<PAGE>
As filed with the Securities and Exchange Commission
on December 14, 2000
Securities Act File No.
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / x /
-------
Pre-Effective Amendment No. /____/ Post-Effective Amendment No. /____/
KEMPER VARIABLE SERIES
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110-4103
(Address of Principal Executive Offices) (Zip Code)
Philip J. Collora, Vice President
Secretary
KEMPER VARIABLE SERIES
222 South Riverside Plaza
Chicago, IL 60606
(Name and Address of Agent for Service)
(312) 781-1121
(Registrant's Area Code and Telephone Number)
with copies to:
Caroline Pearson, Esq. Joseph R. Fleming, Esq.
Scudder Kemper Investments, Inc. Dechert
Two International Place Ten Post Office Square - South
Boston, MA 02110-4103 Boston, MA 02109-4603
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement is declared effective.
Title of Securities Being Registered:
Shares of Beneficial Interest (no par value)
of Kemper Total Return Portfolio, a series of the Registrant
________________________________________________________________________________
It is proposed that this filing will become effective on January 13, 2001
pursuant to Rule 488 under the Securities Act of 1933.
________________________________________________________________________________
No filing fee is required because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS OF
KEMPER HORIZON 5 PORTFOLIO, KEMPER HORIZON 10+ PORTFOLIO
AND KEMPER HORIZON 20+ PORTFOLIO
Please take notice that a joint Special Meeting of Shareholders (the
"Meeting") of Kemper Horizon 5 Portfolio, Kemper Horizon 10+ Portfolio and
Kemper Horizon 20+ Portfolio (each, a "Horizon Portfolio" and collectively, the
"Horizon Portfolios"), each a series of Kemper Variable Series (the "Trust"),
will be held at the offices of Scudder Kemper Investments, Inc., 13th Floor, Two
International Place, Boston, MA 02110-4103, on March 14, 2001, at 3:30 p.m.,
Eastern time, for the following purposes:
Proposal 1: To elect Trustees of the Trust.
Proposal 2: To approve an Agreement and Plan of Reorganization (the
"Plan") as it relates to (i) the transfer of all or
substantially all of the assets and all of the liabilities of
Kemper Horizon 5 Portfolio to Kemper Total Return Portfolio, a
series of Kemper Variable Series, (ii) the distribution to
each shareholder of Kemper Horizon 5 Portfolio shares of
beneficial interest of Kemper Total Return Portfolio in an
amount equal in value to their shares of Kemper Horizon 5
Portfolio, and (iii) the termination of Kemper Horizon 5
Portfolio.
Proposal 3: To approve the Plan as it relates to (i) the transfer of all
or substantially all of the assets and all of the liabilities
of Kemper Horizon 10+ Portfolio to Kemper Total Return
Portfolio, (ii) the distribution to each shareholder of Kemper
Horizon 10+ Portfolio shares of beneficial interest of Kemper
Total Return Portfolio in an amount equal in value to their
shares of Kemper Horizon 10+ Portfolio, and (iii) the
termination of Kemper Horizon 10+ Portfolio.
Proposal 4: To approve the Plan as it relates to (i) the transfer of all
or substantially all of the assets and all of the liabilities
of Kemper Horizon 20+ Portfolio to Kemper Total Return
Portfolio, (ii) the distribution to each shareholder of Kemper
Horizon 20+ Portfolio shares of beneficial interest of Kemper
Total Return Portfolio in an amount equal in value to their
shares of Kemper Horizon 20+ Portfolio, and (iii) the
termination of Kemper Horizon 20+ Portfolio.
Proposal 5: To ratify the selection of Ernst & Young LLP as the
independent auditors for each Horizon Portfolio for their
current fiscal years.
The persons named as proxies will vote in their discretion on any other
business that may properly come before the Meeting or any adjournments or
postponements thereof.
Holders of record of shares of each Horizon Portfolio at the close of
business on January 26, 2001 are entitled to vote at the Meeting and at any
adjournments or postponements thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies with
respect to that Proposal. Any such adjournment as to a matter will require the
affirmative vote of the holders of a majority of the Trust's (for a trust-wide
vote) or the relevant Horizon Fund's (for a fund-wide vote) shares present in
person or by proxy at the Meeting. The persons named as proxies will vote FOR
any such adjournment those proxies which they are entitled to vote in favor of
that Proposal and will vote AGAINST any such adjournment those proxies to be
voted against that Proposal.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
[Date], 2001
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) OR VOTING
INSTRUCTION FORM(S) AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) OR VOTING INSTRUCTION
FORM(S) MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS. IF YOU
WISH TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU WILL
STILL BE ABLE TO DO SO.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION............................................................. __
PROPOSAL 1: ELECTION OF TRUSTEES...................................... __
PROPOSALS 2 THROUGH 4: APPROVAL OF AGREEMENT AND PLAN OF
REORGANIZATION............................................ __
SYNOPSIS.................................................. __
PRINCIPAL RISK FACTORS.................................... __
THE PROPOSED TRANSACTIONS................................. __
PROPOSAL 5: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
AUDITORS.................................................. __
ADDITIONAL INFORMATION................................................... __
</TABLE>
<PAGE>
PROXY STATEMENT/PROSPECTUS
[DATE], 2001
Relating to the acquisition of the assets of
KEMPER HORIZON 5 PORTFOLIO, KEMPER HORIZON 10+ PORTFOLIO
and KEMPER HORIZON 20+ PORTFOLIO,
each a separate series of
KEMPER VARIABLE SERIES (the "Trust")
222 South Riverside Plaza
Chicago, Illinois 60606
(800) [ ]
-----------------------
by and in exchange for shares of beneficial interest of
KEMPER TOTAL RETURN PORTFOLIO,
a separate series of the Trust
222 South Riverside Plaza
Chicago, Illinois 60606
(800) [ ]
-----------------------
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Kemper Horizon 5 Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 20+
Portfolio (each, a "Horizon Portfolio" and collectively, the "Horizon
Portfolios") in connection with the solicitation of proxies by the Board of
Trustees of the Trust for use at the joint Special Meeting of Shareholders of
each Horizon Portfolio to be held on March 14, 2001, at the offices of Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"), 13th
Floor, Two International Place, Boston, MA 02110-4103, at 3:30 p.m. (Eastern
time), or at such later time made necessary by all adjournments or postponements
thereof (the "Meeting").
Each Horizon Portfolio is available exclusively as a funding vehicle for
variable life insurance policies ("VLI contracts") and variable annuity
contracts ("VA contracts") offered by the separate accounts, or sub-accounts
thereof, of certain life insurance companies ("Participating Insurance
Companies"). Individual VLI and VA contract owners are not the "shareholders"
of the Horizon Portfolios. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders. To the extent required to be
consistent with interpretations of voting requirements by the staff of the
Securities and Exchange Commission (the "SEC" or the "Commission"), each
Participating Insurance Company will offer to contract owners the opportunity to
instruct it as to how it should vote shares held by it and the separate accounts
on the items to be considered at the Meeting. This Proxy Statement/Prospectus
is, therefore, furnished to contract owners entitled to give voting instructions
with regard to each Horizon Portfolio. This Proxy Statement/Prospectus, the
Notice of Special Meeting, and the proxy cards and voting instruction forms are
first being mailed to shareholders and contract owners on or about January 29,
2001, or as soon as practicable thereafter.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
This Proxy Statement/Prospectus contains five proposals (each, a "Proposal"
and collectively, the "Proposals"). Proposal 1 describes the election of
Trustees and Proposal 5 proposes the ratification of the selection of each
Horizon Portfolio's independent auditors.
In Proposals 2 through 4, shareholders of each Horizon Portfolio, voting
separately, are asked to vote on an Agreement and Plan of Reorganization (the
"Plan") pursuant to which all or substantially all of the assets of each Horizon
Portfolio would be acquired by Kemper Total Return Portfolio, another series of
the Trust, in exchange for shares of beneficial interest of Kemper Total Return
Portfolio, and the assumption by Kemper Total Return Portfolio of all of the
liabilities of each Horizon Portfolio, as described more fully below (each, a
"Reorganization" and collectively, the "Reorganizations"). Shares of Kemper
Total Return Portfolio received would then be distributed to the shareholders of
the applicable Horizon Portfolio in complete liquidation of the Horizon
Portfolio. As a result of the Reorganizations, shareholders of a Horizon
Portfolio will become shareholders of Kemper Total Return Portfolio, and will
receive shares of Kemper Total Return Portfolio in an amount equal to the value
to their holdings in the applicable Horizon Portfolio in which they are
currently a shareholder as of the close of business on the business day
preceding the closing of each Reorganization (the "Valuation Date"). The
closing of each Reorganization (the "Closing") is contingent upon shareholder
approval of the Plan with respect to the applicable portfolio. A copy of the
Plan is attached as Exhibit A. Each Reorganization is expected to occur on or
about May 1, 2001.
Proposals 1 through 4 arise out of a restructuring program proposed by
Scudder Kemper, the investment manager of both the Horizon Portfolios and Kemper
Total Return Portfolio, described in more detail below. The restructuring
program is designed to respond to changing industry conditions and investor
needs. Scudder Kemper seeks to consolidate its fund line-up and offer all of
the open-end funds it advises under the "Scudder" name. In addition, Scudder
Kemper anticipates changing its name to "Zurich Scudder Investments, Inc."
Scudder Kemper believes that its restructuring program will permit it to
streamline its administrative infrastructure and focus its distribution efforts.
The restructuring program will not result in any reduction in the services
currently offered to shareholders of funds in the Kemper Family of Funds (the
"Kemper Funds").
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean an investment company or series thereof in general, and not the
Horizon Portfolios whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement/Prospectus as being taken by a
Horizon Portfolio or Kemper Total Return Portfolio (which are collectively
referred to as the "Funds" and each referred to as a "Fund"), although all
actions are actually taken by the Trust on behalf of the applicable Fund or
Funds.
This Proxy Statement/Prospectus sets forth concisely the information about
Kemper Total Return Portfolio that a prospective investor should know before
investing and should be retained for future reference. For a more detailed
discussion of the investment objective, policies, restrictions, and risks of all
of the Funds, see the Funds' prospectus dated May 1, 2000, as supplemented from
time to time, which is included in the materials you received with this document
and incorporated herein by reference (meaning that it is legally part of this
document). A copy of the Funds' prospectus also may be obtained upon request
and without charge by calling or writing the Funds at the telephone number or
address listed above.
Also incorporated herein by reference is Kemper Total Return Portfolio's
statement of additional information dated May 1, 2000, as supplemented from time
to time, which may be obtained upon request and without charge by calling or
writing the Funds at the telephone number or address listed above. A Statement
of Additional Information, dated [ ], containing additional information
about each Reorganization has been filed with the SEC and is incorporated by
reference into this Proxy Statement/Prospectus. A copy of this Statement of
Additional Information is available upon request and
2
<PAGE>
without charge by calling or writing Kemper Total Return Portfolio at the
telephone number or address listed above. Shareholder inquiries regarding Kemper
Total Return Portfolio may be made by calling (800) [ ]. The information
contained in this document concerning each Fund has been provided by, and is
included herein in reliance upon, that Fund.
Each Fund is a diversified series of shares of beneficial interest of the
Trust, which is an open-end management investment company organized as a
Massachusetts business trust.
The Board of Trustees unanimously recommends that shareholders of each
Horizon Portfolio vote FOR the nominees listed in Proposal 1, FOR Proposals 2
through 4 as the Proposals relate to the Reorganization of their Fund into
Kemper Total Return Portfolio, and FOR Proposal 5.
PROPOSAL 1: ELECTION OF TRUSTEES
At the Meeting, shareholders will be asked to elect eleven individuals to
constitute the Board of Trustees of the Trust. As discussed further below,
Scudder Kemper commenced an initiative to restructure and streamline the
management and operations of the funds it advises. In connection with that
initiative, the Independent Trustees of the two separate boards of the Kemper
Funds proposed to consolidate into a single board. The eleven individuals who
have been nominated for election as Trustees of the Trust were nominated after
careful consideration by the present Board of Trustees. The nominees are listed
below. Three of the nominees are currently Trustees of the Trust and seven of
the nominees are currently trustees or directors of other Kemper Funds. One of
the nominees, although not currently a trustee or director of any Kemper fund,
is a senior executive of Scudder Kemper and is being nominated to the boards of
[all][virtually all] of the Kemper Funds. These eleven individuals are also
being nominated for election as trustees or directors of most of the other
Kemper Funds. The proposed slate of nominees reflects an effort to consolidate
the two separate boards who have historically supervised different Kemper Funds.
The proposed consolidation is expected to provide administrative efficiencies to
both the Funds and Scudder Kemper.
The persons named as proxies on the enclosed proxy card(s) will vote for
the election of the nominees named below unless authority to vote for any or all
of the nominees is withheld in the proxy. Each Trustee so elected will serve as
a Trustee commencing on May 1, 2001 and 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, or is
removed as provided in the Trust's governing documents. Each of the nominees
has indicated that he or she is willing to serve as a Trustee. If any or all of
the nominees should become unavailable for election due to events not now known
or anticipated, the persons named as proxies will vote for such other nominee or
nominees as the current Trustees may recommend. The following tables present
information about the nominees and the Trustees standing for re-election as well
as those not standing for re-election. Each nominee's or Trustee's date of
birth is in parentheses after his or her name. Unless otherwise noted, (i) each
of the nominees and Trustees has engaged in the principal occupation(s) noted in
the following tables for at least the most recent five years, although not
necessarily in the same capacity, and (ii) the address of each nominee is c/o
Scudder Kemper Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois
60606.
3
<PAGE>
Nominees for Election as Trustees:
------------------------------------------------------------------------------
Name (Date of Birth), Principal Occupation and Affiliations Year First
Became a
Board
Member
------------------------------------------------------------------------------
John W. Ballantine (2/16/46),/(1)/ Retired; formerly, First Nominee
Chicago NBD Corporation/The First National Bank of
Chicago: 1996-1998 Executive Vice President and Chief Risk
Management Officer; 1995-1996 Executive Vice President and
Head of International Banking.
------------------------------------------------------------------------------
Lewis A. Burnham (1/8/33),/(1)/ Retired; formerly, Partner, Nominee
Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
------------------------------------------------------------------------------
Linda C. Coughlin (1/1/52),*/(2)/ Managing Director, Scudder Nominee
Kemper.
------------------------------------------------------------------------------
Donald L. Dunaway (3/8/37),/(1)/ Retired; formerly, Executive Nominee
Vice President, A.O. Smith Corporation (diversified
manufacturer).
------------------------------------------------------------------------------
James R. Edgar (7/22/46),/(3)/ Distinguished Fellow, 1999
University of Illinois Institute of Government and Public
Affairs; Director, Kemper Insurance Companies (not
affiliated with the Kemper Funds); formerly, Governor,
State of Illinois.
------------------------------------------------------------------------------
William F. Glavin (8/30/58),* Managing Director, Scudder Nominee
Kemper.
------------------------------------------------------------------------------
Robert B. Hoffman (12/11/36),/(1)/ Retired; formerly, Nominee
Chairman, Harnischfeger Industries, Inc. (machinery for
the mining and paper industries); formerly, Vice Chairman
and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food
products); formerly, Vice President, Head of International
Operations, FMC Corporation (manufacturer of machinery and
chemicals); Director, Harnischfeger Industries, Inc.
------------------------------------------------------------------------------
Shirley D. Peterson (9/3/41),/(1)/ Retired; formerly, Nominee
President, Hood College; formerly, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner, Internal
Revenue Service; prior thereto, Assistant Attorney General
(Tax), U.S. Department of Justice; Director, Bethlehem
Steel Corp.
------------------------------------------------------------------------------
4
<PAGE>
------------------------------------------------------------------------------
Year First
Became a
Name (Date of Birth), Principal Occupation and Affiliations Board
Member
------------------------------------------------------------------------------
Fred B. Renwick (2/1/30),/(3)/ Professor of Finance, New York 1995
University, Stern School of Business; Director, the
Wartburg Foundation; Chairman, Investment Committee of
Morehouse College Board of Trustees; Director, American
Bible Society Investment Committee; previously member of
the Investment Committee of Atlanta University Board of
Trustees; formerly, Director of Board of Pensions
Evangelical Lutheran Church in America.
------------------------------------------------------------------------------
William P. Sommers (7/22/33),/(1)/ Consultant and Director, Nominee
SRI Consulting; prior thereto, President and Chief
Executive Officer, SRI International (research and
development); prior thereto, Executive Vice President,
Iameter (medical information and educational service
provider); prior thereto, Senior Vice President and
Director, Booz, Allen & Hamilton Inc. (management
consulting firm); Director, PSI Inc., Evergreen Solar,
Inc. and Litton Industries.
------------------------------------------------------------------------------
John G. Weithers (8/8/33),/(3)/ Formerly, Chairman of the 1993
Board and Chief Executive Officer, Chicago Stock Exchange;
Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University.
------------------------------------------------------------------------------
* Interested person of the Trust, as defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(1) Messrs. Ballantine, Burnham, Dunaway, Hoffman, Sommers and Ms. Peterson
serve as board members of 26 investment companies, with 45 portfolios
managed by Scudder Kemper.
(2) Ms. Coughlin serves as a board member of 52 investment companies with 97
portfolios managed by Scudder Kemper.
(3) Messrs. Edgar, Renwick and Weithers serve as board members of 16 investment
companies with 58 portfolios managed by Scudder Kemper.
Trustees Not Standing for Re-Election:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Present Office with the Trust;
Principal Occupation or Employment
Name (Date of Birth) and Directorships
------------------- -----------------
--------------------------------------------------------------------------------------------------------
<S> <C>
James E. Akins (10/15/26) Trustee; Consultant on International, Political and
Economic Affairs; formerly, a career U.S. Foreign
Service Officer, Energy Adviser for the White House
and U.S. Ambassador to Saudi Arabia, 1973-1976.
--------------------------------------------------------------------------------------------------------
Arthur Gottschalk (2/13/25) Trustee; Retired; formerly, President, Illinois
--------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Present Office with the Trust;
Principal Occupation or Employment
Name (Date of Birth) and Directorships
-------------------- -----------------
--------------------------------------------------------------------------------------------------------
<S> <C>
Manufacturers Association; Trustee, Illinois
Masonic Medical Center; formerly, Illinois State
Senator; formerly, Vice President, The Reuben H.
Donnelley Corp.; formerly, attorney.
--------------------------------------------------------------------------------------------------------
Frederick T. Kelsey (4/25/27) Trustee; Retired; formerly, Consultant to Goldman,
Sachs & Co.; formerly, President, Treasurer and
Trustee of Institutional Liquid Assets and its
affiliated mutual funds; formerly, President and
Trustee, Northern Institutional Funds; formerly,
President and Trustee, Pilot Funds.
--------------------------------------------------------------------------------------------------------
Thomas W. Littauer* (4/26/55) Trustee, Chairman and Vice President; Managing
Director, Scudder Kemper; formerly, Head of Broker
Dealer Division of an unaffiliated investment
management firm during 1997; formerly, President of
Client Management Services of an unaffiliated
investment management firm from 1991 to 1996.
--------------------------------------------------------------------------------------------------------
</TABLE>
* Interested person of the Trust, as defined in the 1940 Act.
[Appendix 1 lists the number of shares of each series of the Trust owned
directly or beneficially by the Trustees and by the nominees for election.]
Responsibilities of the Board of Trustees -- Board and Committee Meetings
The primary responsibility of the Board is to represent the interests of
the shareholders of the Horizon Portfolios and to provide oversight of the
management of the Horizon Portfolios. The board that is proposed for election
at this Meeting is comprised of two individuals who are considered "interested"
Trustees, and nine individuals who have no affiliation with Scudder Kemper and
who are not considered "interested" Trustees (the "Independent Trustees"). The
SEC has recently proposed a rule that would require a majority of the board
members of a fund to be "independent" if the fund were to take advantage of
certain exemptive rules under the 1940 Act. If the proposed Board of Trustees
is approved by shareholders, more than 75% will be Independent Trustees. The
Independent Trustees have been selected and nominated solely by the current
Independent Trustees of the Trust.
The Trustees meet multiple times during the year to review the investment
performance of the Horizon Portfolios and other operational matters, including
policies and procedures designed to assure compliance with regulatory and other
requirements. Furthermore, the Independent Trustees review the fees paid to the
Investment Manager and its affiliates for investment advisory services and other
administrative and shareholder services. The Trustees have adopted specific
policies and guidelines that, among other things, seek to further enhance the
effectiveness of the Independent Trustees in performing their duties. Many of
these are similar to those suggested in the Investment Company Institute's 1999
Report of the Advisory Group on Best Practices for Fund Directors (the "Advisory
Group Report"). For example, the Independent Trustees select independent legal
counsel to work with them in reviewing fees, advisory and other contracts, and
overseeing fund matters, and regularly meet privately with their counsel.
6
<PAGE>
Currently, the Board of Trustees has an Audit and Governance Committee, the
responsibilities of which are described below. In addition, the Board has a
Valuation Committee. During calendar year 2000, the Board of Trustees met seven
times. Each then current Trustee attended 75% or more of the respective
meetings of the Board and the Committees (if a member thereof) held during
calendar year 2000.
Audit and Governance Committee
The Audit and Governance Committee makes recommendations regarding the
selection of independent auditors for each Horizon Portfolio, confers with the
independent auditors regarding each Horizon Portfolio's financial statements,
the results of audits and related matters, and performs such other tasks as the
full Board of Trustees deems necessary or appropriate. As suggested by the
Advisory Group Report, the Audit and Governance Committee is comprised of only
Independent Trustees, receives annual representations from the auditors as to
their independence, and has a written charter that delineates the committee's
duties and powers. In addition, the committee seeks and reviews candidates for
consideration as nominees for membership on the Board and oversees the
administration of the Trust's Governance Procedures and Guidelines.
Shareholders wishing to submit the name of a candidate for consideration by the
committee should submit their recommendation(s) to the Secretary of the Trust.
Currently, the members of the Committee are Messrs. Akins, Edgar, Gottschalk,
Kelsey, Renwick and Weithers. The Committee held four meetings during calendar
year 2000.
Officers
The following persons are officers of the Trust:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Present Office with the Trust;
Principal Occupation or
Name (Date of Birth) Employment Year First Became an Officer/1/
------------------- ---------- --------------------------------
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark S. Casady (9/21/60) President; Managing Director, 1998
Scudder Kemper; formerly,
Institutional Sales Manager of an
unaffiliated mutual fund
distributor.
----------------------------------------------------------------------------------------------------------------
Philip J. Collora (11/15/45) Vice President and Secretary; 1992
Managing Director, Scudder
Kemper; formerly, Institutional
Sales Manager of an unaffiliated
mutual fund distributor.
----------------------------------------------------------------------------------------------------------------
Thomas W. Littauer (4/26/55) Vice President; Managing 1998
Director, Scudder Kemper, 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.
----------------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (12/3/52) Vice President; Managing 1998
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Present Office with the Trust;
Principal Occupation or
Name (Date of Birth) Employment Year First Became an Officer/1/
------------------- ---------- --------------------------------
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Linda J. Wondrack (9/12/64) Vice President; Senior Vice 1998
President, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
John R. Hebble (6/27/58) Treasurer; Senior Vice President, 1998
Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Brenda Lyons (2/21/63) Assistant Treasurer; Senior Vice 1998
President, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Caroline Pearson (4/1/62) Assistant Secretary; Senior Vice 1998
President, Scudder Kemper,
formerly, Associate, Dechert
Price & Rhoads (law firm) from
1989-1997.
----------------------------------------------------------------------------------------------------------------
Maureen E. Kane (2/14/62) Assistant Secretary; Vice 1998
President, Scudder Kemper;
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).
----------------------------------------------------------------------------------------------------------------
Jesus A. Cabrera (12/25/61) Vice President; Managing 2000
Director, Scudder Kemper
----------------------------------------------------------------------------------------------------------------
Irene Cheng (6/6/54) Vice President; Managing 2000
Director, Scudder Kemper
----------------------------------------------------------------------------------------------------------------
Robert S. Cessine (1/5/50) Vice President; Managing 1996
Director, Scudder Kemper
----------------------------------------------------------------------------------------------------------------
James M. Eysenbach (4/1/62) Vice President; Managing 1999
Director, Scudder Kemper
----------------------------------------------------------------------------------------------------------------
Jan C. Faller (8/8/66) Vice President; Vice President, 2000
Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Donald E. Hall (8/22/52) Vice President; Managing 2000
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Sewall Hodges (1/9/55) Vice President; Managing 2000
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Gary A. Langbaum (12/16/48) Vice President; Managing 1995
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Valerie F. Malter (7/25/58) Vice President; Managing 2000
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Tracy McCormick (9/27/54) Vice President; Managing 1999
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. Vice President; Managing 1995
(3/26/45) Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Harry E. Resis, Jr. (11/24/45) Vice President; Managing 1995
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Present Office with the Trust;
Principal Occupation or
Name (Date of Birth) Employment Year First Became an Officer/1/
------------------- ---------- --------------------------------
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas F. Sassi (11/7/42) Vice President; Managing 1998
Director, Scudder Kemper;
formerly, consultant with an
unaffiliated investment
consulting firm and an officer of
an unaffiliated investment
banking firm from 1993 to 1996.
----------------------------------------------------------------------------------------------------------------
William F. Truscott (9/14/60) Vice President; Managing 2000
Director, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Robert D. Tymoczko (2/3/70) Vice President; Senior Vice 2000
President, Scudder Kemper.
----------------------------------------------------------------------------------------------------------------
Richard L. Vandenberg (11/16/49) Vice President; Managing 1997
Director, Scudder Kemper,
formerly, senior vice president
and portfolio manager with an
unaffiliated investment
management firm.
----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The President, Treasurer and Secretary each holds office until the first
meeting of Trustees in each calendar year and until his or her successor has
been duly elected and qualified, and all other officers hold offices as the
Trustees permit in accordance with the By-laws of the Trust.
Compensation of Trustees and Officers
The Trust pays the Independent Trustees an annual retainer (paid in
quarterly installments) and an attendance fee, plus expenses, for each Board
meeting and committee meeting attended. As reflected below, the Trustees
currently serve as board members of various other Kemper Funds. Scudder Kemper
supervises each Horizon Portfolio's investments, pays the compensation and
expenses of its personnel who serve as Trustees and officers on behalf of the
Trust and receives a management fee for its services. Several of the officers
and Trustees are also officers, directors, employees or stockholders of Scudder
Kemper and participate in the fees paid to that firm, although the Trust makes
no direct payments to them. Independent Trustees of the Trust are not entitled
to benefits under any pension or retirement plan.
To facilitate the restructuring of the boards of the Kemper Funds, certain
Independent Trustees agreed not to stand for re-election. Independent Trustees
of the Trust are not entitled to benefits under any pension or retirement plan.
However, the board of each Kemper Fund determined that, particularly given the
benefits that would accrue to the Kemper Funds from the restructuring of the
boards, it was appropriate to provide the four Independent Trustees who were not
standing for re-election for various Kemper Funds a one-time benefit. The cost
of such benefit is being allocated among all the Kemper Funds, with Scudder
Kemper agreeing to bear one-half of the cost of such benefit, given that Scudder
Kemper also benefits from administrative efficiencies of a consolidated board.
Messrs. Akins, Gottschalk and Kelsey, Trustees of the Fund who are not standing
for re-election, will each receive a one-time benefit. The amount received by a
trustee on behalf of each fund for which he serves as trustee ranges from $478
to $6,124 for Mr. Akins; $159 to $2,035 for Mr. Gottschalk; and $797 to $10,194
for Mr. Kelsey.
The following Compensation Table provides in tabular form the following
data:
9
<PAGE>
Column (1) All Trustees who receive compensation from the Horizon
Portfolios.
Column (2) Aggregate compensation received by each Trustee from each
Horizon Portfolio during calendar year 2000.
Column (3) Total compensation received by each Trustee from funds advised
by Scudder Kemper (collectively, the "Fund Complex") during calendar year 2000.
Compensation Table
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Aggregate Compensation Total Compensation From
Name of Trustee from Horizon Portfolios Fund Complex/(2)//(3)/
--------------- ----------------------- ------------
------------------------------------------------------------------------------------------------------
<S> <C> <C>
James E. Akins Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
James R. Edgar Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
Arthur R. Gottschalk/(1)/ Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
Frederick T. Kelsey Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
Fred B. Renwick Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
John G. Weithers Kemper Horizon 5 Portfolio: $ [ ] $ [ ]
Kemper Horizon 10+ Portfolio: $ [ ]
Kemper Horizon 20+ Portfolio: $ [ ]
------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Includes deferred fees. Pursuant to deferred compensation agreements with
the Trust, deferred amounts accrue interest monthly at a rate approximate to the
yield of Zurich Money Funds--Zurich Money Market Fund. Total deferred fees
(including interest thereon) payable from the Trust to Mr. Gottschalk are
[$______].
[(2) Includes compensation for service on the boards of [ ] Kemper
trusts/corporations comprised of [ ] funds. Each trustee currently serves on the
boards of [ ] Kemper trusts/corporations comprised of [ ] funds.]
/(3)/ Aggregate compensation does not reflect amounts paid to the Trustees for
special meetings in connection with the Scudder Kemper restructuring initiative.
Such amounts totaled [$_______, $_______, $_______, $_______, $_______ and
$_______ ] for Messrs. Akins, Edgar, Gottschalk, Kelsey, Renwick and Weithers,
respectively.
10
<PAGE>
The Board of Trustees unanimously recommends that the
shareholders of each Fund vote FOR each nominee.
PROPOSALS 2 THROUGH 4: APPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
I. SYNOPSIS
Introduction
The Board of Trustees of the Trust, including all of the Independent
Trustees, approved the Plan at a meeting held on November 29, 2000. Subject to
its approval by shareholders of each Horizon Portfolio with respect to such
portfolio, the Plan provides for (a) the transfer of all or substantially all of
the assets and all of the liabilities of each Horizon Portfolio to Kemper Total
Return Portfolio, in exchange for shares of beneficial interest of Kemper Total
Return Portfolio; (b) the distribution of such shares to shareholders of the
corresponding Horizon Portfolio in complete liquidation of such Horizon
Portfolio; and (c) the termination of each Horizon Portfolio. As a result of the
Reorganizations, each shareholder of a Horizon Portfolio will become a
shareholder of Kemper Total Return Portfolio and will hold, immediately after
the Reorganizations, shares of Kemper Total Return Portfolio having an aggregate
net asset value equal to the aggregate net asset value of such shareholder's
shares of the applicable Horizon Portfolio on the Valuation Date. Each Horizon
Portfolio's shareholders will vote separately on the reorganization of their
Fund into Kemper Total Return Portfolio, with each Reorganization separate and
distinct from the other. The Reorganization for each Horizon Portfolio is not
contingent upon approval by the other Horizon Portfolios' shareholders.
Background of the Reorganizations
Each Reorganization is part of a broader restructuring program to respond
to changing industry conditions and investor needs. The mutual fund industry has
grown dramatically over the last ten years. During this period of rapid growth,
investment managers expanded the range of fund offerings that are available to
investors in an effort to meet the growing and changing needs and desires of an
increasingly large and dynamic group of investors. With this expansion has come
increased complexity and competition among mutual funds, as well as the
potential for increased confusion among investors. The group of funds advised by
Scudder Kemper has followed this pattern.
As a result, Scudder Kemper has sought ways to restructure and streamline
the management and operations of the funds it advises by consolidating all of
the retail mutual funds that it currently sponsors into a single product line
offered under the "Scudder" name. Scudder Kemper believes, and has advised the
boards, that further reducing the number of funds it advises and adding the
classes of shares currently offered on all Kemper Funds to the Scudder Funds
will benefit fund shareholders. Scudder Kemper has, therefore, proposed the
combination of its open-end, directly-distributed funds (the "Scudder Funds")
with the Kemper Funds that have similar or compatible investment objectives and
policies. Scudder Kemper believes that the larger funds, along with the fewer
number of funds, that result from these combinations may help to enhance
investment performance and increase efficiency of operations. The restructuring
program will not result in any changes in the shareholder services currently
offered to shareholders of the Kemper Funds.
The fund consolidations and the consolidation of the boards currently
overseeing the Kemper Funds (see Proposal 1 above) are expected to have a
positive impact on Scudder Kemper, as well. These changes are likely to result
in reduced costs (and the potential for increased profitability) for Scudder
Kemper in advising or servicing funds.
11
<PAGE>
Reasons for the Proposed Reorganizations; Board Approval
Since receiving Scudder Kemper's proposals on May 24, 2000, the Independent
Trustees have conducted a thorough review of all aspects of the proposed
restructuring program. They have been assisted in this regard by their
independent counsel and by independent consultants with special expertise in
financial and mutual fund industry matters. In the course of discussions with
representatives of Scudder Kemper, the Independent Trustees have requested, and
Scudder Kemper has accepted, numerous changes designed to protect and enhance
the interests of shareholders. See "The Proposed Transactions - Board Approval
of the Proposed Transactions" below.
In determining whether to recommend that the shareholders of each Horizon
Portfolio approve the Plan effecting the Reorganization relating to their Fund,
the Board of Trustees considered that:
. Given each Horizon Portfolio's relatively small size and Scudder
Kemper's commitment to a streamlined family of funds, the
Reorganization would allow shareholders to continue their investment
in another fund as opposed to liquidation, which was less practical
for funds serving as funding vehicles for VLI and VA contracts.
. The combined fund would adopt the lower fee schedule of the Funds'
investment advisory agreements.
. Scudder Kemper agreed to pay all of the costs of each Reorganization.
. It is a condition of each Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a TAX-FREE
transaction.
For these reasons, as more fully described below under "The Proposed
Transactions - Board Approval of the Proposed Transactions," the Board of
Trustees, including the Independent Trustees, has concluded that:
. each Reorganization is in the best interests of the applicable Horizon
Portfolio and its shareholders; and
. the interests of the existing shareholders of each Horizon Portfolio
will not be diluted as a result of the Reorganization.
Accordingly, the Board of Trustees unanimously recommends approval of the
Plan effecting each Reorganization. If the Plan is not approved by a Horizon
Portfolio with respect to such portfolio, that Fund will continue in existence
unless other action is taken by the Board of Trustees.
Investment Objectives, Policies, and Restrictions of the Funds
This section will help you compare the investment objectives and policies
of each Horizon Portfolio with Kemper Total Return Portfolio. Please be aware
that this is only a summary. More complete information may be found in the
Funds' combined prospectus.
The investment objectives, policies, and restrictions of Kemper Total
Return Portfolio and the Horizon Portfolios (and, consequently, the risks of
investing in any of the Funds) differ. The investment objective of Kemper Total
Return Portfolio is to seek high total return, a combination of income and
capital appreciation. The investment objective of Kemper Horizon 5 Portfolio is
to seek income consistent with capital preservation; growth of capital is a
secondary goal. The investment objective of
12
<PAGE>
Kemper Horizon 10+ Portfolio is to seek a balance between growth of capital and
income, consistent with moderate risk. The investment objective of Kemper
Horizon 20+ Portfolio is to seek growth of capital and, as a secondary
objective, income. Thus, the Funds offer a range of objectives from growth of
capital to income to various combinations of income and growth. The investment
objective of Kemper Total Return Portfolio may vary substantially from the
objective of your current Horizon Portfolio. There can be no assurance that any
Fund will achieve its investment objective. The Horizon Portfolios have
different portfolio managers than Kemper Total Return Portfolio.
Each of the Funds, including Kemper Total Return Portfolio, invests in a
mix of securities including debt and equity; however, the investment allocation
of debt and equity securities varies by Fund. Kemper Horizon 5 Portfolio
normally invests 40% of its net assets in equity securities and 60% in fixed-
income securities. Kemper Horizon 10+ Portfolio normally invests 60% of its net
assets in equity securities and 40% in fixed-income securities. Kemper Horizon
20+ Portfolio normally invests 80% of its net assets in equity securities and
20% in fixed-income securities. Kemper Total Return Portfolio does not target
any particular allocation between debt and equity securities. The percentage of
assets invested in specific categories of fixed-income and equity securities for
Kemper Total Return Portfolio varies from time to time depending on the judgment
of the manager as to general market and economic conditions, trends in yields
and interest rates and changes in fiscal or monetary policies. Kemper Total
Return Portfolio may shift the proportion of its holdings, at different times
favoring stocks or bonds (and within those asset classes, different types of
securities), while still maintaining variety in terms of the securities, issuers
and economic sectors represented.
Equity Investments
------------------
Each Horizon Portfolio normally seeks to allocate approximately 70% of its
equity investments in U.S. securities and 30% of its equity investments in
foreign securities. Kemper Total Return Portfolio does not have a target
allocation and may invest up to 25% of its total assets in foreign securities,
although, generally, most of its assets are from U.S. issuers.
The U.S. equity portion for each Horizon Portfolio is normally invested in
50% growth stocks and 50% value stocks, but may vary between 40-60% for both.
Kemper Total Return Portfolio generally invests in growth stocks. When choosing
U.S. stocks, the managers of each Horizon Portfolio use proprietary models to
rank stocks according to book value, earnings per share, expected earnings
growth and other factors, normally investing more heavily in large cap stocks
than small cap stocks. Kemper Total Return Portfolio similarly favors large
companies with a history of above-average growth, attractive prices relative to
potential growth, sound financial strength and effective management, among other
factors.
When selecting foreign stocks, the managers of each Horizon Portfolio
generally focus on established companies in countries with developed economies,
although such Fund may invest in stocks of any size and from any country. Kemper
Total Return Portfolio follows the same strategy for domestic and foreign
stocks, favoring large companies with a history of above-average growth, and
attractive prices relative to potential growth.
Fixed-Income Investments
------------------------
Each Fund may invest in corporate debt securities, U.S. government
securities, government agency securities (including mortgage- and asset-backed),
bank obligations and cash equivalents as part of its main investment strategy.
However, Kemper Total Return Portfolio does not require, as each Horizon
Portfolio does, that all of its fixed-income securities be denominated in U.S.
dollars.
13
<PAGE>
The credit quality of the Funds' fixed-income investments may differ. Each
Horizon Portfolio requires 90% of its fixed-income portion to be in the top four
credit grades (i.e., "investment grade"), with an average dollar-weighted credit
quality within the top two credit grades. Normally, Kemper Total Return
Portfolio's bond component consists mainly of investment-grade bonds; however,
up to 35% of its total assets may be invested in junk bonds (i.e., BB or below).
The Funds' fixed-income investments also vary in terms of duration. The
duration of each Horizon Portfolio's fixed-income portion of investments is
generally kept between 1.5 and 3.5 years, with an average of approximately 2.5
years. Kemper Total Return Portfolio may invest in bonds of any duration.
Each Fund may invest in derivatives, although none of the Funds uses
derivatives as principal investments.
The Funds' fundamental and non-fundamental investment restrictions, as such
restrictions are set forth in the Funds' statement of additional information,
are identical. Investors should refer to the Trust's statement of additional
information for a more detailed description of the Funds' investment policies
and restrictions.
Portfolio Turnover
The portfolio turnover rate for each Fund, i.e., the ratio of the lesser of
annual sales or purchases to the monthly average value of the portfolio
(excluding from both the numerator and the denominator securities with
maturities at the time of acquisition of one year or less), for the fiscal year
ended December 31, 1999, is listed in the chart immediately below. A higher
portfolio turnover rate involves greater brokerage and transaction expenses to a
fund and may result in the realization of net capital gains, which would be
taxable to shareholders when distributed.
-------------------------------------------------------------------------------
Turnover Rates for the Funds
as of December 31, 1999
-------------------------------------------------------------------------------
Acquiring Portfolio Acquired Portfolio
-------------------------------------------------------------------------------
Kemper Total Return Portfolio 80% Kemper Horizon 5 Portfolio 33%
-------------------------------------------------------------------------------
Kemper Total Return Portfolio 80% Kemper Horizon 10+ Portfolio 50%
-------------------------------------------------------------------------------
Kemper Total Return Portfolio 80% Kemper Horizon 20+ Portfolio 62%
-------------------------------------------------------------------------------
Comparative Considerations
The portfolio characteristics of Kemper Total Return Portfolio after each
Reorganization will reflect the blended characteristics of Kemper Horizon 5
Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 20+ Portfolio that
are proposed to be combined into Kemper Total Return Portfolio. The following
characteristics for each Fund reflect the portfolio allocation of each Horizon
Portfolio's investments as of December 31, 2000. The table also reflects the
blended portfolio characteristics of all Horizon Portfolios into the Kemper
Total Return Portfolio, giving effect to each Reorganization.
14
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Portfolio Allocation(1)
(As a % of Net Assets)
------------------------------------------------------------------------------------------------------------
Kemper Horizon 5 Kemper Horizon Kemper Horizon Kemper Total Pro forma
Portfolio 10+ Portfolio 20+ Portfolio Return Portfolio (Combined)(2)
<S> <C> <C> <C> <C> <C>
Fixed Income(3) 60% 40% 20%
AAA
AA
A
BBB
Below BBB
Unrated
Equity 40% 60% 80%
International % % %
U.S. % % %
Growth % % %
Value % % %
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Horizon Portfolio's equity portion normally consists of 30%
international securities and 70% U.S. securities. The U.S. equity portion for
each Horizon Portfolio is normally invested in 50% growth stocks and 50% value
stocks but may vary between 40-60% for both. The U.S. equity portion for each
Horizon Portfolio is also normally invested more heavily in large cap stocks
than small cap stocks. Kemper Total Return Portfolio invests in a mix of growth
stocks and bonds, with up to 25% of its total assets in foreign securities.
(2) Reflects the blended characteristics of all Horizon Portfolios into Kemper
Total Return Portfolio after each Reorganization.
(3) Credit ratings represent the higher of ratings by Moody's and S&P. See
Annex A to the Statement of Additional Information for a general description of
Moody's and S&P's ratings.
Performance
The following table shows how each Fund's returns over different periods
average out. For context, the table also includes [a] broad-based market
index[es] (which, unlike the Funds, do[es] not have any fees or expenses). The
performances of each Fund and the index[es] vary over time, and past performance
is not necessarily indicative of future results. All figures assume reinvestment
of dividends and distributions.
Average Annual Total Return
for the Periods Ended December 31, 2000
[Insert Table with appropriate index[es]]
Investment Manager; Fees and Expenses
Each Fund retains the investment management firm of Scudder Kemper,
pursuant to separate contracts, to manage its daily investment and business
affairs, subject to the policies established by the Funds' Trustees. Scudder
Kemper is a Delaware corporation located at 345 Park Avenue, New York, New York
10154.
15
<PAGE>
Pursuant to separate contracts, the Funds pay the Investment Manager an
investment management fee, although the fee rates differ. Kemper Total Return
Portfolio pays the Investment Manager a fee at an annual rate of 0.55% of its
average daily net assets payable monthly. As of December 31, 1999, Kemper Total
Return Portfolio had total net assets of $952,485,000. For the fiscal year ended
December 31, 1999, Kemper Total Return Portfolio paid the Investment Manager a
fee of 0.55% of its average daily net assets.
Each Horizon Portfolio pays the Investment Manager a fee at an annual rate
of 0.60% of each Horizon Portfolio's average daily net assets payable monthly.
However, the Investment Manager has contractually agreed to waive all or a
portion of each Horizon Portfolio's expenses through April 30, 2001 in order to
limit each Horizon Portfolio's total operating expenses expressed as a
percentage of average daily net assets as follows: 0.97% for Kemper Horizon 5
Portfolio, 0.83% for Kemper Horizon 10+ Portfolio and 0.93% for Kemper Horizon
20+ Portfolio. As of December 31, 1999, the total net assets for Kemper Horizon
5 Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 20+ Portfolio were
$42,630,000, $66,963,000 and $37,409,000, respectively. For the fiscal year
ended December 31, 1999, Kemper Horizon 5 Portfolio, Kemper Horizon 10+
Portfolio and Kemper Horizon 20+ Portfolio each paid the Investment Manager a
fee of 0.60% of its average daily net assets.
The fee schedule for the combined fund after the Reorganizations will be
identical to the current fee schedule for Kemper Total Return Portfolio.
Comparison of Expenses
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in Kemper Total Return Portfolio, and compares these with the expenses
of each Horizon Portfolio. As indicated below, it is expected that the total
expense ratio of Kemper Total Return Portfolio following the Reorganizations
will be lower than the current expense ratio of each Horizon Portfolio. Unless
otherwise noted, the information is based on each Fund's expenses and average
daily net assets during the twelve months ended September 30, 2000, and on a pro
forma basis as of that date and for the twelve month period then ended, assuming
each Reorganization had been in effect for that period.
16
<PAGE>
Expense Comparison Table
Annual Fund Operating Expenses (Unaudited)
<TABLE>
<CAPTION>
Kemper Kemper Kemper Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return
Portfolio Portfolio Portfolio Portfolio Pro Forma (Combined)(1)
--------- --------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees........................... 0.60% 0.60% 0.60% 0.55% 0.55%
Distribution and/or Service (12b-1) Fees.. None None None None None
Other Expenses............................ 0.24% 0.12% 0.25% 0.07% 0.07%
Total Annual Fund Operating Expenses...... 0.84% 0.72% 0.85% 0.62% 0.62%
Expense Example of Total Operating
Expenses at the End of the Period(2)
One Year.................................. $ 86 $ 74 $ 87 $ 63 $ 63
Three Years............................... $ 268 $ 230 $ 271 $ 199 $ 199
Five Years................................ $ 466 $ 401 $ 471 $ 346 $ 346
Ten Years................................. $ 1,037 $ 894 $ 1,049 $ 774 $ 774
</TABLE>
________________
Notes to Expense Comparison Table:
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to each Reorganization and reflects the effect of each
Reorganization.
(2) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends,
total operating expenses remain the same and redemption at the end of each
period.
Financial Highlights
For management's discussion of Kemper Total Return Portfolio's performance
for the fiscal year ended December 31, 1999, please refer to Exhibit B attached
hereto.
The financial highlights table for Kemper Total Return Portfolio, which is
intended to help you understand Kemper Total Return Portfolio's financial
performance for at least the past five years, is attached hereto as Exhibit C.
Distribution and Services Fees
Pursuant to an underwriting and distribution services agreement with Kemper
Total Return Portfolio, Kemper Distributors, Inc. ("KDI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, an affiliate of the Investment Manager, will act
as principal underwriter and distributor for the shares of the combined fund and
will act as agent of the combined fund in the continuous offering of its shares.
As agent, KDI will offer shares of the combined fund on a continuous basis to
the separate accounts of Participating Insurance Companies in all states in
which the combined fund or the Trust may from time to time be registered or
where permitted by applicable law. After the Reorganizations, KDI will continue
to accept orders for shares of the combined fund at net asset value without a
sales commission and on a no-load basis.
Purchases and Redemptions
The purchase and redemption procedures and privileges of Kemper Total
Return Portfolio, giving effect to each Reorganization, will be identical to
those of the Horizon Portfolios.
17
<PAGE>
The separate accounts of the Participating Insurance Companies place orders
to purchase and redeem shares of the Funds based on, among other things, the
amount of premium payments to be invested and surrender and transfer requests to
be effected on that day pursuant to VLI and VA contracts. The shares of each
Fund are purchased and redeemed at the net asset value of the applicable Fund's
shares determined that same day or, in the case of an order not resulting
automatically from contract transactions, next determined after an order in
proper form is received. An order is considered to be in proper form if it is
communicated by telephone or wire by an authorized employee of a Participating
Insurance Company.
No fee is charged to shareholders when they purchase or redeem shares of
the Funds, nor will a fee be charged to shareholders when they purchase or
redeem shares of the combined funds. Please see the Funds' prospectus for
additional information.
Dividends and Other Distributions
Each Fund normally declares and distributes dividends of net investment
income annually. Each Fund distributes any net realized short-term and long-term
capital gains at least annually. Each Fund may make an additional distribution
if necessary. Dividends and distributions of each Fund are invested in
additional shares of that Fund at net asset value and credited to the
shareholders' account on the payment date unless an election is made on behalf
of a separate account to receive dividends and capital gains distributions in
cash.
If the Plan is approved by a Horizon Portfolio's shareholders, that Fund
will pay its shareholders a distribution of all undistributed net investment
income and undistributed realized net capital gains immediately prior to the
Closing.
Tax Consequences
As a condition to each Reorganization, each Fund will have received an
opinion of Willkie Farr & Gallagher in connection with the Reorganization to the
effect that, based upon certain facts, assumptions, and representations, each
Reorganization will constitute a tax-free reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
If a Reorganization constitutes a tax-free reorganization, no gain or loss will
be recognized by a Horizon Portfolio or its shareholders as a direct result of
the Reorganization. See "The Proposed Transactions - Federal Income Tax
Consequences" below.
* * *
The preceding is only a summary of certain information contained in this
Proxy Statement/Prospectus relating to the Reorganizations. This summary is
qualified by reference to the more complete information contained elsewhere in
this Proxy Statement/Prospectus, the prospectus and statement of additional
information of Kemper Total Return Portfolio, and the Plan. Shareholders should
read this entire Proxy Statement/Prospectus carefully.
II. PRINCIPAL RISK FACTORS
Because there are substantial differences in the investment objectives,
policies and strategies of the Kemper Total Return Portfolio and the Horizon
Portfolios, there are also substantial differences in the principal risks of the
Funds. The principal risks of Kemper Total Return Portfolio are stock market
risk, particularly for growth stocks, interest rate risk, credit risk and
foreign stock risk. The principal risks of Kemper Horizon 5 Portfolio are bond
market risk, interest rate risk, credit risk and stock market risk. The
18
<PAGE>
principal risks of Kemper Horizon 10+ Portfolio are stock market risk, foreign
stock risk, bond market risk, interest rate risk and credit risk. The principal
risks of Kemper Horizon 20+ Portfolio are stock market risk, foreign stock risk,
bond market risk, interest rate risk and credit risk.
Stock market risk 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 securities may be more volatile than their U.S.
counterparts, for reasons such as currency fluctuations and political and
economic uncertainty.
Although Kemper Total Return Portfolio and the Horizon Portfolios each may
invest in common stocks, their portfolio holdings are expected to differ
considerably in terms of market capitalization, style (i.e., growth versus
value) and foreign exposure. Because different segments of the stock market
(e.g., large cap and small cap) and different investment styles (e.g., growth
versus value) may react quite differently to economic and other factors, the
risks of the Funds are expected to vary.
Bond market risk depends on interest rates, credit quality of issuers and
other factors. 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 Funds' performance; with
mortgage- or asset-backed securities, any unexpected behavior in interest rates
could increase the volatility of the Funds' share price and yield. All bonds are
also subject to credit risk, which is the risk that interest and principal will
not be repaid. Corporate bonds could perform less well than other bonds in a
weak economy.
Kemper Total Return Portfolio may invest more heavily in high yield
securities or "junk bonds" than the Horizon Portfolios and is more susceptible
to the credit risks of investing in junk bonds. Investments in junk bonds entail
relatively greater risk of loss of income and principal than investments in
higher-rated securities and may fluctuate more in value.
The Funds are not insured or guaranteed by the FDIC or any other government
agency. Share prices will go up and down, so be aware that you could lose
money.
For a further discussion of the investment techniques and risk factors
applicable to each Fund, see "Investment Objectives, Policies, and Restrictions
of the Funds" above, and the prospectus and statement of additional information
for the Funds.
III. THE PROPOSED TRANSACTIONS
Description of the Plan
As stated above, the Plan provides for the transfer of all or substantially
all of the assets of the Horizon Portfolios to Kemper Total Return Portfolio, in
exchange for that number of full and fractional shares having an aggregate net
asset value equal to the aggregate net asset value of the shares of each Horizon
Portfolio as of the close of business on the Valuation Date. Kemper Total Return
Portfolio will assume all of the liabilities of each Horizon Portfolio. Each
Horizon Portfolio will distribute the shares received in the exchange to the
shareholders of that Horizon Portfolio in complete liquidation of that Fund.
That Horizon Portfolio will then be terminated.
Upon completion of the Reorganizations, each shareholder of a Horizon
Portfolio will own that number of full and fractional shares having an aggregate
net asset value equal to the aggregate net asset value of such shareholder's
shares held in that Horizon Portfolio as of the close of business on the
19
<PAGE>
Valuation Date. Such shares will be held in an account with Kemper Total Return
Portfolio identical in all material respects to the account currently maintained
by the relevant Horizon Portfolio for such shareholder.
In the interest of economy and convenience, shares issued to each Horizon
Portfolio's shareholders in the Reorganizations will be in uncertificated form.
If shares of any Horizon Portfolio are represented by certificates prior to the
Closing, such certificates should be returned to the Horizon Portfolios'
shareholder servicing agent. Any shares of Kemper Total Return Portfolio
distributed in the Reorganizations to shareholders in exchange for certificated
shares of a Horizon Portfolio may not be transferred, exchanged, or redeemed
without delivery of such certificates.
Until the Closing, shareholders of each Horizon Portfolio will continue to
be able to redeem their shares at the net asset value next determined after
receipt by the Funds' transfer agent of a redemption request in proper form.
Redemption and purchase requests received by the transfer agent after the
Closing will be treated as requests received for the redemption or purchase of
shares of Kemper Total Return Portfolio received by the shareholder in
connection with such Reorganization.
The obligations of the Trust on behalf of the respective Funds under the
Plan are subject to various conditions, as stated therein. Among other things,
the Plan requires that all filings be made with, and all authority be received
from, the SEC and state securities commissions as may be necessary in the
opinion of counsel to permit the parties to carry out the transactions
contemplated by the Plan. Each Fund is in the process of making the necessary
filings. To provide for unforeseen events, the Plan may be terminated: (i) by
the mutual agreement of the parties; (ii) by a party if the Closing has not
occurred by ____ __, 2001, unless such date is extended by mutual agreement of
the parties; or (iii) by a party if the other party has materially breached its
obligations under the Plan or made a material misrepresentation in the Plan or
in connection with a Reorganization. The Plan may also be amended by mutual
agreement in writing. However, no amendment may be made following the
shareholder Meeting if such amendment would have the effect of changing the
provisions for determining the number of shares of Kemper Total Return Portfolio
to be issued to the applicable Horizon Portfolio in the Plan to the detriment of
that Horizon Portfolio's shareholders without their approval. For a complete
description of the terms and conditions of each Reorganization, please refer to
the Plan at Exhibit A.
Board Approval of the Proposed Transactions
As discussed above, the Reorganizations are part of a Scudder Kemper
initiative that is intended to restructure and streamline the management and
operations of the funds Scudder Kemper advises. Scudder Kemper first proposed
the Reorganizations to the Independent Trustees of the Trust at a meeting held
on May 24, 2000, see "Synopsis - Background of the Reorganizations" above. This
initiative included several major components:
(i) A change in branding to offer virtually all funds advised by Scudder
Kemper under the Scudder Investments name, with a concentration on
intermediary distribution;
(ii) The combination of funds with similar investment objectives and
policies, including in particular, the combination of the Kemper
Funds with similar Scudder Funds currently offered to the general
public;
(iii) The liquidation of certain small funds which have not achieved
market acceptance and which are unlikely to reach an efficient
operating size;
(iv) The implementation of an administration agreement for the Kemper
Funds similar to that recently adopted by the Scudder Funds
covering, for a single fee rate, substantially all services required
for the operation of the fund (other than those provided under the
fund's investment management agreement) and most expenses; and
(v) The consolidation of certain boards overseeing funds advised by
Scudder Kemper.
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<PAGE>
The Independent Trustees of the Trust reviewed the potential implications
of these proposals for each Horizon Portfolio as well as the various other funds
for which they serve as board members. They were assisted in this review by
their independent legal counsel and by independent consultants with special
expertise in financial and mutual fund industry matters. Following the May 24
meeting, the Independent Trustees met in person or by telephone on numerous
occasions (including committee meetings) to review and discuss these proposals,
both among themselves and with representatives of Scudder Kemper, including the
"interested" Trustees. In the course of their review, the Independent Trustees
requested and received substantial additional information and suggested numerous
changes to Scudder Kemper's proposals.
Following the conclusion of this process, the Independent Trustees of the
Trust, the board members of other funds involved and Scudder Kemper reached
general agreement on the elements of a restructuring plan that they believed
were in the best interests of shareholders and, where required, agreed to submit
elements of the plan for approval to shareholders of those funds.
On November 29, 2000, the Board of Trustees, including the Independent
Trustees, unanimously approved the terms of each Reorganization and certain
related proposals. The Independent Trustees have also unanimously agreed to
recommend that each Reorganization be approved by the applicable Horizon
Portfolio's shareholders.
In determining whether to recommend that the shareholders of each Horizon
Portfolio approve their Reorganization, the Board of Trustees considered, among
other factors, that:
. Given each Horizon Portfolio's relatively small size and Scudder
Kemper's commitment to a streamlined family of funds, the
Reorganization would allow shareholders to continue their investment
in another fund as opposed to liquidation, which was less practical
for funds serving as funding vehicles for VLI and VA contracts.
. The combined fund would adopt the lower fee schedule of the Funds'
investment advisory agreements.
. Scudder Kemper agreed to pay all of the costs of each Reorganization.
. It is a condition of each Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a TAX-FREE
transaction.
As part of their deliberations, the Trustees considered, among other
things: (a) the fees and expense ratios of each Horizon Portfolio, including
comparisons between the expenses of each Horizon Portfolio and the estimated
operating expenses of Kemper Total Return Portfolio, and between the estimated
operating expenses of Kemper Total Return Portfolio and other mutual funds with
similar investment objectives; (b) the terms and conditions of each
Reorganization and whether the Reorganization would result in the dilution of
shareholder interests; (c) the compatibility of the Funds' investment
objectives, policies, restrictions and portfolios; (d) the service features
available to shareholders of each Fund; (e) prospects for Kemper Total Return
Portfolio to attract additional assets; and (f) the investment performance of
each Fund.
As part of their analysis, the Trustees considered direct and indirect
costs to shareholders, including: (a) the direct costs of each Reorganization to
be borne by existing shareholders; and (b) the potential costs of any necessary
rebalancing of each Fund's portfolio.
21
<PAGE>
Costs. Scudder Kemper agreed to bear all of the anticipated costs of each
Reorganization. The costs include board meeting fees, legal, accounting and
other consultant fees, and proxy solicitation costs, but do not include SEC
registration fees, which will be paid by Kemper Total Return Portfolio.
Portfolio Transaction Costs. To consider the potential costs of any
necessary rebalancing of each Horizon Portfolio's portfolio as a result of each
Reorganization, the Independent Trustees asked for, and Scudder Kemper provided,
an estimate of the expected turnover of the securities of each Horizon
Portfolio, as a percentage of the assets of the combined fund, as a result of
each Reorganization. Scudder Kemper estimated such turnover to be [5-7]%,
assuming all three of the Reorganizations are effected, which would result in
estimated brokerage expenses and/or transaction costs of $[ ] (less than $0.01
per share of Kemper Horizon 5 Portfolio), $[ ] (less than $0.01 per share of
Kemper Horizon 10+ Portfolio), and $[ ] (less than $0.01 per share of Kemper
Horizon 20+ Portfolio), which the Trustees considered were immaterial. These
estimates were based upon current market conditions at the time and any actual
costs will be dependent upon liquidity and market conditions at the Closing. In
a "bear" market, for example, such costs could be substantially higher and could
result in capital losses.
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with each
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal.
Based on all of the foregoing, the Board concluded that each Horizon
Portfolio's participation in the applicable Reorganization would be in the best
interests of that Horizon Portfolio and would not dilute the interests of that
Horizon Portfolio's shareholders. The Board of Trustees, including the
Independent Trustees, unanimously recommends that shareholders of the Horizon
Portfolios approve the Reorganizations.
Description of the Securities to Be Issued
Kemper Total Return Portfolio is a series of the Trust, a Massachusetts
business trust established under a Declaration of Trust dated January 22, 1987,
as amended. The Trust's authorized capital consists of an unlimited number of
shares of beneficial interest, all having no par value per share. The Trustees
of the Trust are authorized to divide the Trust's shares into separate series.
Kemper Total Return Portfolio is one of twenty-six series of the Trust that the
Board has created to date. The Trustees of the Trust are also authorized to
further divide the shares of the series of the Trust into classes. Currently,
the Trust does not offer a multiple-class structure.
Each share of a series of the Trust, such as Kemper Total Return Portfolio,
represents an interest that is equal to and proportionate with each other share
of that series. Shareholders of a series are entitled to one vote per share held
on matters on which they are entitled to vote. In the areas of shareholder
voting and the powers and conduct of the Trustees, there are no differences
between the rights of shareholders of each Horizon Portfolio and the rights of
shareholders of Kemper Total Return Portfolio.
Federal Income Tax Consequences
The Reorganizations in Proposals 2 through 4 are conditioned upon the
receipt by each Horizon Portfolio and Kemper Total Return Portfolio of an
opinion from Willkie Farr & Gallagher substantially to the effect that, based
upon certain facts, assumptions, and representations of the parties, for federal
income tax purposes: (i) the transfer to Kemper Total Return Portfolio of all or
substantially all of the assets of each Horizon Portfolio in exchange solely for
shares of beneficial interest of Kemper Total Return Portfolio and the
assumption by Kemper Total Return Portfolio of all of the liabilities of the
applicable Horizon Portfolio, followed by the distribution of such shares to
that Horizon Portfolio's
22
<PAGE>
shareholders in exchange for their shares of that Horizon Portfolio in complete
liquidation of that Horizon Portfolio, will constitute a "reorganization" within
the meaning of Section 368(a)(1) of the Code, and Kemper Total Return Portfolio
and each Horizon Portfolio will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
by any Horizon Portfolio upon the transfer of all or substantially all of its
assets to Kemper Total Return Portfolio in exchange solely for shares of
beneficial interest of Kemper Total Return Portfolio and the assumption by
Kemper Total Return Portfolio of all of the liabilities of the applicable
Horizon Portfolio or upon the distribution of such shares to shareholders of
that Horizon Portfolio in exchange for their shares of that Horizon Portfolio;
(iii) the basis of the assets of each Horizon Portfolio in the hands of Kemper
Total Return Portfolio will be the same as the basis of such assets of the
applicable Horizon Portfolio immediately prior to the transfer; (iv) the holding
period of the assets of each Horizon Portfolio in the hands of Kemper Total
Return Portfolio will include the period during which such assets were held by
the applicable Horizon Portfolio; (v) no gain or loss will be recognized by
Kemper Total Return Portfolio upon the receipt of the assets of a Horizon
Portfolio in exchange for shares of beneficial interest of Kemper Total Return
Portfolio and the assumption by Kemper Total Return Portfolio of all of the
liabilities of that Horizon Portfolio; (vi) no gain or loss will be recognized
by the shareholders of a Horizon Portfolio upon the receipt of the shares of
beneficial interest of Kemper Total Return Portfolio solely in exchange for
their shares of that Horizon Portfolio as part of the transaction; (vii) the
basis of the shares received by each shareholder of an applicable Horizon
Portfolio will be the same as the basis of the shares of the applicable Horizon
Portfolio exchanged therefor; and (viii) the holding period of the shares
received by each shareholder of an applicable Horizon Portfolio will include the
holding period during which the shares of the applicable Horizon Portfolio
exchanged therefor were held, provided that at the time of the exchange the
shares of that Horizon Portfolio were held as capital assets in the hands of
such shareholder of that Horizon Portfolio.
After the Closing, Kemper Total Return Portfolio may dispose of certain
securities received by it from the Horizon Portfolios in connection with the
Reorganizations, which may result in transaction costs and capital gains.
While the Horizon Portfolios are not aware of any adverse state or local
tax consequences of the proposed Reorganizations, they have not requested any
ruling or opinion with respect to such consequences and shareholders may wish to
consult their own tax adviser with respect to such matters.
Legal Matters
Certain legal matters concerning the federal income tax consequences of the
Reorganizations will be passed on by Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019-6099. Certain legal matters concerning the
issuance of shares of Kemper Total Return Portfolio will be passed on by
Dechert, Ten Post Office Square, South, Boston, Massachusetts 02109.
Capitalization
The following table shows on an unaudited basis the capitalization of
Kemper Total Return Portfolio, Kemper Horizon 5 Portfolio, Kemper Horizon 10+
Portfolio and Kemper Horizon 20+ Portfolio as of September 30, 2000 and on a pro
forma basis as of that date, giving effect to the Reorganizations/(1)/:
23
<PAGE>
<TABLE>
<CAPTION>
Kemper Kemper Kemper Kemper
Total Return Horizon 5 Horizon 10+ Horizon 20+ Pro Forma Pro Forma
Portfolio Portfolio Portfolio Portfolio Adjustments (Combined)
--------- --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net Assets....................... $903,231,490 $37,433,033 $57,148,438 $30,285,801 $1,028,098,762
Shares Outstanding............... 333,800,914 30,540,183 43,864,784 22,494,841 (50,823,324) 379,877,398
Net Asset Value Per Share........ $ 2.71 $ 1.23 $ 1.30 $ 1.35 $ 2.71
</TABLE>
________________
(1) Assumes the Reorganizations had been consummated on September 30, 2000, and
is for informational purposes only. No assurance can be given as to how
many shares of Kemper Total Return Portfolio will be received by the
shareholders of Kemper Horizon 5 Portfolio, Kemper Horizon 10+ Portfolio or
Kemper Horizon 20+ Portfolio on the date the Reorganizations take place,
and the foregoing should not be relied upon to reflect the number of shares
of Kemper Total Return Portfolio that actually will be received on or after
such date.
The Board of Trustees unanimously recommends that shareholders of
each Horizon Portfolio vote FOR the Proposal that relates to
the Reorganization of their Fund into Kemper Total Return Portfolio.
PROPOSAL 5: RATIFICATION OR REJECTION OF THE SELECTION OF
INDEPENDENT AUDITORS
The Board of Trustees, including all of the Independent Trustees, has
selected Ernst & Young LLP to act as independent auditors of each Horizon
Portfolio for such portfolio's current fiscal year and recommends that
shareholders ratify such selection. One or more representatives of Ernst & Young
LLP are expected to be present at the Meeting and will have an opportunity to
make a statement if they so desire. Such representatives are expected to be
available to respond to appropriate questions posed by shareholders or
management.
The Board of Trustees unanimously recommends that shareholders of each
Horizon Portfolio vote FOR this Proposal 5.
ADDITIONAL INFORMATION
Information about the Funds
Additional information about the Trust, the Funds and the Reorganizations
has been filed with the SEC and may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, MA 02110-4103,
or by calling 1-800-[ ].
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith,
files reports, proxy material, and other information about each of the Funds
with the SEC. Such reports, proxy material, and other information filed by the
Trust can be inspected and copied at the Public Reference Room maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following SEC
Regional Offices: Northeast Regional Office, 7 World Trade Center, Suite 1300,
New York, NY 10048; Southeast Regional Office, 1401 Brickell Avenue, Suite 200,
Miami, FL 33131; Midwest Regional Office, Citicorp Center, 500 W. Madison
Street, Chicago, IL, 60661-2511; Central Regional Office, 1801 California
Street, Suite 4800, Denver, CO 80202-2648; and Pacific Regional Office, 5670
Wilshire Boulevard, 11th Floor, Los Angeles, CA 90036-3648. Copies of such
material can also be obtained from the Public Reference
24
<PAGE>
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The SEC maintains an Internet World Wide Web site (at
http://www.sec.gov) that contains the prospectus and statement of additional
information for the Funds, materials that are incorporated by reference into the
prospectus and statement of additional information, and other information about
the Trust and the Funds.
General
Proxy Solicitation. Proxy solicitation costs will be paid by Scudder
Kemper. In addition to solicitation by mail, certain officers and
representatives of the Trust, officers and employees of Scudder Kemper, and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone, by
telegram, or personally.
As discussed above, shares of each Horizon Portfolio are offered only to
Participating Insurance Companies to fund benefits under their VA contracts and
VLI contracts (each a "Contract"). Accordingly, as of the close of business on
January 26, 2001, shares of each Horizon Portfolio were held by separate
accounts, or subaccounts thereof, of various Participating Insurance Companies.
These shares are owned by the Participating Insurance Companies as depositors
for their respective Contracts issued to individual contract holders or to a
group (e.g., a defined benefit plan) in which individuals participate
(collectively, "Participants"). Under the terms of the Contracts, Participants
have the right to instruct the Participating Insurance Companies on how to vote
the shares related to their interests through their Contracts (i.e., pass-
through voting). A Participating Insurance Company must vote the shares of each
Horizon Portfolio held in its name as directed. If a Participating Insurance
Company does not receive voting instructions for all of the shares of each
applicable Horizon Portfolio held under the Contracts, it may vote all of the
shares in the relevant separate accounts with respect to each Proposal on which
it is entitled to vote, for, against, or abstaining, in the same proportion as
the shares of each applicable Horizon Portfolio for which it has received
instructions (i.e., echo voting). The group Participants of some group
Contracts may have the right to direct the vote, with respect to each Proposal
on which they are entitled to vote, for all shares of each applicable Horizon
Portfolio held under the Contract, for, against, or abstaining, in the same
proportions as shares for which instructions have been given under the same
Contract. This Proxy Statement/Prospectus is used to solicit instructions from
Participants for voting shares of each Horizon Portfolio, as well as for
soliciting proxies from the Participating Insurance Companies and the actual
shareholders of each Horizon Portfolio. All persons entitled to direct the
voting of shares, whether or not they are shareholders, will be described as
voting for purposes of this Proxy Statement/Prospectus.
Any shareholder of a Horizon Portfolio giving a proxy has the power to
revoke it by mail (addressed to the Secretary at the principal executive office
of the Funds, c/o Scudder Kemper Investments, Inc., at the address for the Funds
shown at the beginning of this Proxy Statement/Prospectus) or in person at the
Meeting, by executing a superseding proxy or by submitting a notice of
revocation to the applicable Horizon Portfolio. All properly executed proxies
received in time for the Meeting will be voted as specified in the proxy or, if
no specification is made, in favor of each Proposal. Only a shareholder may
execute or revoke a proxy. A Participant who has given voting instructions may
revoke them through the applicable Participating Insurance Company. A
Participant may also revoke the accompanying voting instruction at any time
prior to its use by filing with the Trust a written revocation or duly executed
voting instruction bearing a later date. In addition, any Participant who
attends the Meeting in person may vote by ballot at the Meeting, thereby
canceling any voting instruction previously given. The persons named in the
accompanying voting instruction will vote as directed, but in the absence of
voting directions in any voting instruction that is signed and returned, they
may vote the interest represented thereby FOR each Proposal and may vote in
accordance with their best judgment with respect to other matters not now known
to the Board that may be presented to the Meeting.
25
<PAGE>
The presence at any shareholders' meeting, in person or by proxy, of the
holders of at least 30% of the shares of the Trust (for a trust-wide vote) or a
Horizon Portfolio (for a fund-wide vote) entitled to be cast shall be necessary
and sufficient to constitute a quorum for the transaction of business. In the
event that the necessary quorum to transact business or the vote required to
approve any Proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to that
Proposal. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Trust's (for a trust-wide vote) or a Horizon
Portfolio's (for a fund-wide vote) shares present in person or by proxy at the
Meeting. The persons named as proxies will vote in favor of any such
adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote against any such adjournment those proxies to be voted
against that Proposal. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but that have not been voted. Broker non-
votes are proxies received by a Horizon Portfolio from brokers or nominees when
the broker or nominee has neither received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter. Accordingly, shareholders are urged to forward their voting
instructions promptly.
The election of the Trustees under Proposal 1 requires the affirmative vote
of a plurality of the shares of the Trust voting on such election. Each Horizon
Portfolio will vote separately on the Proposal relating to its reorganization
into Kemper Total Return Portfolio. Approval of Proposals 2 through 4 requires
the affirmative vote of the holders of a majority of the applicable Horizon
Portfolio's shares outstanding and entitled to vote thereon. Approval of
Proposal 5, with respect to each Horizon Portfolio, requires the affirmative
vote of a majority of the shares of that Horizon Portfolio voting at the
Meeting. Abstentions and broker non-votes will not be counted in favor of, but
will have no other effect on, Proposals 1 and 5, and will have the effect of a
"no" vote on Proposals 2 through 4.
Holders of record of shares of each Horizon Portfolio at the close of
business on January 26, 2001 will be entitled to one vote per share on all
business of the Meeting. As of [ ], 2000 there were [ ] shares of
Kemper Horizon 5 Portfolio outstanding; there were [ ] shares of Kemper
Horizon 10+ Portfolio outstanding; and there were [ ] shares of Kemper
Horizon 20+ Portfolio outstanding.
[As of December 31, 2000, the officers and Trustees of the Trust as a group
owned beneficially less than 1% of the outstanding shares of Kemper Total Return
Portfolio. Appendix 2 hereto sets forth the beneficial owners of 5% or more of
each Fund's shares, as well as the beneficial owners of more than 5% of the
shares of each other series of the Trust. To the best of the Trust's knowledge,
as of December 31, 2000, no person owned beneficially 5% or more of the
outstanding shares of the applicable Fund or the shares of any other series of
the Trust, except as stated on Appendix 2.]
In addition to solicitation by mail, certain officers and representatives
of the Acquired Trust, officers and employees of Scudder Kemper or its
affiliates and certain financial services firms and their representatives, who
will receive no extra compensation for their services, may solicit proxies by
telephone, telegram or personally. Shareholder Communications Corporation
("SCC") also has been engaged to assist in the solicitation of proxies, at an
estimated cost of $[ ]. As the Meeting date approaches, certain
shareholders of the Fund, if their votes have not yet been received, may receive
a telephone call from a representative of SCC requesting that they submit the
proxy card(s) originally sent with the Proxy Statement/Prospectus. Should
shareholders require additional information regarding the proxy or replacement
proxy card(s), they may contact SCC toll-free at 1-800-[ ]. Any proxy
given by a shareholder is revocable until voted at the Meeting.
26
<PAGE>
Shareholder Proposals for Subsequent Meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of the Trust, c/o Scudder Kemper Investments, Inc., 222 South
Riverside Plaza, Chicago, Illinois 60606, within a reasonable time before the
solicitation of proxies for such meeting. The timely submission of a proposal
does not guarantee its inclusion.
Other Matters to Come Before the Meeting. The Board is not aware of any
matters that will be presented for action at the Meeting other than the matters
described in this material. Should any other matters requiring a vote of
shareholders arise, the proxy in the accompanying form will confer upon the
person or persons entitled to vote the shares represented by such proxy the
discretionary authority to vote the shares as to any such other matters in
accordance with their best judgment in the interest of the Trust and/or the
applicable Horizon Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) OR VOTING
INSTRUCTION FORM(S) PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
27
<PAGE>
INDEX OF EXHIBITS AND APPENDIX[CES]
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION................................
EXHIBIT B: MANAGEMENT'S DISCUSSION OF KEMPER TOTAL RETURN PORTFOLIO'S
PERFORMANCE.........................................................
EXHIBIT C: FINANCIAL HIGHLIGHTS TABLE FOR KEMPER TOTAL RETURN PORTFOLIO........
[APPENDIX 1: TRUSTEE AND NOMINEE SHAREHOLDINGS]...............................
APPENDIX [2]: BENEFICIAL OWNERS OF FUND SHARES................................
28
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [ ] day of [ ], 2001, by and among Kemper Variable Series (the
"Trust"), a Massachusetts business trust, on behalf of each of Kemper Total
Return Portfolio (the "Acquiring Fund") and Kemper Horizon 5 Portfolio, Kemper
Horizon 10+ Portfolio and Kemper Horizon 20+ Portfolio (each an "Acquired Fund"
and collectively the "Acquired Funds" and, together with the Acquiring Fund,
each a "Fund" and collectively the "Funds"), and Scudder Kemper Investments,
Inc. ("Scudder Kemper"), investment adviser to the Funds (for purposes of
Paragraph 10.2 of the Agreement only). Each Fund is a separate series of the
Trust. The principal place of business of the Trust is Two International Place,
Boston, Massachusetts 02110-4103.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganizations (each, a
"Reorganization" and collectively, the "Reorganizations") will consist of the
transfer of all or substantially all of the assets of each Acquired Fund to the
Acquiring Fund in exchange solely for voting shares of beneficial interest (no
par value per share) of the Acquiring Fund (the "Acquiring Fund Shares"), the
assumption by the Acquiring Fund of all of the liabilities of each Acquired Fund
and the distribution of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in complete liquidation of each Acquired Fund as provided herein,
all upon the terms and conditions hereinafter set forth in this Agreement.
Notwithstanding anything to the contrary in this Agreement, the rights and
obligations of each Acquired Fund, and the Trust with respect to that Acquired
Fund, are not contingent upon the satisfaction by any other Acquired Fund of its
obligations under this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows :
1. TRANSFER OF ASSETS OF EACH ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF EACH ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, each Acquired Fund
agrees to transfer to the Acquiring Fund all or substantially all of the
Acquired Fund's assets as set forth in section 1.2, and the Acquiring Fund
agrees in exchange therefor (i) to deliver to the Acquired Fund that number of
full and fractional Acquiring Fund Shares determined by dividing the value of
the Acquired Fund's assets net of any liabilities of the Acquired Fund, computed
in the manner and as of the time and date set forth in section 2.1, by the net
asset value of one Acquiring Fund Share, computed in the manner and as of the
time and date set forth in section 2.2; and (ii) to assume all of the
liabilities of the Acquired Fund, including, but not limited to, any deferred
compensation to Acquired Fund board members. All Acquiring Fund Shares delivered
to the Acquired Funds shall be delivered at net asset value without sales load,
commission or other similar fee being imposed. Such transactions shall take
place at the closing provided for in section 3.1 (the "Closing").
1.2. The assets of each Acquired Fund to be acquired by the Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited statement of assets
and liabilities of such Acquired Fund prepared as of the effective time of the
Closing in accordance with generally accepted
<PAGE>
accounting principles ("GAAP") applied consistently with those of the Acquired
Fund's most recent audited balance sheet. The Assets shall constitute at least
90% of the fair market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by each Acquired Fund immediately before
the Closing (excluding for these purposes assets used to pay the dividends and
other distributions paid pursuant to section 1.4).
1.3. Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.6.
1.4. On or as soon as practicable prior to the Closing Date as defined
in section 3.1, each Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section
1.1, each Acquired Fund will distribute to such Acquired Fund's shareholders of
record (the "Acquired Fund Shareholders"), determined as of the Valuation Time
(as defined in section 2.1), on a pro rata basis, the Acquiring Fund Shares
received by such Acquired Fund pursuant to section 1.1 and will completely
liquidate. Such distribution and liquidation will be accomplished by the
transfer of the Acquiring Fund Shares then credited to the account of the
applicable Acquired Fund on the books of the Acquiring Fund to open accounts on
the share records of the Acquiring Fund in the names of the Acquired Fund
Shareholders. The Acquiring Fund shall have no obligation to inquire as to the
validity, propriety or correctness of such records, but shall assume that such
transaction is valid, proper and correct. The aggregate net asset value of the
Acquiring Fund Shares to be so credited to the Acquired Fund Shareholders shall
be equal to the aggregate net asset value of the Acquired Fund shares owned by
such shareholders as of the Valuation Time. All issued and outstanding shares of
that Acquired Fund will simultaneously be cancelled on the books of the Acquired
Fund, although share certificates representing interests in shares of the
Acquired Fund will represent a number of Acquiring Fund Shares after the Closing
Date as determined in accordance with section 2.3. The Acquiring Fund will not
issue certificates representing Acquiring Fund Shares in connection with such
exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of each Acquired Fund including,
without limitation, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission (the
"Commission"), any state securities commission, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the applicable Acquired Fund.
1.8. All books and records of each Acquired Fund, including all books
and records required to be maintained under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of
regular trading on The New York Stock Exchange, Inc. (the "NYSE") on the
business day immediately preceding the Closing Date, as
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defined in Section 3.1 (the "Valuation Time") after the declaration and payment
of any dividends and/or other distributions on that date, using the valuation
procedures set forth in the Declaration of Trust, as amended, and then-current
prospectus or statement of additional information, copies of which have been
delivered to each Acquired Fund.
2.2. The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of the Valuation Time using the valuation
procedures referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the applicable
Acquired Fund determined in accordance with section 2.1 by the net asset value
of an Acquiring Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement
shall be May 1, 2001, or such later date as the parties may agree in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place simultaneously as of 9:00 a.m., Eastern time, on the Closing Date,
unless otherwise agreed to by the parties. The Closing shall be held at the
offices of Dechert, Ten Post Office Square - South, Boston, MA 02109, or at such
other place and time as the parties may agree.
3.2. Each Acquired Fund shall deliver to Acquiring Fund on the Closing
Date a schedule of Assets.
3.3. State Street Bank and Trust Company ("State Street"), custodian for
each Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
State Street, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. Each Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by the custodian for each Acquired Fund to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date and transferred and delivered by each Acquired Fund as of the
Closing Date by each Acquired Fund for the account of Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. Each Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under the 1940
Act, shall be delivered as of the Closing Date by book entry in accordance with
the customary practices of such depositories and the custodian for the Acquiring
Fund. The cash to be transferred by each Acquired Fund shall be delivered by
wire transfer of federal funds on the Closing Date.
3.4. Investors Fiduciary Trust Company, as transfer agent for each
Acquired Fund, on behalf of each Acquired Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the names
and addresses of the Acquired Fund Shareholders and the number and percentage
ownership (to three decimal places) of outstanding Acquired Fund shares owned by
each such shareholder immediately prior to the Closing. The Acquiring Fund shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to each Acquired Fund or
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provide evidence satisfactory to each Acquired Fund that such Acquiring Fund
Shares have been credited to each Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request to effect
the transactions contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the
NYSE or another primary trading market for portfolio securities of the Acquiring
Fund or an Acquired Fund shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board members of
either party to this Agreement, accurate appraisal of the value of the net
assets with respect to the shares of the Acquiring Fund or an Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.6. The liabilities of each Acquired Fund shall include all of such
Acquired Fund's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Closing Date, and whether or not specifically referred to in this Agreement
including but not limited to any deferred compensation to such Acquired Fund's
board members.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Trust, on behalf of each Acquired Fund, represents and warrants
to the Acquiring Fund as follows:
(a) The Trust is a voluntary association with transferable
shares commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Trust's Declaration of Trust, as amended, to own all of its properties
and assets and to carry on its business as it is now being conducted and,
subject to approval of shareholders of the Acquired Fund, to carry out the
Agreement. The Acquired Fund is a separate series of the Trust duly designated
in accordance with the applicable provisions of the Trust's Declaration of
Trust. The Trust and Acquired Fund are qualified to do business in all
jurisdictions in which they are required to be so qualified, except
jurisdictions in which the failure to so qualify would not have material adverse
effect on the Trust or Acquired Fund. The Acquired Fund has all material
federal, state and local authorizations necessary to own all of the properties
and assets and to carry on its business as now being conducted, except
authorizations which the failure to so obtain would not have a material adverse
effect on the Acquired Fund;
(b) The Trust is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is in
full force and effect and the Acquired Fund is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by the Acquired Fund
of the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in
connection with the portfolio management of the Acquired Fund which shall
terminate on or prior to the Closing Date, the Trust is not,
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and the execution, delivery and performance of this Agreement by the Trust will
not result (i) in violation of Massachusetts law or of the Trust's Declaration
of Trust, as amended, or By-Laws, (ii) in a violation or breach of, or
constitute a default under, any material agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party or by
which it is bound, and the execution, delivery and performance of this Agreement
by the Acquired Fund will not result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquired Fund is a party or by
which it is bound, or (iii) in the creation or imposition of any lien, charge or
encumbrance on any property or assets of the Acquired Fund;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended December 31, 1999, have been
audited by Ernst & Young LLP, independent auditors, and are in accordance with
GAAP consistently applied, and such statements (a copy of each of which has been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial position of the Acquired Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Acquired Fund required to
be reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(g) Since December 31, 1999, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Acquiring Fund. For purposes of this subsection (g),
a decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund shares by Acquired
Fund Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquired Fund required by law to have been filed
by such dates (including any extensions) shall have been filed and are or will
be correct in all material respects, and all federal and other taxes shown as
due or required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof, and, to the best
of the Acquired Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation (including the taxable
year ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable
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registration requirements of the 1933 Act and state securities laws, (ii) are,
and on the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable and not subject to preemptive or dissenter's rights
(recognizing that, under Massachusetts law, Acquired Fund Shareholders, under
certain circumstances, could be held personally liable for obligations of the
Acquired Fund), and (iii) will be held at the time of the Closing by the persons
and in the amounts set forth in the records of Investors Fiduciary Trust, as
provided in section 3.4. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund shares, nor is there outstanding any security convertible into any
of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to section 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets hereunder free of any liens or
other encumbrances, except those liens or encumbrances as to which the Acquiring
Fund has received notice at or prior to the Closing, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act and the 1940 Act,
except those restrictions as to which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Trust (including the determinations
required by Rule 17a-8(a) under the 1940 Act), and, subject to the approval of
the Acquired Fund Shareholders, this Agreement constitutes a valid and binding
obligation of the Trust, on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc. (the "NASD")), which may be necessary in connection with the transactions
contemplated hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
insofar as it relates to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act and 1940
Act, as applicable, and (ii) not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements are made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquiring Fund for use therein.
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4.2. The Trust, on behalf of the Acquiring Fund, represents and warrants to
each Acquired Fund as follows:
(a) The Trust is a voluntary association with transferable shares
commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Trust's Declaration of Trust, as amended, to own all of its properties
and assets and to carry on its business as it is now being conducted and,
subject to the approval of shareholders of the Acquired Fund, to carry out the
Agreement. The Acquiring Fund is a separate series of the Trust duly designated
in accordance with the applicable provisions of the Trust's Declaration of
Trust. The Trust and Acquiring Fund are qualified to do business in all
jurisdictions in which they are required to be so qualified, except
jurisdictions in which the failure to so qualify would not have material adverse
effect on the Trust or Acquiring Fund. The Acquiring Fund has all material
federal, state and local authorizations necessary to own all of the properties
and assets and to carry on its business as now being conducted, except
authorizations which the failure to so obtain would not have a material adverse
effect on the Acquiring Fund;
(b) The Trust is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is in
full force and effect and the Acquiring Fund is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The Trust is not, and the execution, delivery and performance of
this law or of the Trust's Declaration of Trust, as amended, or By-Laws, or (ii)
in a violation or breach of, or constitute a default under, any material
agreement, indenture, instrument, contract, lease or other undertaking known to
counsel to which the Acquiring Fund is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by the Acquiring Fund will
not result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment
or decree to which the Acquiring Fund is a party or by which it is bound, or
(iii) in the creation or imposition of any lien, charge or encumbrance on any
property or assets of the Acquiring Fund;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquiring Fund or any properties or
assets held by it. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquiring Fund at and for the fiscal year ended December 31, 1999, have been
audited by Ernst & Young LLP, independent auditors, and are in accordance with
GAAP consistently applied, and such statements (a copy of each of which has been
furnished to the Acquired Fund) present fairly, in all material respects, the
financial position of the Acquiring Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities
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of the Acquiring Fund required to be reflected on a balance sheet (including the
notes thereto) in accordance with GAAP as of such date not disclosed therein;
(g) Since December 31, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquired Fund. For purposes of this subsection
(g), a decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
shares by Acquiring Fund shareholders shall not constitute a material adverse
change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquiring Fund required by law to have been filed
by such dates (including any extensions) shall have been filed and are or will
be correct in all material respects, and all federal and other taxes shown as
due or required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof, and, to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has
met the of Subchapter M of the Code for qualification as a regulated investment
company and has elected to be treated as such, has been eligible to and has
computed its federal income tax under Section 852 of the Code, and will do so
for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration requirements of the 1933
Act and state securities laws and (ii) are, and on the Closing Date will be,
duly and validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive or dissenter's rights (recognizing that, under
Massachusetts law, Acquiring Fund Shareholders, under certain circumstances,
could be held personally liable for the obligations of the Acquiring Fund). The
Acquiring Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Acquiring Fund shares, nor is there
outstanding any security convertible into any of the Acquiring Fund shares;
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued and
outstanding Acquiring Fund Shares, and will be fully paid and non-assessable
(recognizing that, under Massachusetts law, Acquiring Fund Shareholders, under
certain circumstances, could be held personally liable for the obligations of
the Acquiring Fund);
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired Fund
has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Trust (including the determinations
required by Rule 17a-8(a) under the 1940 Act) and this Agreement will constitute
a valid and binding obligation of the Trust, on behalf of the Acquiring Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer,
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reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the NASD), which may be necessary in connection
with the transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement,
only insofar as it relates to the Acquiring Fund, will, on the effective date of
the Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act, and 1940
Act and (ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquired Fund for use therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. Each Acquired Fund and the Acquiring Fund covenants to operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that (a) such ordinary course of business will include (i) the
declaration and payment of customary dividends and other distributions and (ii)
such changes as are contemplated by the Funds' normal operations; and (b) each
Fund shall retain exclusive control of the composition of its portfolio until
the Closing Date. No party shall take any action that would, or reasonably would
be expected to, result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect. Each Acquired
Fund and Acquiring Fund covenants and agrees to coordinate the respective
portfolios of the Acquired Fund and Acquiring Fund from the date of the
Agreement up to and including the Closing Date in order that at Closing, when
the Assets are added to the Acquiring Fund's portfolio, the resulting portfolio
will meet the Acquiring Fund's investment objective, policies and restrictions,
as set forth in the Acquiring Fund's Prospectus, a copy of which has been
delivered to each Acquired Fund.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to each Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
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5.3. Each Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than March 14, 2001.
5.4. Each Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.5. Each Acquired Fund covenants that it will assist the Acquiring Fund
in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund shares.
5.6. Subject to the provisions of this Agreement, each Acquired Fund and
the Acquiring Fund will take, or cause to be taken, all actions, and do or cause
to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the
1934 Act and the 1940 Act the Registration Statement on Form N-14 (the
"Registration Statement") in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. Each Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. Each Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by an Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund shares to be transferred to the Acquired Fund pursuant to this Agreement
and (ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, each Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
10
<PAGE>
5.12. Each Acquired Fund and the Acquiring Fund shall use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.13. The intention of the parties is that the transaction will qualify as
a reorganization within the meaning of Section 368(a) of the Code. Neither the
Trust, the Acquiring Fund nor an Acquired Fund shall take any action, or cause
any action to be taken (including, without limitation, the filing of any tax
return) that is inconsistent with such treatment or results in the failure of
the transaction to qualify as a reorganization within the meaning of Section
368(a) of the Code. At or prior to the Closing Date, the Trust, the Acquiring
Fund and each Acquired Fund will take such action, or cause such action to be
taken, as is reasonably necessary to enable Willkie Farr & Gallagher to render
the tax opinion contemplated herein in Section 8.5.
5.14. At or immediately prior to the Closing, each Acquired Fund may
declare and pay to its stockholders a dividend or other distribution in an
amount large enough so that it will have distributed substantially all (and in
any event not less than 98%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH ACQUIRED FUND
The obligations of each Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Trust, on behalf of the
Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than an Acquired Fund, its adviser or any of their affiliates) against the
Acquiring Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquiring Fund which the
Acquiring Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to each Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Trust, on behalf of the
Acquired Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received on the Closing Date an
opinion of Dechert, in a form reasonably satisfactory to the Acquired Fund, and
dated as of the Closing Date, to the effect that:
(a) The Trust has been duly formed and is an existing business
trust; (b) the Acquiring Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquiring
Fund's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Trust, on behalf of the Acquiring
Fund, and constitutes a valid and legally binding obligation of the Trust, on
behalf of the Acquiring Fund, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
laws of general applicability relating to or affecting creditors' rights and to
general equity
11
<PAGE>
principles; (d) the execution and delivery of the Agreement did not, and the
exchange of the Acquired Fund's assets for Acquiring Fund Shares pursuant to the
Agreement will not, violate the Trust's Declaration of Trust, as amended, or By-
laws; and (e) to the knowledge of such counsel, and without any independent
investigation, (i) the Trust is not subject to any litigation or other
proceedings that might have a materially adverse effect on the operations of the
Trust, (ii) the Trust is duly registered as an investment company with the
Commission and is not subject to any stop order; and (iii) all regulatory
consents, authorizations, approvals or filings required to be obtained or made
by the Acquiring Fund under the Federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert
of customary representations it shall reasonably request of the Trust, on behalf
of each of the Acquired Funds and Acquiring Fund.
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
each Acquired Fund of all of the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Trust, on behalf of each
Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquiring Fund, its adviser or any of their affiliates) against an
Acquired Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to any Acquired Fund which such
Acquired Fund reasonably believes might result in such litigation.
7.2. Each Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund.
7.3. Each Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Trust, on behalf of the
Acquiring Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Trust with respect to each Acquired Fund
made in this Agreement are true and correct on and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquiring Fund shall reasonably
request.
7.4. The Acquiring Fund shall have received on the Closing Date an
opinion of Dechert, in a form reasonably satisfactory to the Acquiring Fund, and
dated as of the Closing Date, to the effect that:
12
<PAGE>
(a) The Trust has been duly formed and is an existing business
trust; (b) each Acquired Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Trust's
registration statement under the 1940 Act; (c) the Agreement has been duly
authorized, executed and delivered by the Trust, on behalf of the Acquired Fund,
and constitutes a valid and legally binding obligation of the Trust, on behalf
of the Acquired Fund, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and laws
of general applicability relating to or affecting creditors' rights and to
general equity principles; (d) the execution and delivery of the Agreement did
not, and the exchange of the Acquired Fund's assets for Acquiring Fund Shares
pursuant to the Agreement will not, violate the Trust's Declaration of Trust, as
amended, or By-laws; and (e) to the knowledge of such counsel, and without any
independent investigation, (i) the Trust is not subject to any litigation or
other proceedings that might have a materially adverse effect on the operations
of the Trust, (ii) the Trust is duly registered as an investment company with
the Commission and is not subject to any stop order, and (iii) all regulatory
consents, authorizations, approvals or filings required to be obtained or made
by the Acquired Fund under the Federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert
of customary representations it shall reasonably request of the Trust, on behalf
of each of the Acquired Funds and the Acquiring Fund.
7.5. Each Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by an Acquired Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND EACH
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before the
Closing Date with respect to an Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein, with
respect to the Acquired Fund, shall have been approved by the requisite vote of
the holders of the outstanding shares of the Acquired Fund in accordance with
the provisions of the Trust's Declaration of Trust, as amended, and By-Laws,
applicable Massachusetts law and the 1940 Act, and certified copies of the
resolutions evidencing such approval shall have been delivered to the Acquiring
Fund. Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this section
8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material
13
<PAGE>
adverse effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4. The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The parties shall have received an opinion of Willkie Farr &
Gallagher addressed to the Acquired Fund and the Acquiring Fund, in a form
reasonably satisfactory to each such party to this Agreement, substantially to
the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all
of the liabilities of the Acquired Fund, followed by the distribution of such
shares to the Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund in complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund upon the transfer of all or substantially all of
its assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund; (iii) the basis of the assets of the Acquired Fund in the hands
of the Acquiring Fund will be the same as the basis of such assets of the
Acquired Fund immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which such assets were held by the Acquired Fund; (v) no gain or
loss will be recognized by the Acquiring Fund upon the receipt of the assets of
the Acquired Fund in exchange for Acquiring Fund Shares and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain
or loss will be recognized by Acquired Fund Shareholders upon the receipt of the
Acquiring Fund Shares solely in exchange for their shares of the Acquired Fund
as part of the transaction; (vii) the basis of the Acquiring Fund Shares
received by Acquired Fund Shareholders will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
Acquiring Fund Shares received by Acquired Fund Shareholders will include the
holding period during which the shares of the Acquired Fund exchanged therefor
were held, provided that at the time of the exchange the shares of the Acquired
Fund were held as capital assets in the hands of Acquired Fund Shareholders. The
delivery of such opinion is conditioned upon receipt by Willkie Farr & Gallagher
of representations it shall request of the Trust. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the condition set forth in this section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless each
Acquired Fund and each of such Acquired Fund's Board members and officers from
and against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, the payment of reasonable legal fees and
reasonable costs of investigation) to which jointly and severally, the Acquired
Fund or any of its Board members or officers may become subject, insofar as any
such loss, claim, damage, liability or expense (or actions with respect thereto)
arises out of or is based on any breach by the Acquiring Fund of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
9.2. Each Acquired Fund agrees to indemnify and hold harmless the
Acquiring Fund and each of the Acquiring Fund's Board members and officers from
and against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, the payment of reasonable legal fees and
reasonable costs of investigation) to which jointly and severally, the Acquiring
Fund or any of its Board
14
<PAGE>
members or officers may become subject, insofar as any such loss, claim, damage,
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Acquired Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. The Trust, on behalf of each of the Acquired Funds and the Acquiring
Fund, represents and warrants that it has no obligations to pay any brokers or
finders fees in connection with the transactions provided for herein.
10.2. Scudder Kemper will pay the expenses associated with the
Reorganization. Any such expenses which are so borne by Scudder Kemper will be
solely and directly related to the Reorganization within the meaning of Revenue
Ruling 73-54, 1973-1 C.B. 187. Acquired Fund Shareholders will pay their own
expenses, if any, incurred in connection with the Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and each Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and the Acquired Funds in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either the Acquiring Fund or the applicable Acquired
Fund by (i) mutual agreement of the parties, or (ii) by either party if the
Closing shall not have occurred on or before [ ], 2001, unless such date is
extended by mutual agreement of the parties, or (iii) by either party if the
other party shall have materially breached its obligations under this Agreement
or made a material and intentional misrepresentation herein or in connection
herewith. In the event of any such termination, this Agreement shall become void
and there shall be no liability hereunder on the part of any party or their
respective Board members or officers, except for any such material breach or
intentional misrepresentation, as to each of which all remedies at law or in
equity of the party adversely affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of an Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of Acquired Fund Shareholders called by the applicable
Acquired Fund pursuant to section 5.3 of this Agreement, no such amendment may
have the effect of changing the provisions for determining the number of the
Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
15
<PAGE>
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
applicable Acquired Fund, 222 South Riverside Plaza, Chicago, Illinois 60606,
with a copy to Dechert, Ten Post Office Square South, Boston, MA 02109-4603,
Attention: Joseph R. Fleming, Esq., or to the Acquiring Fund, 222 South
Riverside Plaza, Chicago, Illinois 60606, with a copy to Dechert, Ten Post
Office Square South, Boston, MA 02109-4603, Attention: Joseph R. Fleming, Esq.,
or to any other address that the Acquired Fund or the Acquiring Fund shall have
last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and each Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
15.4. References in this Agreement to the Trust mean and refer to the
Board members of the Trust from time to time serving under its Declaration of
Trust on file with the Secretary of State of The Commonwealth of Massachusetts,
as the same may be amended from time to time, pursuant to which the Trust
conducts its business. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Board members, shareholders,
nominees, officers, agents, or employees of the Trust or the Funds personally,
but bind only the respective property of the Funds, as provided in the Trust's
Declaration of Trust. Moreover, no series of the Trust other than the Funds
shall be responsible for the obligations of the Trust hereunder, and all persons
shall look only to the assets of the Funds to satisfy the obligations of the
Trust hereunder. The execution and the delivery of this Agreement have been
authorized by the Trust's Board members, on behalf of the applicable Fund, and
this Agreement has been signed by authorized officers of each Fund acting as
such, and neither such authorization by such Board members, nor such execution
and delivery by such officers, shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the respective property of the Funds, as provided in the Trust's
Declaration of Trust.
Notwithstanding anything to the contrary contained in this Agreement, the
obligations, agreements, representations and warranties with respect to each
Fund shall constitute the obligations, agreements, representations and
warranties of that Fund only (the "Obligated Fund"), and in no event shall any
other series of the Trust or the assets of any such series be held liable with
respect to the breach or other default by the Obligated Fund of its obligations,
agreements, representations and warranties as set forth herein.
16
<PAGE>
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: KEMPER VARIABLE SERIES
on behalf of Kemper Horizon 5 Portfolio
_________________________
Secretary
______________________________
By:___________________________
Its:____________________________
Attest: KEMPER VARIABLE SERIES
on behalf of Kemper Horizon 10+ Portfolio
_________________________
Secretary
______________________________
By:___________________________
Its:____________________________
Attest: KEMPER VARIABLE SERIES
on behalf of Kemper Horizon 20+ Portfolio
_________________________
Secretary
______________________________
By:___________________________
Its:____________________________
Attest: KEMPER VARIABLE SERIES
on behalf of Kemper Total Return Portfolio
_________________________
Secretary
______________________________
By:___________________________
Its:___________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
17
<PAGE>
____________________________________
By:_________________________________
Its:_________________________________
18
<PAGE>
EXHIBIT B
Management's Discussion of Kemper Total Return Portfolio's Performance
Management Summary And Performance Update
--------------------------------------------------------------------------------
December 31, 1999
Kemper Total Return Portfolio
The Kemper Total Return Portfolio stuck to its stock selection discipline in
1999, which helped us find good performers in nearly every stock sector despite
the market's fairly narrow focus on a relatively small group of large-
capitalization names.
Among the positive notes during the year were the performance of our technology
and telecommunications holdings, supplemented by healthy returns from select
broadcasting and biotech names as well.
We have also focused of late on attractively priced stocks in areas that we
believe will benefit from strong consumer confidence, including the retail,
leisure, entertainment, consumer services and media sectors. On the downside,
consumer-staple holding and financial services stocks took a toll on the
portfolio, although we're finding some opportunities among credit card issuers
and companies in the insurance, brokerage and investment management businesses.
Our bond holdings generally served as a stabilizing factor during periodic dips
in the market in 1999, although the struggling bond markets did prevent the
portfolio from experiencing the full measure of the stock market's strength,
especially in the fourth quarter. As a balanced portfolio, though, that is a
trade-off we willingly accept, as our investors put a premium on
1
<PAGE>
steady, consistent performance.
We're looking forward to the upcoming months, despite the possibility of
upcoming action by the Fed. Inflation continues to be well-controlled and
corporate profits are on track. There's good potential for slow, steady economic
growth, which bodes well for the equity market in general and growth stocks
specifically.
Gary A. Langbaum
Lead Portfolio Manager
--------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Kemper Total Return Portfolio from
4/6/1982 to 12/31/1999
--------------------------------------------------------------------------------
The Russell 1000 Growth Index is an unmanaged index composed of common stock of
larger U.S. companies with greater than average growth orientation and
represents the universe of stocks from which "earnings/growth" money managers
typically select. The Lehman Brothers Government/ Corporate Bond Index is an
unmanaged index composed of intermediate and long-term government and investment
grade corporate debt securities.
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA: From 4/6/82 through 12/31/99
2
<PAGE>
Kemper Russell 1000 Lehman Brothers
Total Return Growth Government/Corporate
Portfolio Index Bond Index
0 1982.25 10000 10000 1000
4 1982.5 9781 9428 1000
0 1982.75 10730 10574 1138
4 1983 12427 12826 1232
2 1983.25 13525 14039 1271
8 1983.5 15539 15843 1291
7 1983.75 14976 15289 1311
9 1984 14617 14875 1330
6 1984.25 13472 13677 1337
9 1984.5 13078 13517 1314
8 1984.75 13945 14560 1424
9 1985 13907 14733 1530
7 1985.25 15133 16212 1563
4 1985.5 16202 17254 1692
3 1985.75 15635 16422 1726
0 1986 17860 19572 1857
3 1986.25 20358 22622 2015
0 1986.5 21572 24476 2042
0 1986.75 19866 21485 2083
7 1987 20561 22576 2146
3
<PAGE>
6 1987.25 24128 28013 2178
3 1987.5 24698 29085 2137
0 1987.75 25517 31048 2075
1 1988 20689 23772 2196
8 1988.25 21602 24508 2274
2 1988.5 22380 25826 2297
2 1988.75 22412 25716 2340
7 1989 23166 26450 2362
8 1989.25 24318 28289 2388
9 1989.5 26335 31138 2580
2 1989.75 28627 35012 2605
2 1990 28764 35953 2699
3 1990.25 28512 34623 2668
3 1990.5 30935 37991 2764
8 1990.75 28148 32317 2780
4 1991 30215 35860 2922
2 1991.25 34725 42292 3001
3 1991.5 34558 41886 3046
2 1991.75 37598 44812 3221
0 1992 41667 50617 3393
4
<PAGE>
0 1992.25 40285 48116 3342
4 1992.5 39000 47591 3477
4 1992.75 39300 49686 3647
1 1993 42372 53151 3650
2 1993.25 43369 52708 3820
0 1993.5 44138 51888 3935
5 1993.75 47241 52656 4065
8 1994 47511 54693 4053
3 1994.25 44963 52285 3926
7 1994.5 42500 51756 3877
1 1994.75 43815 55733 3897
5 1995 42999 56151 3911
4 1995.25 45871 61494 4106
1 1995.5 49495 67544 4373
8 1995.75 52022 73678 4456
5 1996 54164 77035 4664
3 1996.25 55338 81170 4555
2 1996.5 57166 86333 4576
7 1996.75 60082 89440 4656
1 1997 63245 94838 4799
6 1997.25 62681 95343 4757
4 1997.5 71029 113375 4930
3 1997.75 75077 121894 5103
5
<PAGE>
1 1998 75868 123744 5267
2 1998.25 82562 142495 5347
9 1998.5 83174 148948 5486
5 1998.75 77426 135414 5758
3 1999 87356 171635 5766
3 1999.25 89771 182544 5697
2 1999.5 94233 189572 5635
5 1999.75 90587 182618 5665
2 12/31/99 100294 228519 5642
--------------------------------------------------------------------------------
Average Annual Total Returns 1
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Life of
For the periods ended December 31, 1999 1-year 5-year 10-year portfolio
------------------------------------------------------------------------------------------------
Kemper Total Return Portfolio 14.81% 18.46% 13.31% 13.88%
(Since 4/6/1982)
-----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
1 Average annual total return and total return measure net investment
income and capital gain or loss from portfolio investments over the periods
specified, assuming reinvestment of all dividends. Average annual total return
reflects annualized change while total return reflects aggregate change.
Performance is net of the portfolio's management fee and other operating
expenses but does not include any deduction at the separate account or
contract level for any insurance or surrender charges that may be incurred
under a contract. Please see the prospectus for more details.
Past performance is not a guarantee of future results. Returns and
principal values will fluctuate so that accumulation units, when redeemed, may
be worth more or less than original cost.
7
<PAGE>
EXHIBIT C
Financial Highlights Table for Kemper Total Return Portfolio
This table is designed to help you understand Kemper Total Return Portfolio's
financial performance for the periods reflected below. The figures in the first
part of the table are for a single share. The total return figures show what a
shareholder in Kemper Total Return Portfolio would have earned (or lost),
assuming all dividends and distributions were reinvested. The information for
the 1995 through 1999 fiscal years has been audited by Ernst & Young LLP whose
report, along with Kemper Total Return Portfolio's financial statements, is
included in Kemper Total Return Portfolio's annual report.
<TABLE>
<CAPTION>
Years Ended December 31, 2000(a) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $2.882 2.735 2.822 2.815 2.579 2.112
----------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .593(b) .084(b) .086 .090 .084 .084
Net realized and unrealized gain (loss) on
investment transactions (.573) .303 .317 .377 .322 .453
----------------------------------------------------------
Total from investment operations .020 .387 .403 .467 .406 .537
Less distributions from:
Net investment income (.090) (.090) (.090) (.090) (.090) (.070)
Net realized gains on investment transactions (.135) (.150) (.400) (.370) (.080) ---
----------------------------------------------------------
Total distributions (.225) (.240) (.490) (.460) (.170) (.070)
Net asset value, end of period $2.677 2.882 2.735 2.822 2.815 2.579
----------------------------------------------------------
Total Return (%) .61** 14.81 15.14 19.96 16.76 25.97
Ratios of Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 913,347 952,485 865,423 786,996 697,102 659,894
Ratio of expenses before expense reductions (%) .64* .61 .60 .60 .59 .60
Ratio of expenses after expense reductions (%) .64* .61 .60 .60 .59 .60
Ratio of net investment income (loss) (%) 2.75* 3.12 3.33 3.32 3.21 3.52
Portfolio turnover rate (%) 47* 80 81 122 90 118
</TABLE>
(a) For the six months ended June 30, 2000 (Unaudited).
(b) Based on monthly average shares outstanding during the period.
* Annualized
** Not annualized
<PAGE>
[APPENDIX 1]
[Trustee and Nominee Shareholdings]
<PAGE>
APPENDIX [2]
Beneficial Owners of Fund Shares
<PAGE>
PART B
KEMPER VARIABLE SERIES
---------------------------------------------
Statement of Additional Information
[Date], 2000
---------------------------------------------
Acquisition of the Assets of By and in Exchange for shares of
Kemper Horizon 5 Portfolio, Kemper Total Return Portfolio,
Kemper Horizon 10+ Portfolio and a series of the Trust
Kemper Horizon 20+ Portfolio, 222 South Riverside Plaza
each a series of Chicago, IL 60606
Kemper Variable Series (the "Trust")
222 South Riverside Plaza
Chicago, IL 60606
This Statement of Additional Information is available to the shareholders
of Kemper Horizon 5 Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon
20+ Portfolio (each, a "Horizon Portfolio" and collectively, the "Horizon
Portfolios") in connection with a proposed transaction whereby Kemper Total
Return Portfolio will acquire all or substantially all of the assets and all of
the liabilities of each Horizon Portfolio in exchange for shares of beneficial
interest of Kemper Total Return Portfolio (each, a "Reorganization" and
collectively, the "Reorganizations").
This Statement of Additional Information of the Trust contains material
that may be of interest to investors but which is not included in the Proxy
Statement/Prospectus of the Trust relating to the Reorganizations. This
Statement of Additional Information consists of this cover page and the
following documents:
1. The Horizon Portfolios' and Kemper Total Return Portfolio's (collectively
referred to as the "Funds" and each referred to as a "Fund") prospectus dated
May 1, 2000, which was previously filed with the Securities and Exchange
Commission (the "Commission") via EDGAR on May 5, 2000 (File No. 811-05002) and
is incorporated by reference herein.
2. The Funds' statement of additional information dated May 1, 2000, which was
previously filed with the Commission via EDGAR on May 5, 2000 (File No.
811-05002) and is incorporated by reference herein.
3. The Funds' annual report to shareholders for the fiscal year ended December
31, 1999, which was previously filed with the Commission via EDGAR on March 3,
2000 (File No. 811-05002) and is incorporated by reference herein.
4. The Funds' semiannual report to shareholders for the period ended June 30,
2000, which was previously filed with the Commission via EDGAR on August 22,
2000 (File No. 811-05002) and is incorporated by reference herein.
<PAGE>
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated [Date], 2000 relating to the Reorganizations may be
obtained by writing the Horizon Portfolios at 222 South Riverside Drive,
Chicago, IL 60606 or by calling [ ] at 1-800-[ ]. This
Statement of Additional Information should be read in conjunction with the Proxy
Statement/Prospectus.
<PAGE>
ANNEX A
RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 and Prime-1, Prime-2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Ratings Services has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is rated A-1 or A-2.
The ratings Prime-1 and Prime-2 are the two highest commercial paper
ratings assigned by Moody's Investors Service, Inc. Among the factors considered
by them in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated Prime-1 or 2.
CORPORATE BONDS
Standard & Poor's Ratings Services 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.
<PAGE>
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Moody's Investors Service, Inc. Bond Ratings
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt-
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
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.
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification.
-------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit (1)(a)(1) and (2) 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 question as to whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding
Corp. ("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder,
Stevens & Clark, Inc. ("Scudder") and the representatives of the
beneficial owners of the capital stock of Scudder ("Scudder
Representatives") entered into a transaction agreement ("Transaction
Agreement") pursuant to which Zurich became the majority stockholder
in Scudder with an approximately 70% interest, and ZKI was combined
with Scudder ("Transaction"). In connection with the trustees'
evaluation of the Transaction, Zurich agreed to indemnify the
Registrant and the trustees who were not interested persons of ZKI or
Scudder (the "Independent Trustees") for and against any liability and
expenses based upon any action or omission by the Independent Trustees
in connection with their consideration of and action with respect to
the Transaction. In addition, Scudder has agreed to indemnify the
Registrant and the Independent Trustees for and against any liability
and expenses based upon any misstatements or omissions by Scudder to
the Independent Trustees in connection with their consideration of the
Transaction.
Item 16. Exhibits.
-------- ---------
(1) (a)(1) Amended and Restated Agreement and Declaration of
Trust, dated April 24, 1998. (Incorporated by
reference to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A filed on April
28, 1998.)
<PAGE>
(a)(2) Amendment to the Declaration of Trust, dated March
31, 1999. (Incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement on Form N-1A filed on April 29, 1999.)
(a)(3) Amended and Restated Establishment and Designation
of Series of Shares of Beneficial Interest dated
March 31, 1999. (Incorporated by reference to Post-
Effective Amendment No. 27 to the Registration
Statement on Form N-1A filed on September 1, 1999.)
(a)(4) Amended and Restated Establishment and Designation
of Series of Shares of Beneficial Interest dated
September 29, 1999. (Incorporated by reference to
Post-Effective Amendment No. 29 to the Registration
Statement on Form N-1A filed on October 29, 1999.)
(a)(5) Redesignation of Series dated May 1, 2000
(Incorporated by reference to Post-Effective
Amendment No. 32 to the Registration Statement on
Form N-1A filed on May 1, 2000.)
(a)(6) Text of Share Certificate. (Incorporated by
reference to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A filed on April
27, 1995.)
(2) (b)(1) By-laws. (Incorporated by reference to Post-
Effective Amendment No. 14 to the Registration
Statement on Form N-1A filed on April 27, 1995.)
(3) Inapplicable.
(4) Form of Agreement and Plan of Reorganization is
filed herein as Exhibit A to Part A.
(5) Inapplicable.
(6) (d)(1) Investment Management Agreement between the
Registrant, on behalf of Kemper Money Market
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(2) Investment Management Agreement between the
Registrant, on behalf of Kemper High Yield
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(3) Investment Management Agreement between the
Registrant, on behalf of Kemper Growth Portfolio,
and Scudder Kemper Investments, Inc., dated
September 7, 1998. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A filed on February 12, 1999.)
<PAGE>
(d)(4) Investment Management Agreement between the
Registrant, on behalf of Kemper Government
Securities Portfolio, and Scudder Kemper
Investments, Inc., dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
(d)(5) Investment Management Agreement between the
Registrant, on behalf of Kemper International
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(6) Investment Management Agreement between the
Registrant, on behalf of Kemper Small Cap Growth
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(7) Investment Management Agreement between the
Registrant, on behalf of Kemper Investment Grade
Bond Portfolio, and Scudder Kemper Investments,
Inc., dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(8) Investment Management Agreement between the
Registrant, on behalf of Kemper Value+Growth
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(9) Investment Management Agreement between the
Registrant, on behalf of Kemper Horizon 20+
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(10) Investment Management Agreement between the
Registrant, on behalf of Kemper Horizon 10+
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by reference
to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(11) Investment Management Agreement between the
Registrant, on behalf of Kemper Horizon 5 Portfolio,
and Scudder Kemper Investments, Inc., dated
September 7, 1998. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A filed on February 12, 1999.)
<PAGE>
(d)(12) Investment Management Agreement between the
Registrant, on behalf of Kemper Contrarian Value
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(13) Investment Management Agreement between the
Registrant, on behalf of Kemper Small Cap Value
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(14) Investment Management Agreement between the
Registrant, on behalf of Kemper Blue Chip
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(15) Investment Management Agreement between the
Registrant, on behalf of Kemper Global Income
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(16) Investment Management Agreement between the
Registrant, on behalf of KVS Dreman High Return
Equity Portfolio (formerly Kemper-Dreman High
Return Equity Portfolio), and Scudder Kemper
Investments, Inc., dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
(d)(17) Investment Management Agreement between the
Registrant, on behalf of KVS Dreman Financial
Services Portfolio (formerly Kemper Dreman
Financial Services Portfolio), and Scudder Kemper
Investments, Inc., dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
(d)(18) Investment Management Agreement between the
Registrant, on behalf of Kemper Global Blue Chip
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(19) Investment Management Agreement between the
Registrant, on behalf of Kemper International
Growth and Income Portfolio, and Scudder Kemper
Investments, Inc., dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
<PAGE>
(d)(20) Investment Management Agreement between the
Registrant, on behalf of Kemper Total Return
Portfolio, and Scudder Kemper Investments, Inc.,
dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
(d)(21) Investment Management Agreement between the
Registrant, on behalf of Kemper Aggressive Growth
Portfolio, and Scudder Kemper Investments, Inc.,
dated May 1, 1999. (Incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A filed on April
29, 1999.)
(d)(22) Investment Management Agreement between the
Registrant, on behalf of Kemper Technology
Portfolio, and Scudder Kemper Investments, Inc.,
dated May 1, 1999. (Incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A filed on April
29, 1999.)
(d)(23) Investment Management Agreement between the
Registrant, on behalf of KVS Index 500 Portfolio,
and Scudder Kemper Investments, Inc., dated
September 1, 1999. (Incorporated by reference to
Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A filed on
August 31, 1999.)
(d)(24) Investment Management Agreement between the
Registrant, on behalf of the KVS Focused Large Cap
Growth Portfolio, and Scudder Kemper Investments,
Inc. (Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement on
Form N-1A filed on February 25, 2000.)
(d)(25) Investment Management Agreement between the
Registrant, on behalf of the KVS Growth and Income
Portfolio, and Scudder Kemper Investments, Inc.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement on
Form N-1A filed on February 25, 2000.)
(d)(26) Investment Management Agreement between the
Registrant, on behalf of the KVS Growth
Opportunities Portfolio, and Scudder Kemper
Investments, Inc. (Incorporated by reference to
Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on
February 25, 2000.)
(d)(27) Subadvisory Agreement between Scudder Kemper
Investments, Inc. and Dreman Value Management,
L.L.C., dated September 7, 1998, for KVS Dreman
High Return Equity Portfolio. (Incorporated by
reference to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A filed on
February 12, 1999.)
<PAGE>
(d)(28) Subadvisory Agreement between Scudder Kemper Investments, Inc.,
on behalf of Investors Fund Series, and Dreman Value Management,
L.L.C., dated September 7, 1998, for KVS Dreman Financial
Services Portfolio. (Incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A filed
on February 12, 1999.)
(d)(29) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Scudder Investments (U.K.) Limited, dated September 7, 1998,
for Kemper Global Income Portfolio. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
(d)(30) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Scudder Investments (U.K.) Limited, dated September 7, 1998,
for Kemper International Portfolio. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A filed on February 12, 1999.)
(d)(31) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Banker Trust Company, dated September 1, 1999, for Kemper
Index 500 Portfolio. (Incorporated by reference to Post-Effective
Amendment No. 27 to the Registration Statement on Form N-1A filed
on August 31, 1999.)
(d)(32) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Eagle Asset Management, dated October 29, 1999, for KVS
Focused Large Cap Growth Portfolio. (Incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A filed on February 25, 2000.)
(d)(33) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Janus Capital Corporation, dated October 29, 1999, for KVS
Growth and Income Portfolio. (Incorporated by reference to Post-
Effective Amendment No. 30 to the Registration Statement on Form
N-1A filed on February 25, 2000.)
(d)(34) Subadvisory Agreement between Scudder Kemper Investments, Inc.
and Janus Capital Corporation, dated October 29, 1999, for KVS
Growth Opportunities Portfolio. (Incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A filed on February 25, 2000.)
(7) (e)(1) Underwriting Agreement between Investors Fund Series and Kemper
Distributors, Inc., dated August 1, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A filed on February 12, 1999.)
<PAGE>
(e)(2) Underwriting Agreement between Investors Fund Series and Kemper
Distributors, Inc., dated September 7, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A filed on February 12, 1999.)
(8) Inapplicable.
(9) (g)(1) Custody Agreement between the Registrant, on behalf of Kemper
Money Market Portfolio, Kemper Total Return Portfolio, Kemper
High Yield Portfolio, Kemper Growth Portfolio, Kemper Government
Securities Portfolio, Kemper International Portfolio, Kemper
Small Cap Growth Portfolio, Kemper Investment Grade Bond
Portfolio, Kemper Value+Growth Portfolio, Kemper Horizon 20+
Portfolio, Kemper Horizon 10+ Portfolio, Kemper Horizon 5
Portfolio, Kemper Contrarian Portfolio, Kemper Small Cap Value
Portfolio, Kemper Blue Chip Portfolio and Kemper Global Income
Portfolio, and Investors Fiduciary Trust Company, dated March 1,
1995. (Incorporated by reference to Post-Effective Amendment No.
14 to the Registration Statement on Form N-1A filed on April 27,
1995.)
(g)(2) Foreign Custodian Agreement between Chase Manhattan Bank and
Kemper Investors Fund, dated January 2, 1990. (Incorporated by
reference to Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A filed on April 27, 1995.)
(g)(3) Custody Agreement between the Registrant, on behalf of KVS Dreman
High Return Equity Portfolio and KVS Dreman Financial Services
Portfolio, and State Street Bank and Trust Company, dated April
24, 1998. (Incorporated by reference to Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A filed on
February 12, 1999.)
(g)(4) Custody Agreement between the Registrant, on behalf of Kemper
International Growth and Income Portfolio and Kemper Global Blue
Chip Portfolio, and Brown Brothers Harriman & Co., dated May 1,
1998. (Incorporated by reference to Post-Effective Amendment No.
23 to the Registration Statement on Form N-1A filed on February
12, 1999.)
(g)(5) Addendum to the Custody Agreement between the Registrant, on
behalf of Kemper Aggressive Growth Portfolio and Kemper
Technology Growth Portfolio, and State Street Bank and Trust
Company, dated May 1, 1999. (Incorporated by reference to Post-
Effective Amendment No. 24 to the Registration Statement on Form
N-1A filed on April 29, 1999.)
(10) Inapplicable.
(11) Opinions and Consents of Dechert is filed herewith.
<PAGE>
(12) Opinion and Consent of Willkie, Farr & Gallagher to be filed by
post-effective amendment.
(13) (h)(1) Agency Agreement between Kemper Investors Fund and Investors
Fiduciary Trust Company, dated March 24, 1987. (Incorporated by
reference to Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A filed on April 27, 1995.)
(h)(2) Supplement to Agency Agreement. (Incorporated by reference to
Post-Effective Amendment No. 24 to the Registration Statement on
Form N-1A filed on April 29, 1999.)
(h)(3) Fund Accounting Services Agreements between the Registrant, on
behalf of Kemper Money Market Portfolio, Kemper Total Return
Portfolio, Kemper High Yield Portfolio, Kemper Growth Portfolio,
Kemper Government Securities Portfolio, Kemper International
Portfolio, Kemper Small Cap Growth Portfolio, Kemper Investment
Grade Bond Portfolio, Kemper Value+Growth Portfolio, Kemper
Horizon 20+ Portfolio, Kemper Horizon 10+ Portfolio, Kemper
Horizon 5 Portfolio, Kemper Value Portfolio, Kemper Small Cap
Value Portfolio, Kemper Blue Chip Portfolio and Kemper Global
Income Portfolio, and Scudder Fund Accounting Corporation, dated
December 31, 1997. (Incorporated by reference to Post-Effective
Amendment No. 21 to the Registration Statement on Form N-1A filed
on March 26, 1998.)
(h)(4) Fund Accounting Services Agreement between the Registrant, on
behalf of KVS Dreman High Return Equity Portfolio, KVS Dreman
Financial Services Portfolio, Kemper Global Blue Chip Portfolio
and Kemper International Growth and Income Portfolio, and Scudder
Fund Accounting Corporation, dated May 1, 1998. (Incorporated by
reference to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A filed on February 12, 1999.)
(h)(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Aggressive Growth Portfolio, and Scudder Fund
Accounting Corporation, dated May 1, 1999. (Incorporated by
reference to Post-Effective Amendment No. 24 to the Registration
Statement on Form N-1A filed on April 29, 1999.)
(h)(6) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Technology Growth Portfolio, and Scudder Fund
Accounting Corporation, dated May 1, 1999. (Incorporated by
reference to Post-Effective Amendment No. 24 to the Registration
Statement on Form N-1A filed on April 29, 1999.)
<PAGE>
(h)(7) Fund Accounting Services Agreement between the Registrant, on
behalf of KVS Index 500 Portfolio (formerly, Kemper Index 500
Portfolio), and Scudder Fund Accounting Corporation, dated
September 1, 1999. (Incorporated by reference to Post-Effective
Amendment No. 27 to the Registration Statement on Form N-1A filed
on August 31, 1999.)
(h)(8) Fund Accounting Services Agreement between the Registrant, on
behalf of KVS Focused Large Cap Portfolio, and Scudder Fund
Accounting Corporation, dated October 29, 1999. (Incorporated by
reference to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on February 25, 2000.)
(h)(9) Fund Accounting Services Agreement between the Registrant, on
behalf of KVS Growth and Income Portfolio, and Scudder Fund
Accounting Corporation, dated October 29, 1999. (Incorporated by
reference to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on February 25, 2000.)
(h)(10) Fund Accounting Services Agreement between the Registrant, on
behalf of KVS Growth Opportunities Portfolio, and Scudder Fund
Accounting Corporation, dated October 29, 1999. (Incorporated by
reference to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on February 25, 2000.)
(h)(11) Amended and Restated Establishment and Designation of Series, on
behalf of Kemper Aggressive Growth Portfolio and Kemper
Technology Growth Portfolio, dated March 31, 1999. (Incorporated
by reference to Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A filed on August 31, 1999.)
(h)(12) Amended and Restated Establishment and Designation of Series, on
behalf of KVS Index 500 Portfolio, dated July 14, 1999.
(Incorporated by reference to Post-Effective Amendment No. 27 to
the Registration Statement on Form N-1A filed on August 31,
1999.)
(h)(13) Amended and Restated Establishment and Designation of Series, on
behalf of KVS Growth Opportunities Portfolio, KVS Growth and
Income Portfolio and KVS Focused Large Cap Growth Portfolio,
dated September 29, 1999. (Incorporated by reference to Post-
Effective Amendment No. 29 to the Registration Statement on Form
N-1A filed on October 29, 1999. )
(14) Consent of Independent Auditors is filed herewith.
(15) Inapplicable.
(16) Powers of Attorney are filed herewith.
(17) Forms of Proxy are filed herewith.
<PAGE>
Item 17. Undertakings.
-------- -------------
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act [17 CFR 230.145c], the reoffering prospectus will
contain the information called for by the applicable registration
form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment
is effective, and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The undersigned Registrant undertakes to file, by post-effective
amendment, an opinion of counsel supporting the tax consequences of
the proposed reorganization within a reasonable time after receipt of
such opinion.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Kemper Variable Series has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 14th day of December, 2000.
KEMPER VARIABLE SERIES
By: /s/Mark S. Casady
-----------------
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Mark S. Casady President December 14, 2000
-----------------
Mark S. Casady
/s/James E. Akins* Trustee December 14, 2000
-----------------
James E. Akins
/s/James R. Edgar* Trustee December 14, 2000
-----------------
James R. Edgar
/s/Arthur R. Gottschalk* Trustee December 14, 2000
-----------------------
Arthur R. Gottschalk
/s/Frederick T. Kelsey* Trustee December 14, 2000
----------------------
Frederick T. Kelsey
/s/Thomas W. Littauer* Trustee December 14, 2000
---------------------
Thomas W. Littauer
/s/Fred B. Renwick* Trustee December 14, 2000
------------------
Fred B. Renwick
/s/John G. Weithers* Trustee December 14, 2000
-------------------
John G. Weithers
/s/John R. Hebble Treasurer (Principal Financial and December 14, 2000
----------------- Accounting Officer)
John R. Hebble
</TABLE>
*By: /s/ Caroline Pearson December 14, 2000
----------------------------------
Caroline Pearson, Attorney-in-fact
*Executed pursuant to powers of attorney filed herein as an exhibit to the
Registrant's Registration Statement on Form N-14.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KEMPER VARIABLE SERIES
<PAGE>
KEMPER VARIABLE SERIES
EXHIBIT INDEX
Exhibit 11 Opinions and Consents of Dechert
Exhibit 14 Consent of Independent Auditors
Exhibit 16 Powers of Attorney
Exhibit 17 Forms of Proxy
