its industrialization cycle. Currently, emerging markets generally include
every country in the world other than the United States, Canada, Japan,
Australia, New Zealand, Hong Kong, Singapore and most Western European
countries. Currently, investing in many emerging markets may not be desirable or
feasible because of the lack of adequate custody arrangements for a Portfolio's
assets, overly burdensome repatriation and similar restrictions, the lack of
organized and liquid securities markets, unacceptable political risks or other
reasons. As opportunities to invest in securities in emerging markets develop, a
Portfolio may expand and further broaden the group of emerging markets in which
it invests. In the past, markets of developing or emerging market countries have
been more volatile than the markets of developed countries; however, such
markets often have provided higher rates of return to investors. The investment
manager believes that these characteristics can be expected to continue in the
future.
Many of the risks described above relating to foreign securities generally will
be greater for emerging markets than for developed countries. For instance,
economies in individual developing markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging markets have
experienced substantial rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain developing markets.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries with which they
trade.
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Also, the securities markets of developing countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure, regulatory and
accounting standards in many respects are less stringent than in the United
States and other developed markets. There also may be a lower level of
monitoring and regulation of developing markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Such settlement problems may cause emerging market securities to be illiquid.
The inability of a Portfolio to make intended securities purchases due to
settlement problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to a Portfolio due to subsequent declines
in value of the portfolio security or, if a Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. Certain emerging markets may lack clearing facilities equivalent to
those in developed countries. Accordingly, settlements can pose additional risks
in such markets and ultimately can expose a Portfolio to the risk of losses
resulting from the Portfolio's inability to recover from a counterparty.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading securities may cease or may be
substantially curtailed and prices for such securities in emerging markets may
not be readily available. In that case, securities in the affected markets will
be valued at fair value determined in good faith by or under the direction of
the Board of Trustees.
Investment in certain emerging market securities is restricted or controlled to
varying degrees. These restrictions or controls may at times limit or preclude
foreign investment in certain emerging market securities and increase the costs
and expenses of a Portfolio. Emerging markets may require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments, the market could impose temporary
restrictions on foreign capital remittances.
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, each Portfolio
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
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.
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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.
OPTIONS AND FUTURES. 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.
Options on securities. Each Portfolio may write (sell) "covered" call options on
securities as long as it owns the underlying securities subject to the option or
an option to purchase the same underlying securities, having an exercise price
equal to or less than the exercise price of the "covered" option, or will
establish and maintain for the term of the option a segregated account
consisting of cash, U.S. Government securities or other liquid high-grade debt
obligations ("eligible securities") having a value at least equal to the
fluctuating market value of the optioned securities. Each Portfolio may write
"covered" put options provided that, as long as the Portfolio is obligated as a
writer of a put option, the Portfolio will own an option to sell the underlying
securities subject to the option, having an exercise price equal to or greater
than the exercise price of the "covered" option, or it will deposit and maintain
in a segregated account eligible securities having a value equal to or greater
than the exercise price of the option. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during 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. Each
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
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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. 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.
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.
Each Portfolio 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
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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.
Each Portfolio anticipates entering into agreements with dealers to which the
Portfolio sells OTC options. Under these agreements the Portfolio would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the "Repurchase
Price"). The "liquidity charge" referred to above for a specific OTC option
transaction will be the Repurchase Price related to the OTC option less the
intrinsic value of the OTC option. The intrinsic value of an OTC call option for
such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow a Portfolio to repurchase a specific OTC
option written by the Portfolio, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.
Options on Securities Indices. Each Portfolio may purchase and write, call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Portfolio owns or intends
to purchase, and not for speculation. Through the writing or purchase of index
options, a Portfolio can achieve many of the same objectives as through the use
of options on individual securities. Options on securities indices are similar
to options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to such difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike security options, all settlements are in cash
and gain or loss depends upon price movements in the market generally (or in a
particular industry or segment of the market), rather than upon price movements
in individual securities. Price movements in 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 a 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.
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Financial Futures Contracts. The Portfolios may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or an amount of foreign currency or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might affect adversely the value of securities or other assets which
the Portfolio holds or intends to purchase. A "sale" of a futures contract means
the undertaking of a contractual obligation to deliver the securities or the
cash value of an index or foreign currency called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index or foreign currency at a specified price
during a specified delivery period. At the time of delivery, in the case of
fixed income securities pursuant to the contract, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than that specified in the contract. In some cases,
securities called for by a futures contract may not have been issued at the time
the contract was written.
Although some futures contracts by their terms call for the actual delivery or
acquisition of securities or other assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case may be)
on a commodities exchange an identical futures contract calling for delivery in
the same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the underlying securities or
other assets. All transactions in the futures market are made, offset or
fulfilled through a clearing house associated with the exchange on which the
contracts are traded. A Portfolio will incur brokerage fees when it purchases or
sells contracts, and will be required to maintain margin deposits. At the time a
Portfolio enters into a futures contract, it is required to deposit with its
custodian, on behalf of the broker, a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded. Subsequent
payments, called "variation margin," to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. The costs incurred
in connection with futures transactions could reduce a Portfolio's return.
Futures contracts entail risks. If the investment manager's judgment about the
general direction of markets or exchange rates is wrong, the overall performance
may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio assets being hedged. In addition, the market prices of
futures contracts may be affected by certain factors. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the assets and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities or other assets rather than engage in
closing transactions because of the resultant reduction in the liquidity of the
futures market. In addition, because, from the point of view of speculators, the
margin requirements in the futures 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, a 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
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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.
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
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 a 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
a 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
10
<PAGE>
movement in forward contract prices. If a 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
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.
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.
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
11
<PAGE>
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.
LENDING OF PORTFOLIO SECURITIES. Each Portfolio may seek to increase its income
by lending portfolio securities. Such loans may be made to registered
broker/dealers, and are required to be secured continuously by collateral in
cash, U.S. Government securities and high grade debt obligations, maintained on
a current basis at an amount at least equal to the market value and accrued
interest of the securities loaned. Each Portfolio has the right to call a loan
and obtain the securities loaned on no more than five days' notice. During the
existence of a loan, a Portfolio continues to receive the equivalent of any
distributions paid by the issuer on the securities loaned and also receives
compensation based on investment of the collateral. 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 may be made only to firms deemed by the Adviser to be of good standing and
will not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk.
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 or non-rated securities. Ratings
published by nationally recognized rating agencies such as Standard & Poor's
("S&P") and Moody's Investors Service, Inc. ("Moody's") are widely accepted
measures of credit risk. The fixed income portion of each Portfolio will be
invested in securities that are rated at the time of purchase within the four
highest grades assigned by Moody's, S&P, Fitch Investors Service, Inc. ("Fitch")
or Duff & Phelps Credit Rating Co. ("Duff") or any other Nationally Recognized
Statistical Rating Organization ("NRSRO") as designated by the Securities and
Exchange Commission, or will be of comparable quality as determined by the
Portfolios' investment manager, provided that up to 10% of the fixed income
portion of each Portfolio may be invested in securities that are lower rated
("junk bonds"). The top four ratings currently assigned by these organizations
are as follows: Moody's (Aaa, Aa, A or Baa), S&P (AAA, AA, A or BBB), Fitch
(AAA, AA, A or BBB) and Duff (AAA, AA, A or BBB). In addition, under normal
conditions, each Portfolio expects to maintain a relatively high average
dollar-weighted credit quality (i.e., within the top two rating categories of an
NRSRO or comparable as determined by the investment manager). Average
dollar-weighted credit quality is calculated by averaging the ratings of each
fixed income security held by a Portfolio with each rating "weighted" according
to the percentage of assets that it represents. Average dollar-weighted credit
quality is not a precise measure of the credit risk presented by a portfolio of
fixed income securities. For instance, a combination of securities that are
rated AAA and securities that are rated BB that together result in an average
weighted credit quality of AA may present more risk than a group of just AA
rated securities.
After a Portfolio purchases a security, its quality level may fall below that at
which it was purchased (i.e., downgraded). In such instance, the Portfolio would
not be required to sell the security, but the investment manager will consider
such an event in determining whether the Portfolio should continue to hold the
security. The ratings of NRSROs represent their opinions as to the quality of
the securities that they undertake to rate. It should be emphasized, however,
that ratings, and other opinions as to quality, are
12
<PAGE>
relative and subjective and are not absolute standards of quality. For a
discussion of lower rated and non-rated securities and related risks, see "Other
Considerations -- 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 each
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
tends 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%.
OTHER CONSIDERATIONS -- HIGH YIELD (HIGH RISK) BONDS. As reflected in the
prospectus, a Portfolio may invest a portion of its assets in fixed income
securities that are in the lower rating categories of recognized rating agencies
(i.e., junk bonds) or are non-rated. No Portfolio currently intends to invest
more than 5% of its net assets in junk bonds. These lower rated or non-rated
fixed income securities are considered, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
The market values of such securities tend to reflect individual corporate
developments to a greater extent than do those of higher rated securities, which
react primarily to fluctuations in the general level of interest rates. Such
lower rated securities also tend to be more sensitive to economic conditions
than are higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding lower rated bonds may
depress the prices for such securities. These and other factors adversely
affecting the market value of high yield securities will adversely affect a
Portfolio's net asset value. Although some risk is inherent in all securities
ownership, holders of fixed income securities have a claim on the assets of the
issuer prior to the holders of common stock. Therefore, an investment in fixed
income securities generally entails less risk than an investment in common stock
of the same issuer.
High yield securities frequently are issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such high yielding
securities often are highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risk associated with acquiring
the securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn or recession, highly
leveraged issuers of high yield securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss from default by the
issuer is significantly greater for the holders of high yielding securities
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
13
<PAGE>
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.
Payments of principal and interest on the underlying collateral securities are
not passed through directly to the holders of the collateralized obligations as
such. Collateralized obligations often are issued in two or more classes with
varying maturities and stated rates of interest. Because interest and principal
payments on the underlying securities are not passed through directly to holders
of collateralized obligations, such obligations of varying maturities may be
secured by a single portfolio or pool of securities, the payments on which are
used to pay interest on each class and to retire successive maturities in
sequence. These relationships may in effect "strip" the interest payments from
principal payments of the underlying securities and allow for the separate
purchase of either the interest or the principal payments, sometimes called
interest only ("IO") and principal only ("PO") securities. Collateralized
obligations are designed to be retired as the underlying securities are repaid.
In the event of prepayment on or call of such securities, the class of
collateralized obligation first to mature generally will be paid down first.
Therefore, although in most cases the issuer of collateralized obligations will
not supply additional collateral in the event of such prepayment, there will be
sufficient collateral to secure collateralized obligations that remain
outstanding. It is anticipated that no more than 5% of a Portfolio's net assets
will be invested in IO and PO securities. Governmentally-issued and
privately-issued IO's and PO's will be considered illiquid for purposes of a
Portfolio's limitation on illiquid securities, however, the Board of Trustees
may adopt guidelines under which governmentally-issued IO's and PO's may be
determined to be liquid.
In reliance on an interpretation by the SEC, a Portfolio's investments in
certain qualifying collateralized obligations are not subject to the limitations
in the 1940 Act regarding investments by a registered investment company, such
as each Portfolio, in another investment company.
14
<PAGE>
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.
INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), 345 Park Avenue, New York, New York, is each Portfolio's investment
adviser. 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 for each Portfolio, Scudder Kemper acts as each
Portfolio'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. Each investment management agreement provides that the Portfolio 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 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. Each Portfolio 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 Portfolio's
shares for sale under the securities laws of the various states.
Each 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.
Each Portfolio's investment management agreement continues in effect from year
to year for each Portfolio 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 of each Portfolio or the Board of Trustees.
Each Portfolio'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. 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,
15
<PAGE>
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, Zurich Insurance Company ("Zurich") the majority owner of
the Adviser, entered into an agreement with B.A.T. Industries p.l.c. ("B.A.T."),
pursuant to which the financial services business of B.A.T. were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, each Portfolio's then current investment management agreement with
the Adviser was deemed to have been assigned and, therefore, terminated. The
Board of Trustees of each Portfolio and the shareholders of each Portfolio have
approved new investment management agreements with the Adviser, which are
substantially identical to the former investment management agreement, except
for the dates of execution and termination.
For the services and facilities furnished, 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>
The table below shows investment management fees paid by each Portfolio for the
fiscal year ended July 31, 1999, July 31, 1998 and July 31 1997.
<TABLE>
<CAPTION>
Portfolio Fiscal 1999 Fiscal 1998 Fiscal 1997
--------- ----------- ----------- -----------
<S> <C> <C> <C>
Horizon 20+ $ 495,000 225,000
Horizon 10+ $ 495,000 234,000
Horizon 5 $ 242,000 130,000
</TABLE>
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts, a subsidiary of Scudder Kemper, is
responsible for determining the daily net asset value per share of each
Portfolio and maintaining all accounting records related thereto. Currently,
SFAC receives no fee for its services to each Portfolio; 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"), 222 South Riverside Plaza, Chicago, Illinois, a wholly-owned subsidiary
of Scudder Kemper, is the principal underwriter and distributor for the shares
of each Portfolio and acts as agent of each Portfolio 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. Each
Portfolio 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.
16
<PAGE>
Each 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. Each agreement automatically terminates in the event of its
assignment and may be terminated for a class or a Portfolio at any time without
penalty by the Fund or by KDI upon 60 days' notice. Termination by the Fund with
respect to a class or a Portfolio may be by vote of a majority of the Board of
Trustees, or a majority of the Trustees who are not interested persons of the
Fund and who have no direct or indirect financial interest in the agreement, or
a "majority of the outstanding voting securities" of the class or the Portfolio,
as defined under the 1940 Act. 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 each 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, 1999, July 31, 1998 and July 31, 1997.
<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+ 1999 $ $
1998 $26,000 $303,000 0
1997 $23,000 $198,000 0
Horizon 10+ 1999 $
1998 $30,000 $300,000 0
1997 $31,000 $219,000 0
Horizon 5 1999
1998 $13,000 $156,000 0
1997 $20,000 127,000 0
</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, 1999, July 31, 1998 and
July 31, 1997 and are set forth below. A portion of the marketing, sales and
operating expenses shown below could be considered overhead expenses.
17
<PAGE>
<TABLE>
<CAPTION>
Portfolio Class B Shares
------------------------
Horizon 20+ Horizon 10+ Horizon 5
----------- ----------- ---------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Distribution Fees Paid $305,000 148,000 265,000 141,000 150,000 90,000
by Fund to KDI
Contingent Deferred $72,000 20,000 49,000 19,000 20,000 14,000
Sales Charges to KDI
Total Commissions $689,000 565,000 555,000 490,000 312,000 264,000
Paid by KDI to Firms
Distribution Fees Paid 0 0 0 0 0 0
by KDI to Affiliated
Firms
Advertising and $81,000 106,000 61,000 90,000 29,000 50,000
Literature
Other Distribution
Expenses Paid by KDI
Prospectus Printing $6,000 8,000 5,000 6,000 2,000 4,000
Marketing and Sales $162,000 260,000 128,000 223,000 62,000 122,000
Expenses
Misc. Operating Expenses $41,000 43,000 38,000 38,000 27,000 29,000
Interest Expenses $149,000 80,000 131,000 75,000 79,000 49,000
Portfolio Class C Shares
------------------------
Horizon 20+ Horizon 10+ Horizon 5
----------- ----------- ---------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
Distribution Fees Paid $45,000 17,000 61,000 27,000 31,000 14,000
by Fund to KDI
Contingent Deferred $1,000 0 1,000 4,000 1,000 1,000
Sales Charges to KDI
Total Distribution Fees $60,000 22,000 70,000 24,000 34,000 15,000
Paid by KDI to Firms
Distribution Fees Paid
18
<PAGE>
by KDI to Affiliated 0 0 0 0 0 0 0 0 0
Firms
Distribution Fees Paid
by KDI to Affiliated 0 0 0 0 0 0
Firms
Advertising and $19,000 18,000 20,000 24,000 11,000 12,000
Literature
Other Distribution
Expenses Paid by KDI
Prospectus Printing $1,000 1,000 1,000 2,000 1,000 1,000
Marketing and Sales $27,000 44,000 40,000 58,000 22,000 28,000
Expenses
Misc. Operating Expenses $7,000 15,000 10,000 16,000 19,000 14,000
Interest Expenses $12,000 5,000 13,000 6,000 8,000 4,000
</TABLE>
ADMINISTRATIVE SERVICES. Administrative services are provided to each Portfolio
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 each Portfolio, 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. 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.
19
<PAGE>
The following information concerns the administrative services fee paid by each
Portfolio for the fiscal years ended July 31, 1999, July 31, 1998 and July 31,
1997.
<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+ 1999 $
1998 $86,000 103,000 15,000 213,000 0
1997 $34,000 49,000 5,000 96,000 0
Horizon 10+ 1999 $
1998 $98,000 88,000 20,000 212,000 0
1997 $40,000 47,000 9,000 100,000 0
Horizon 5 1999 $
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 each 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. [update with new
Custodian info] State Street Bank and Trust Company ("State Street"), 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 receives as
transfer agent and pays to KSvC annual account fees of $10 ($18 for retirement
plans) for set up 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.
20
<PAGE>
The following shows for each Portfolio, for the fiscal years ended July 31,
1999, July 31, 1998 and July 31, 1997 the shareholder service fees IFTC remitted
to KSvC.
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
Portfolio Fees IFTC Paid to KSvC Fees IFTC Paid to KSvC Fees IFTC Paid to KSvC
--------- ---------------------- ---------------------- ----------------------
<S> <C> <C>
Horizon 20+ $756,000 224,000
Horizon 10+ $441,000 179,000
Horizon 5 $167,000 65,000
</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 Portfolios.
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 the 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
Scudder Investor Services, Inc. ("SIS") with commissions charged on comparable
transactions, as well as by comparing commissions paid by each Portfolio to
reported commissions paid by others. The Adviser routinely reviews commission
rates, execution and settlement services makingperformed and makes internal and
external comparisons.
The Portfolio's 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 Portfolio. 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 brokerage and research services to the Adviser or each
Portfolio. The term "research services" 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, if applicable, for
the Portfolio 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 services. The Adviser has negotiated
arrangements, which are not applicable to most fixed-income transactions, with
certain broker/dealers pursuant to which a broker/dealer will provide research
services, to the Adviser or the Portfolio in exchange for the direction by the
Adviser of brokerage transactions to the broker/dealer. These arrangements
regarding receipt of research services generally apply to equity security
transactions. The Adviser may place orders with a broker/dealer on the basis
that the broker/dealer has or has not sold shares of the Portfolio. In effecting
transactions in over-the-counter
21
<PAGE>
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.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through SIS which is a corporation registered
as a broker/dealer and a subsidiary of the Adviser; SIS place orders on behalf
of the Portfolio with issuers, underwriters or other brokers and dealers. SIS
will not receive any commission, fee or other remuneration from the Portfolio
for this service.
Although certain research services from broker/dealers may be useful to the
Portfolio 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 Portfolio. 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 Portfolio.
The Trustees review, from time to time, whether the recapture for the benefit of
the Portfolio of some portion of the brokerage commissions or similar fees paid
by the Portfolios on portfolio transactions is legally permissible and
advisable.
The table below shows total brokerage commissions paid by each Portfolio for the
fiscal years ended July 31 1999, July 31, 1998 and July 31, 1997, 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
Portfolio Fiscal 1999 Research in Fiscal 1999 Fiscal 1998 Fiscal 1997
--------- ----------- ----------------------- ----------- -----------
<S> <C> <C>
Horizon 20+ $188,000 $137,000
Horizon 10+ $141,000 $104,000
Horizon 5 $52,000 $ 43,000
</TABLE>
PURCHASE AND REDEMPTION OF SHARES
Purchase of shares. As described in each Portfolio'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 ($250 for IRAs) and the minimum subsequent
investment is $100 ($50 for IRAs) 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
Portfolio 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.
If shares of a Portfolio to be redeemed were purchased by check or through
certain Automated Clearing House ("ACH") transactions, the Portfolio 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 Portfolio of the purchase amount. Shareholders may not use
expedited redemption procedures (wire transfer or Redemption Check) until the
shares being redeemed have been owned for at least 10 days, and shareholders may
not use such procedures to redeem shares held in certificated form. There is no
delay when shares being redeemed were purchased by wiring Federal Funds.
22
<PAGE>
Redemption of shares. Upon receipt by the Shareholder Service Agent of a request
for redemption, shares of a Portfolio will be redeemed by the Portfolio at the
applicable net asset value per share of such Portfolio as described in each
Portfolio'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.
Each Portfolio 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 Portfolios' shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to the Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in a Portfolio's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
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 each Portfolio's shares. Those
brokers may also designate other parties to accept purchase and redemption
orders on each Portfolio's behalf. Orders for purchase or redemption will be
deemed to have been received by each Portfolio when such brokers or their
authorized designees accept the orders. Subject to the terms of the contract
between each Portfolio and the broker, ordinarily orders will be priced as each
Portfolio's net asset value next computed after acceptance by such brokers or
their authorized designees. Further, if purchases or redemptions of each
Portfolio'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 each Portfolio 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 each Portfolio 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, each Portfolio 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
23
<PAGE>
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.
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. 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
24
<PAGE>
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 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
25
<PAGE>
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 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
26
<PAGE>
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 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 (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. 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
27
<PAGE>
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.
Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.
NET ASSET VALUE
The net asset value per share of each Portfolio is the value of one share and is
determined separately for each class by dividing the value of each 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 the
Portfolio because of the higher expenses borne by the Class B and Class C
shares. The net asset value of shares of the Portfolio is computed as of the
close of regular trading (the "value time") on the New York Stock Exchange, Inc.
(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 securities listed primarily on foreign exchanges, such
securities may trade on days when the Portfolio's net asset value is not
computed; and therefore, the net asset value of each 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 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
28
<PAGE>
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 portfolios 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.
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, 1999
(Adjusted for the maximum sales charge)
1-Year Life of
Fund*
<S> <C> <C> <C>
Horizon 20+ Class A % %
29
<PAGE>
Class B
Class C
Horizon 10+ Class A
Class B
Class C
Horizon 5 Class A
Class B
Class C
* 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 each Portfolio'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
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.
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 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.
30
<PAGE>
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.
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.
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) Director, 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
and United States Ambassador to Saudi Arabia, 1973-76.
JAMES R. EDGAR (7/22/46), Trustee, 1927 County Road 150 E, Seymour, IL;
Distinguished Fellow, University of Illinois Institute of Government and Public
Affairs; formerly, Governor of the State of Illinois, 1991-1998; Illinois
Secretary of State, 1981-1990; Director of Legislative Affairs, Office of the
Governor of Illinois, 1979-1980; Representative in Illinois General Assembly,
1976-1979.
ARTHUR R. GOTTSCHALK (2/13/25) Director, 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; Former Member, Illinois state Senate;
Formerly Vice President, The Reuben H. Donnelley Corp., Formerly, Attorney.
FREDERICK T. KELSEY (4/25/27) Director, 4010 Arbor Lane, Unit 102, 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 Northern Institutional Funds, formerly,
Trustee of the Pilot Fund.
THOMAS W. LITTAUER (4/26/55), Trustee*, 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.
FRED B. RENWICK (2/1/30) Director, 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 Foundation; Chairman
Finance 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.
31
<PAGE>
JOHN G. WEITHERS (8/8/33) Director, 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.
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 J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, Scudder Kemper.
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.
CORNELIA M. SMALL ( / / ), Vice President*, Two International Place, Boston,
Massachusetts;_________.
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).
* "Interested persons" as defined in the 1940 Act.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Portfolios' 1999 fiscal year and the total compensation that the Kemper funds
paid to such trustees during the calendar year 1998.
<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 $ $
Arthur R. Gottschalk(1) $ $
Frederick T. Kelsey $ $
Fred B. Renwick $ $
John B. Tingleff $ $
John G. Weithers $ $
</TABLE>
32
<PAGE>
(1) Includes deferred fees 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 $_____ 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.
[As of November 2, 1999, the officers and trustees of the Fund as a group owned
beneficially less than 1% of the outstanding shares 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.
HORIZON 20+
<TABLE>
<CAPTION>
Name and Address Class Percentage
- ---------------- ----- ----------
<S> <C> <C>
HORIZON 10+
- -----------
Name and Address Class Percentage
- ---------------- ----- ----------
TBD
HORIZON 5+
- ----------
Name and Address Class Percentage
- ---------------- ----- ----------
TBD
</TABLE>
* Record and beneficial owner.
** Record owner only.
33
<PAGE>
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of the shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Fund, a Portfolio or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Fund, 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
34
<PAGE>
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.
35
<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.
36
<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.
37
<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.
38
<PAGE>
KEMPER HORIZON FUND
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23.
- --------
<S> <C> <C>
Exhibits:
(a)(1) Agreement and Declaration of Trust. (Incorporated by reference to
Registrant's Registration Statement on Form N-1A which was filed
on October 17, 1995.)
(a)(2) Written Instrument Amending the Agreement and Declaration of
Trust. (Incorporated by reference to Registrant's Registration
Statement on Form N-1A which was filed on October 17, 1995.)
(a)(3) Written Instrument Establishing and Designating Separate Classes
of Shares. (Incorporated by reference to Pre-effective Amendment
No. 2 to Registrant's Registration Statement on Form N-1A filed on
December 14, 1995.)
(a)(4) Written Instrument Changing the Name of the Existing Series and
Establishing and Designating Two Additional Series. (Incorporated
by reference to Pre-effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed on December 14, 1995.)
(a)(5) Written Instrument Changing the Name of the Series of the Trust.
(Incorporated by reference to Pre-effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed on
December 14, 1995.)
(a)(6) Amended and Restated Written Instrument Establishing and
Designating Separate Classes of Shares. (Incorporated herein by
reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed on August 29, 1996.)
(b) By-Laws. (Incorporated by reference to Pre-effective Amendment
No. 2 to Registrant's Registration Statement on Form N-1A filed on
December 14, 1995.)
(c) Inapplicable.
(d)(1) Investment Management Agreement. (Incorporated herein by
reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A filed on August 29, 1996.)
(d)(2) Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 20+ Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(d)(3) Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 10+ Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
Part C - Page 1
<PAGE>
(d)(4) Investment Management Agreement dated December 31, 1997 on behalf
of Kemper Horizon 5 Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(d)(5) Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 20+ Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(d)(6) Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 10+ Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(d)(7) Investment Management Agreement dated September 7, 1998 on behalf
of Kemper Horizon 5 Fund. (Incorporated by reference to
Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(d)(8) Sub-Advisory Agreement. (Incorporated herein by reference to
Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A filed on August 29, 1996.)
(e)(1) Underwriting and Distribution Services Agreement. (Incorporated
by reference to Post Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A filed on November 17, 1997.)
(e)(2) Underwriting and Distribution Services Agreement dated January 20,
1998 on behalf of Kemper Horizon Fund. (Incorporated by reference
to Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(e)(3) Underwriting and Distribution Services Agreement dated August 1,
1998 on behalf of Kemper Horizon Fund. (Incorporated by reference
to Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(e)(4) Underwriting and Distribution Services Agreement dated September
7, 1998 on behalf of Kemper Horizon Fund. (Incorporated by
reference to Post-effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A filed on November 30, 1998.)
(f) Not applicable.
(g)(1) Custody Agreement. (Incorporated by reference to Pre-effective
Amendment No. 2 to Registrant's Registration Statement on
Form N-1A filed on December 14, 1995.)
(g)(2) Foreign Custody Agreement. (Incorporated by reference to
Pre-effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A filed on December 14, 1995.)
Part C - Page 2
<PAGE>
(h)(1) Form of Selling Group Agreement. (Incorporated by reference to
Pre-effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A filed on December 14, 1995.)
(h)(2) Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 20+ Portfolio. (Incorporated by
reference to Post-effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A filed on November 30, 1998.)
(h)(3) Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 10+ Portfolio. (Incorporated by
reference to Post-effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A filed on November 30, 1998.)
(h)(4) Fund Accounting Services Agreement dated December 31, 1997, on
behalf of Kemper Horizon 5 Portfolio. (Incorporated by reference
to Post-effective Amendment No. 3 to Registrant's Registration
Statement on Form N-1A filed on November 30, 1998.)
(h)(5) Agency Agreement. (Incorporated by reference to Pre-effective
Amendment No. 2 to Registrant's Registration Statement on
Form N-1A filed on December 14, 1995.)
(h)(6) Administrative Services Agreement. (Incorporated by reference to
Post-effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A filed on November 17, 1997.)
(h)(7) Supplement to Agency Agreement. (Incorporated by reference to
Post-effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A filed on November 17, 1997.)
(i) To be filed by amendment.
(j) To be filed by amendment.
(k) Not applicable.
(l) Not applicable.
(m)(1) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 20+ Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
(m)(2) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 20+ Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
(m)(3) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 10+ Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
(m)(4) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 10+ Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
Part C - Page 3
<PAGE>
(m)(5) Rule 12b-1 Plan dated August 1, 1998 for Class B shares on behalf
of Horizon 5 Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
(m)(6) Rule 12b-1 Plan dated August 1, 1998 for Class C shares on behalf
of Horizon 5 Fund. (Incorporated by reference to Post-effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A filed on November 30, 1998.)
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.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
Inapplicable.
Item 25. Indemnification.
- -------- ----------------
Article VIII of the Registrant's Agreement and Declaration of
Trust (Exhibit 1 hereto, which is incorporated herein by
reference) provides in effect that the Registrant will
indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and
17(i) of the Investment Company Act of 1940 and its own terms,
said Article of the Agreement and Declaration of Trust does
not protect any person against any liability to the Registrant
or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
his office.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer, or
controlling person of the Registrant in the successful defense
of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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.
Part C - Page 4
<PAGE>
Item 26. 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 26.
<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 Investments, 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.##
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 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**
Part C - Page 5
<PAGE>
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 and Vice President, 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
</TABLE>
* 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
Xxx Grand Cayman, Cayman Islands, British West Indies
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
Item 27. Principal Underwriters.
- -------- -----------------------
(a)
Kemper Distributors, Inc. acts as principal underwriter of the Registrant's
shares and also acts as principal underwriter for other funds managed by Scudder
Kemper Investments, Inc.
(b)
The Underwriter has employees who are denominated officers of an operational
area. Such persons do not have corporation-wide responsibilities and are not
considered officers for the purpose of this Item 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions 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 and Vice President
James J. McGovern Chief Financial Officer and Vice None
President
Linda J. Wondrack Vice President and Chief Compliance Vice President
Officer
Part C - Page 6
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
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
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable.
Item 28. 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 29. Management Services.
- -------- --------------------
Not applicable.
Item 30. 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(a) 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 30th day
of Seotember, 1999.
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 the 30th day of September, 1999
on behalf of the following persons in the capacities indicated.
SIGNATURE TITLE
- --------- -----
/s/ Thomas W. Littauer Chairman and Trustee
- --------------------------------------
Thomas W. Littauer
/s/James E. Akins Trustee
- --------------------------------------
James E. Akins*
/s/ James R. Edgar Trustee
- --------------------------------------
James R. Edgar
/s/Arthur R. Gottschalk Trustee
- --------------------------------------
Arthur R. Gottschalk*
/s/Frederick T. Kelsey Trustee
- --------------------------------------
Frederick T. Kelsey*
/s/Fred B. Renwick Trustee
- --------------------------------------
Fred B. Renwick*
/s/ John G. Weithers Trustee
- --------------------------------------
John G. Weithers*
/s/ John R. Hebble Treasurer (Principal Financial
- -------------------------------------- and Accounting Officer)
John R. Hebble
*By: /s/ Philip J. Collora
---------------------
Philip J. Collora**
** Attorney-in-fact pursuant to powers of
attorney contained in the signature page of
Post Effective Amendment No. 2 to the
Registration Statement, filed November 17,
1997.
<PAGE>
KEMPER HORIZON FUND
EXHIBIT INDEX
To be filed by amendment.
