<PAGE>
As filed with the Securities and Exchange Commission
on December 6, 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 TOTAL RETURN FUND
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Philip J. Collora
Kemper Total Return Fund
222 South Riverside Plaza
Chicago, Illinois 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 ($.01 par value)
of Kemper Total Return Fund, a series of the Registrant
________________________________________________________________________________
It is proposed that this filing will become effective on January 5, 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 SPECIAL MEETING OF SHAREHOLDERS OF
KEMPER HORIZON FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of each series of Kemper Horizon Fund (the "Trust"), with respect to each of its
portfolio series (each, a "Fund"), will be held at the offices of Scudder Kemper
Investments, Inc., 13th Floor, Two International Place, Boston, MA 02110-4103,
on May 24, 2001, at [ ] [a][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 Fund; (ii)
the distribution to each shareholder of Kemper Horizon 5
Portfolio shares of beneficial interest of Kemper Total
Return Fund 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 Fund;
(ii) the distribution to each shareholder of Kemper Horizon
10+ Portfolio shares of beneficial interest of Kemper Total
Return Fund 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 Fund;
(ii) the distribution to each shareholder of Kemper Horizon
20+ Portfolio shares of beneficial interest of Kemper Total
Return Fund 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 Fund for that Fund's current
fiscal year.
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 Fund at the close of business on March
5, 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. 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 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
<PAGE>
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
March 6, 2001
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE (OR TO TAKE ADVANTAGE OF
THE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES DESCRIBED ON THE PROXY CARD(S)).
YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) (OR YOUR VOTING BY OTHER
AVAILABLE MEANS) 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 TRANSACTION...................................................... __
PROPOSAL 5: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT AUDITORS............ __
ADDITIONAL INFORMATION.................................................................... __
</TABLE>
<PAGE>
PROXY STATEMENT/PROSPECTUS
March [ ], 2001
Relating to the acquisition of the assets of
KEMPER HORIZON 5 PORTFOLIO,
KEMPER HORIZON 10+ PORTFOLIO and
KEMPER HORIZON 20+ PORTFOLIO,
each a series of
KEMPER HORIZON FUND (the "Acquired Trust" or "Trust")
222 South Riverside Plaza
Chicago, Illinois 60606
(800) [ ]
--------------------------
by and in exchange for shares of beneficial interest of
KEMPER TOTAL RETURN FUND,
(the "Acquiring Trust")
222 South Riverside Plaza
Chicago, Illinois 60606
(800) [ ]
--------------------------
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of each
series of the Acquired Trust (Kemper Horizon 5 Portfolio, Kemper Horizon 10+
Portfolio, and Kemper Horizon 20+ Portfolio) (each, a "Fund" and collectively,
the "Funds" or "Horizon Funds") in connection with five proposals. Proposal 1
describes the election of Trustees and Proposal 5 proposes the ratification of
the selection of each Fund's auditors.
In Proposals 2 through 4, shareholders 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 Fund would be acquired by Kemper Total Return Fund, a
fund managed by the same investment manager as the Funds, in exchange for shares
of beneficial interest of Kemper Total Return Fund and the assumption by Kemper
Total Return Fund of all of the liabilities of the Funds, as described more
fully below (the "Reorganization"). Shares of Kemper Total Return Fund received
would then be distributed to the shareholders of each Fund in complete
liquidation of that Fund. As a result of the Reorganization, shareholders of
each Fund will become shareholders of Kemper Total Return Fund and will receive
shares of Kemper Total Return Fund in an amount equal to the value of their
holdings in the Fund in which they are currently a shareholder as of the close
of business on the business day preceding the closing of the Reorganization (the
"Valuation Date"). The closing of the Reorganization (the "Closing") is
contingent upon shareholder approval of the Plan. A copy of the Plan is
attached as Exhibit A. The Reorganization is expected to occur on or about June
11, 2001.
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.
Proposals 1 through 4 arise out of a restructuring program proposed by
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"),
the investment manager of both the
-1-
<PAGE>
Funds and Kemper Total Return Fund, 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 the combination of its open-end, directly-
distributed funds (the "Scudder Funds") with the funds in the Kemper Family of
Funds (the "Kemper Funds") 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 Kemper
Funds shareholders.
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
Funds whose Proxy Statement/Prospectus this is. In addition, for simplicity,
actions are described in this Proxy Statement/Prospectus as being taken by
either a Fund or Kemper Total Return Fund (which are collectively referred to as
the "Funds" and each referred to as a "Fund"), although all actions are actually
taken either by the Acquired Trust or the Acquiring Trust (together with the
Acquired Trust, the "Trusts"), on behalf of the applicable Fund or Funds.
This Proxy Statement/Prospectus sets forth concisely the information about
Kemper Total Return Fund 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
Kemper Total Return Fund, see Kemper Total Return Fund's prospectus dated
February 1, 2001, 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). For a more detailed
discussion of the investment objective, policies, restrictions and risks of the
Funds, see the Funds' prospectus dated December 1, 2000, as supplemented from
time to time, which is also incorporated herein by reference and a copy of which
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 Fund's
statement of additional information dated February 1, 2001, as supplemented from
time to time, which may be obtained upon request and without charge by calling
or writing Kemper Total Return Fund at the telephone number or address listed
above. A Statement of Additional Information, dated March [ ], 2001,
containing additional information about the Reorganization has been filed with
the Securities and Exchange Commission (the "SEC" or the "Commission") and is
incorporated by reference into this Proxy Statement/Prospectus. A copy of this
Statement of Additional Information is available upon request and without charge
by calling or writing Kemper Total Return Fund at the telephone number or
address listed above. Shareholder inquiries regarding Kemper Total Return Fund
may be made by calling (800) [ ] and shareholder inquiries regarding
the Funds 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.
Kemper Total Return Fund and the Funds are diversified series of shares of
beneficial interest of the Acquiring Trust and the Acquired Trust, respectively,
which are open-end management investment companies organized as Massachusetts
business trusts.
The Board of Trustees that oversees the Funds is soliciting proxies from
shareholders of the Funds for the Special Meeting of Shareholders to be held on
May 24, 2001, at Scudder Kemper's offices, 13th Floor, Two International Place,
Boston, MA 02110-4103 at [ ] [a][p].m. (Eastern time), and at any and all
adjournments or postponements thereof (the "Meeting"). This Proxy
Statement/Prospectus, the Notice of Special Meeting and the proxy card(s) are
first being mailed to shareholders on or about March 6, 2001 or as soon as
practicable thereafter.
-2-
<PAGE>
The Board of Trustees unanimously recommends that shareholders vote FOR the
nominees listed in Proposal 1, and FOR Proposals 2, 3, 4 and 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. Shareholders are being asked to
elect these individuals to the Board of Trustees in case the Plan, as described
under Proposals 2, 3 and 4, is not approved by shareholders. Shareholders of
Kemper Total Return Fund are being asked to approve the same slate of eleven
individuals although the current board differs in composition. (See "Synopsis -
Other Differences Between the Funds" under Proposals 2 through 4).
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 Kemper Funds proposed to consolidate into a single board.
The eleven individuals who have been nominated for election as Trustees of the
Fund 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. These eleven individuals are also being
nominated for election as trustees or directors of most of the other Kemper
Funds (including Kemper Total Return Fund). 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 July 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 governing documents of the Trust. 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 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.
Nominees for Election as Trustees:
--------------------------------------------------------------------------------
Year First
Name, (Date of Birth), Principal Occupation and Affiliations 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
--------------------------------------------------------------------------------
-3-
<PAGE>
--------------------------------------------------------------------------------
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, Nominee
Scudder Kemper Investments, Inc.
--------------------------------------------------------------------------------
Donald L. Dunaway (3/8/37),/(1)/ Retired; formerly, Nominee
Executive 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),*/(4)/ Managing Director, Nominee
Scudder Kemper Investments, Inc.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
Fred B. Renwick (2/1/30),/(3)/ Professor of Finance, New 1995
York 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
--------------------------------------------------------------------------------
-4-
<PAGE>
--------------------------------------------------------------------------
Solar, Inc. and Litton Industries.
--------------------------------------------------------------------------
John G. Weithers (8/8/33),/(3)/ Formerly, Chairman of the 1995
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 30 portfolios
managed by Scudder Kemper.
/(2)/ Ms. Coughlin serves as a board member of 52 investment companies with 75
portfolios managed by Scudder Kemper.
/(3)/ Messrs. Edgar, Renwick and Weithers serve as board members of 16
investment companies with 50 portfolios managed by Scudder Kemper.
/(4)/ Mr. Glavin does not currently serve as a board member of any investment
companies managed by Scudder Kemper.
Trustees Not Standing for Re-Election:
--------------------------------------------------------------------------------
Present Office with the Fund;
Principal Occupation or Employment
Name (Date of Birth) and Directorships
-------------------- -----------------
--------------------------------------------------------------------------------
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 R. Gottschalk (2/13/25) Trustee; Retired; formerly, President,
Illinois 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) Chairman and Trustee; Managing Director,
Scudder Kemper Investments, Inc.; formerly,
Head of Broker Dealer Division of Putnam
Investment Management; formerly, President
of Clement
--------------------------------------------------------------------------------
-5-
<PAGE>
--------------------------------------------------------------------------------
Management Services for Fidelity Investments.
--------------------------------------------------------------------------------
* Interested person of the Trust as defined in the 1940 Act.
Appendix 1 lists the number of shares of each Fund 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 Funds and to provide oversight of the management of the
Funds. 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 each Fund 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.
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 and a Contract Renewal Committee. During each Fund's fiscal
year ended July 31, 2000, the Board of Trustees met six 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 the fiscal year ended July 31,
2000.]
Audit and Governance Committee
The Audit and Governance Committee makes recommendations regarding the
selection of independent auditors for the Funds, confers with the independent
auditors regarding the Funds' 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 only of 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
Funds' 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 six meetings during the fiscal year ended July 31, 2000.
-6-
<PAGE>
Officers
The following persons are officers of the Trust:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Name (Date of Birth) Present Office with the Acquired Year First Became an Officer/1/
-------------------- ----------------------------
Trust; Principal Occupation or
Employment
----------
---------------------------------------------------------------------------------------------------------
<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; 1995
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.
---------------------------------------------------------------------------------------------------------
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.
---------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (12/3/52) Vice President; Managing 1998
Director, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
Linda J. Wondrack (9/12/64) Vice President; Senior Vice 1998
President, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
John R. Hebble (6/27/58) Treasurer; Senior Vice 1998
President, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
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, Associated
Staff
---------------------------------------------------------------------------------------------------------
</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 Funds.
-7-
<PAGE>
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------------------
Attorney of an unaffiliated
investment management firm;
Associate, Peabody & Arnold (law
firm).
-----------------------------------------------------------------------------------
Caroline Pearson (4/1/62) Assistant Secretary; Senior Vice 1998
President, Scudder Kemper;
formerly, Associate, Dechert
Price & Rhoads (law firm) from
1989 to 1997.
-----------------------------------------------------------------------------------
Brenda Lyons (2/21/63) Assistant Treasurer; Senior Vice 1998
President, Scudder Kemper.
-----------------------------------------------------------------------------------
</TABLE>
Compensation of Trustees and Officers
Each Fund 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 Fund's investments, pays the compensation and expenses of its
personnel who serve as Trustees and officers on behalf of a Fund 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 Funds makes no direct payments to
them.
The Independent Trustees of the Trust are not entitled to benefits under
any pension or retirement plan. Each of Messrs. Akins, Gottschalk, and Kelsey,
none of whom is standing for re-election, will be provided by the Funds, as well
as each other Kemper Fund for which he serves as a trustee, with a one-time
benefit in an amount that is based upon the number of years remaining until his
normal retirement age. The benefit that Mr. Akins will receive from each fund
will range from $[ ] to $[ ]. The benefit that Mr. Gottschalk will
receive from each fund will range from $[ ] to $[ ]. The benefit that
Mr. Kelsey will receive from each fund will range from $[ ] to $[ ].
Because Scudder Kemper will also benefit from the administrative efficiencies
of a consolidated board, Scudder Kemper has agreed to bear one-half of the cost
of any such benefit.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Trustees who receive compensation from the Funds.
Column (2) Aggregate compensation received by each Trustee from each Fund
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 From Total Compensation From
Name of Trustee Each Fund Fund Complex/(2)(3)/
-------------------------------------------------------------------------------------
<S> <C> <C>
James E. Akins Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------
James R. Edgar Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
Arthur R. Gottschalk/(1)/ Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
Frederick T. Kelsey Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
Fred B. Renwick Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
John G. Weithers Kemper Horizon 5:
Kemper Horizon 10+:
Kemper Horizon 20+:
-------------------------------------------------------------------------------------
</TABLE>
/(1)/ Includes deferred fees. Pursuant to deferred compensation agreements
with the Trust, deferred amounts accrue interest monthly at a rate equal to the
yield of Zurich Money Funds - Zurich Money Market Fund. Total deferred fees
(including interest thereon) payable 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.
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, including all of the Independent Trustees, approved
the Plan at a meeting held on November 29, 2000. Subject to its approval by the
shareholders of the Funds, the Plan provides that each Horizon Fund would (a)
transfer all or substantially all of its assets and all of its liabilities to
Kemper Total Return Fund in exchange for Class A, Class B, Class C and Class I
shares of Kemper Total Return Fund; (b) distribute such shares to each
shareholder of the Fund in liquidation of the Fund, and (c) terminate as a
series of the Acquired Trust. As a result of the Reorganization, each
shareholder of each Fund will become a shareholder of Kemper Total Return Fund
and will hold, immediately after the Reorganization, shares of the class of
shares of Kemper Total Return Fund that
-9-
<PAGE>
corresponds to the class of shares of the relevant Fund held by that shareholder
on the Valuation Date, having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the relevant Fund on
the Valuation Date. Each Horizon Fund's shareholders will vote on reorganization
of their Fund into Kemper Total Return Fund, with each reorganization separate
and distinct from the other. The Reorganization of each Horizon Fund is not
contingent upon approval of the other Horizon Funds' shareholders.
Scudder Kemper is the investment manager of each Fund and Kemper Total
Return Fund. If the Reorganization is completed, each Fund's shareholders will
continue to enjoy all of the same shareholder privileges as they currently
enjoy, such as access to professional service representatives, exchange
privileges and automatic dividend reinvestment. Services provided to the Class
A, Class B, Class C and Class I shareholders of Kemper Total Return Fund
following the Reorganization will be identical to those currently provided to
shareholders of the corresponding class of the relevant Fund. See "Purchase,
Redemption and Exchange Information."
Background of the Reorganization
The 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 many Scudder Funds and 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.
Most of the Scudder Funds have recently adopted a new fee structure for
certain administrative services. Under this fee structure, in exchange for
payment by a fund of a single administrative fee rate, Scudder Kemper provides
or pays for substantially all services that the fund normally requires for its
operations, other than those provided under the fund's investment management
agreement and certain other expenses. This administrative fee enables investors
to determine with greater certainty the expense level that a fund will
experience, and, for the term of the administrative agreement, transfers
substantially all of the risk of increased costs to Scudder Kemper. Likewise,
Scudder Kemper receives all of the benefits of economies of scale from increases
in asset size or decreased operating expenses. As part of the restructuring
effort, Scudder Kemper has proposed extending this administrative fee structure
to those funds currently offered under the Kemper name.
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.
-10-
<PAGE>
Reasons for the Proposed Reorganization; 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 Transaction - Board Approval
of the Proposed Transaction" below.
In determining whether to recommend that the shareholders of the Funds
approve the Reorganization, the Board of Trustees considered that:
. Given each Fund's relative small size and Scudder Kemper's commitment
to a streamlined family of funds, each Reorganization would allow
shareholders to continue their investment in another fund and would be
effected on a tax-free basis, as opposed to liquidation, which would
be a taxable transaction.
. The fixed rate under the Administration Agreement is expected to be
less than the estimated current applicable operating expenses each
class of shares would otherwise pay.
. It is a condition of the Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a tax-free
transaction.
. Scudder Kemper agreed to bear a portion of the costs of the
Reorganization allocable to Class I shares of each Horizon Fund. Class
A, B and C shares of each Horizon Fund will bear all of the costs of
the Reorganization allocable to such class. The portion of the costs
of the Reorganization paid by each class is estimated to be
recoverable from lower overall expense rates within six months of
completion of each Reorganization.
For these reasons, as more fully described below under "The Proposed
Transaction -- Board Approval of the Proposed Transaction," the Board of
Trustees, including the Independent Trustees, has concluded that:
. the Reorganization is in the best interests of the Funds and their
shareholders; and
. the interests of the existing shareholders of the Funds will not be
diluted as a result of the Reorganization.
Accordingly, the Trustees unanimously recommend approval of the Plan
effecting the Reorganization. If the Plan is not approved with respect to a
Fund, that Fund will continue in existence unless other action is taken by the
Trustees.
Investment Objectives, Policies and Restrictions of the Funds
The investment objectives, policies and restrictions of each of the Funds
differ. Kemper Total Return Fund's investment objective is to seek the highest
total return, a combination of income and capital appreciation, consistent with
reasonable risk. The investment objective of Kemper Horizon 20+ is to seek
growth of capital, with income a secondary goal. The investment objective of
Kemper Horizon
-11-
<PAGE>
10+ is to seek a balance between growth of capital and income, consistent with
moderate risk. The investment objective of Kemper Horizon 5 is to seek income
consistent with capital preservation; growth of capital is a secondary goal.
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 Fund may vary substantially from the objective of your current
Fund. There can be no assurance that any Fund will achieve its investment
objective.
Each of the Funds, including Kemper Total Return Fund, invests in a mix of
securities including both debt and equity; however, the investment allocation of
debt and equity securities varies by Fund. Kemper Total Return Fund does not
have a particular target allocation between debt and equity securities. Kemper
Horizon 20+ normally invests 80% of its net assets in equity securities and 20%
in fixed-income securities. Kemper Horizon 10+ normally invests 60% of its net
assets in equity securities and 40% in fixed-income securities. Kemper Horizon
5 normally invests 40% of its net assets in equity securities and 60% in fixed-
income securities. Kemper Total Return Fund does not target any particular
allocation between debt and equity securities, [but normally consists of ___ %
in fixed-income securities and ___ % in equity securities]. The percentage of
assets invested in specific categories of fixed-income and equity securities for
Kemper Total Return Fund 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 monetary policies. Kemper Total Return
Fund 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. The portfolio management team for Kemper Total Return Fund
and the Horizon Funds differ.
Equity Investments
------------------
Each Horizon Fund 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 Fund 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 Fund is normally invested in 50%
growth stocks and 50% value stocks, but may vary between 40-60% for both.
Kemper Total Return Fund generally invests in growth stocks. When choosing U.S.
stocks, the managers of the Horizon Funds 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 Fund 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, managers of the Horizon Funds generally
focus on established companies in countries with developed economies, although
the Funds may invest in stocks of any size and from any country. Kemper Total
Return Fund 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, including Kemper Total Return 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 Fund does not
require, as the Horizon Funds do, that all of its fixed-income securities be
denominated in U.S. dollars.
-12-
<PAGE>
The credit quality of the Funds' fixed-income investments may differ from
Kemper Total Return Fund. Each Horizon Fund requires 90% of its fixed-income
portion to be in the top four credit grades ("investment grade"), with an
average dollar-weighted credit quality within the top two credit grades.
Normally, Kemper Total Return Fund'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 the Horizon Funds' 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 Fund may invest in bonds of any duration.
Each Fund may invest in derivatives, although none of the Funds use
derivatives as principal investments.
Each of Kemper Total Return Fund and the Funds' [fundamental] investment
restrictions, as such restrictions are set forth in such Funds' statement of
additional information, are identical. Fundamental investment restrictions may
not be changed without the approval of Fund shareholders. One difference
exists, however, between Kemper Total Return Fund and each of the Funds' non-
fundamental investment restrictions (i.e., those changeable by the Board without
shareholder approval), as such restrictions are set forth in such Funds'
statement of additional information. Each Horizon Fund is limited to lending
portfolio securities in an amount up to 5% of its total assets. Kemper Total
Return Fund is limited to lending portfolio securities in an amount up to one-
third of its total assets. Investors should refer to each Fund's statement of
additional information for a more detailed description of each Fund's investment
policies and restrictions.
Portfolio Turnover
The portfolio turnover rate for Kemper Total Return 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 October 31, 2000 was 95%. The portfolio turnover rates for Horizon 5,
Horizon 10+ and Horizon 20+ Funds for the fiscal year ended July 31, 2000 were
72%, 61% and 72%, respectively.
Comparative Considerations
The portfolio characteristics of the Total Return Fund after the
Reorganization will reflect the blended characteristics of the Horizon 5 Fund,
Horizon 10+ Fund and Horizon 20+ Fund that are proposed to be combined into
Kemper Total Return Fund. The following characteristics for each Fund reflect
the portfolio allocation of each Fund's investments as of __________, 2000. The
table also reflects the blended portfolio characteristics of all Funds into
Kemper Total Return Fund, giving effect to the Reorganization.
-13-
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Portfolio Allocation (1)
(As a % of Net Assets)
------------------------------------------------------------------------------------------------------
Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return Fund Pro forma(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 12% 18% 24%
U.S. 28% 42% 56%
Growth 14% 21% 28%
Value 14% 21% 28%
------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each Horizon Fund's equity portion normally consists of 30% international
securities and 70% U.S. securities. The U.S. equity portion for each Horizon
Fund 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 Fund is also
normally invested more heavily in large cap stocks than small cap stocks.
Kemper Total Return Fund 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 Funds into Kemper Total Return
Fund after the 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 the returns of each Fund and Kemper Total Return
Fund over different periods. For context, the table also includes a broad-based
market index (two indices for the Horizon Funds) (which, unlike the Funds, does
not have any fees or expenses). The performances of each Fund, Kemper Total
Return Fund, and the index 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]
* [Index information.]
-14-
<PAGE>
For management's discussion of Kemper Total Return Fund's performance for
the fiscal year ended October 31, 2000, please refer to Exhibit B.
Investment Manager; Fees and Expenses
Each of the Funds and Kemper Total Return 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
each Fund's Trustees. Scudder Kemper is a Delaware corporation located at Two
International Place, Boston, Massachusetts 02110-4103.
Pursuant to separate contracts, each of Kemper Total Return Fund and the
Funds pay the Investment Manager a graduated investment management fee at an
identical rate. The fee is graduated so that increases in a Fund's net assets
may result in a lower annual fee rate and decreases in its net assets may result
in a higher annual fee rate. As of October 31, 2000, Kemper Total Return Fund
had total net assets of $3,500,560,218. For the fiscal year ended October 31,
2000, Kemper Total Return Fund paid the Investment Manager a fee of 0.53% of its
average daily net assets. As of July 31, 2000, Kemper Horizon 5, Kemper Horizon
10+, and Kemper Horizon 20+ had total net assets of $62,391,000, $96,905,000,
and $94,366,000, respectively, and each Horizon Fund paid the Investment Manager
a fee of 0.58% of its average daily net assets.
Currently, the fee schedules for the Funds and Kemper Total Return Fund are
as follows:
Average Daily Net Assets Fee Rate
------------------------ --------
First $250 Million 0.58%
Next $750 million 0.55%
Next $1.5 billion 0.53%
Next $2.5 billion 0.51%
Next $2.5 billion 0.48%
Next $2.5 billion 0.46%
Next $2.5 billion 0.44%
Over $12.5 billion 0.42%
Based upon each Fund's net assets for the twelve month period ended
September 30, 2000, the effective advisory fee rate for each Horizon Fund was
0.58%. Based upon each Fund's net assets as of September 30, 2000, the
effective advisory fee rate for Kemper Total Return Fund after the
Reorganization would be 0.53% of average daily net assets.
Administrative Fee
On or prior to the Closing, Kemper Total Return Fund will have entered into
an administration agreement with Scudder Kemper (the "Administration
Agreement"), pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by Kemper
Total Return Fund (other than those provided by Scudder Kemper under its
investment management agreement with that Fund) in exchange for the payment by
Kemper Total Return Fund of an annual administrative services fee (the
"Administrative Fee") equal to 0.225%, 0.375%, 0.30% and 0.10% of average daily
net assets (after giving effect to a contractual waiver for Class A and Class C
shares of 0.10% and 0.05%, respectively) attributable to the Class A, Class B,
Class C and Class I shares,
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<PAGE>
respectively. The fees for the services provided by Kemper Distributors, Inc.
("KDI") under its current services agreement with Kemper Total Return Fund are
not covered by, and are in addition to, the Administrative Fee. One effect of
this arrangement is to make Kemper Total Return Fund's future expense ratio more
predictable. On the other hand, the administrative fee rate will not decrease
with economies of scale from increases in asset size or decreased operating
expenses. The details of this arrangement (including expenses that are not
covered) are set out below.
Various service providers (the "Service Providers"), some of which are
affiliated with Scudder Kemper, provide certain services to Kemper Total Return
Fund pursuant to separate agreements. Scudder Fund Accounting Corporation, a
subsidiary of Scudder Kemper, computes net asset value for Kemper Total Return
Fund and maintains its accounting records. State Street Bank and Trust Co.
("State Street") is the transfer agent and dividend-paying agent for the Kemper
Total Return Fund. Pursuant to a services agreement with State Street, Kemper
Service Company, an affiliate of Scudder Kemper, serves as "Shareholder Service
Agent" of such Fund, and as such, performs all of State Street's duties as
transfer agent and dividend paying agent. As custodian, State Street holds the
portfolio securities of Kemper Total Return Fund, pursuant to a custodian
agreement. Other Service Providers include the independent public accountants
and legal counsel for Kemper Total Return Fund.
Once the Administration Agreement becomes effective, each Service Provider
will continue to provide the services to Kemper Total Return Fund described
above, except that Scudder Kemper will pay these entities for the provision of
their services to Kemper Total Return Fund and will pay most other fund
expenses, including insurance, registration, printing and postage fees. In
return, Kemper Total Return Fund will pay Scudder Kemper the Administrative Fee.
The Administration Agreement will remain in effect with respect to the
Class A, Class B, Class C and Class I shares for an initial term ending
September 30, 2003, subject to earlier termination by the trustees that oversee
Kemper Total Return Fund. The fee payable by Kemper Total Return Fund to Scudder
Kemper pursuant to the Administration Agreement would be reduced by the amount
of any credit received from Kemper Total Return Fund's custodian for cash
balances.
Certain expenses of Kemper Total Return Fund would not be borne by Scudder
Kemper under the Administration Agreement, such as taxes, brokerage, interest
and extraordinary expenses, and the fees and expenses of the Independent
Trustees (including the fees and expenses of their independent counsel). Kemper
Total Return Fund will continue to pay the fees required by its investment
management agreement with Scudder Kemper. In addition, it will pay the fees
under its services agreement and underwriting and distribution services
agreement with KDI, as described in "Distribution and Service Fees" below.
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 the Class A, Class B, Class C and Class I shares of Kemper Total
Return Fund, and compares these with the expenses of the Funds. As indicated
below, it is expected that the total expense ratio of each class of Kemper Total
Return Fund following the Reorganizations will be substantially lower than the
current expense ratio of the comparable class of each Horizon Fund. Except for
the "Other Expenses", 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 the Reorganization had been in effect for the
period. The "Other Expenses" for each Fund, including Kemper Total Return Fund,
are based upon an estimate, as of September 30, 2000, of expected ongoing
operating expenses. The "Other Expenses" for Kemper Total Return Fund and the
pro forma Reorganized Fund are
-16-
<PAGE>
based upon the new fee schedule under a new Administration Agreement to be
adopted by Kemper Total Return Fund.
Expense Comparison Table
Class A Shares
<TABLE>
<CAPTION>
Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return Pro Forma
Fund Fund Fund Fund (combined) (1)
---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Fees
Maximum Sales Charge (Load) Imposed on
Purchases (as % of offering price)........... 5.75% 5.75% 5.75% 5.75% 5.75%
Maximum Contingent Deferred Sales Charge (Load)
(as % of redemption proceeds)(2) ............ None None None None None
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees............................... .58% .58% .58% .53% .53%
Rule 12b-1/ASF Fees........................... .25% .23% .25% .27% .24%
Other Expenses................................ .81% .76% .88% .23% .23%(3)
Total Fund Operating Expenses................. 1.64% 1.57% 1.71% 1.03% 1.00%
Expense Example of Total Operating Expenses at
the End of the Period(4)
One Year...................................... $ 732 $ 726 $ 739 $ 674 $ 671
Three Years................................... $1,063 $1,042 $1,083 $ 884 $ 895
Five Years.................................... $1,415 $1,381 $1,450 $1,111 $1,137
Ten Years..................................... $2,407 $2,335 $2,478 $1,762 $1,830
</TABLE>
______________________________
Notes to Expenses 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) Class A shares purchased under the Large Order NAV Purchase Privilege have a
1% contingent deferred sales charge if sold during the first year after
purchase and .50% if sold during the second year after purchase.
(3) Reflects the impact of a contractual waiver by Scudder Kemper of 0.10% of
the Administrative Services Fee.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return, the reinvestment of all dividends and total
operating expenses remain the same.
-17-
<PAGE>
Expense Comparison Table
Class B Shares
<TABLE>
<CAPTION>
Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return Pro Forma
Fund Fund Fund Fund (combined) (1)
---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Fees
Maximum Sales Charge (Load) Imposed on Purchases
(as % of offering price)...................... None None None None None
Maximum Contingent Deferred Sales Charge (Load)
(as % of redemption proceeds)(2).............. 4.00% 4.00% 4.00% 4.00% 4.00%
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees................................ .58% .58% .58% .53% .53%
Rule 12b-1/ASF Fees............................ 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses................................. .72% .86% .94% .45% .38%
Total Fund Operating Expenses.................. 2.30% 2.44% 2.52% 1.98% 1.91%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period(3)
One Year....................................... $ 633 $ 647 $ 655 $ 601 $ 594
Three Years.................................... $1,018 $1,061 $1,085 $ 921 $ 900
Five Years..................................... $1,430 $1,501 $1,540 $1,268 $1,232
Ten Years...................................... $2,315 $2,363 $2,475 $1,834 $1,828
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the
Period(3)
One Year....................................... $ 233 $ 247 $ 255 $ 201 $ 194
Three Years.................................... $ 718 $ 761 $ 785 $ 621 $ 600
Five Years..................................... $1,230 $1,301 $1,340 $1,068 $1,032
Ten Years...................................... $2,315 $2,363 $2,475 $1,834 $1,828
</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) Contingent deferred sales charges on Class B shares sold within the first
six years of ownership are 4% in the first year, 3% in the second and third
year, 2% in the fourth and fifth year, and 1% in the sixth year.
(3) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return, the reinvestment of all dividends and total
operating expenses remain the same. Assumes conversion to Class A shares six
years after purchase.
-18-
<PAGE>
Expense Comparison Table
Class C Shares
<TABLE>
<CAPTION>
Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return Pro Forma
Fund Fund Fund Fund (combined) (1)
---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Shareholder Fees
Maximum Sales Charge (Load) Imposed on Purchases
(as % of offering price)...................... None None None None None
Maximum Contingent Deferred Sales Charge (Load)
(as % of redemption proceeds)(2).............. 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees................................ .58% .58% .58% .53% .53%
Rule 12b-1/ASF Fees............................ 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses................................. .74% .87% 1.03% .35% .30%(3)
Total Fund Operating Expenses.................. 2.32% 2.45% 2.61% 1.88% 1.83%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period(4)
One Year....................................... $ 335 $ 348 $ 364 $ 291 $ 286
Three Years.................................... $ 724 $ 764 $ 811 $ 591 $ 586
Five Years..................................... $1,240 $1,306 $1,385 $1,016 $1,011
Ten Years...................................... $2,656 $2,786 $2,944 $2,201 $2,197
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the
Period(4)
One Year....................................... $ 235 $ 248 $ 264 $ 191 $ 186
Three Years.................................... $ 724 $ 764 $ 811 $ 591 $ 586
Five Years..................................... $1,240 $1,306 $1,385 $1,016 $1,011
Ten Years...................................... $2,656 $2,786 $2,944 $2,201 $2,197
</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) Contingent deferred sales charges on Class C shares is 1% for shares sold
during the first year after purchase.
(3) Reflects the impact of a contractual waiver by Scudder Kemper of 0.05% of
the Administrative Services Fee.
(4) Expense examples reflect what an investor would pay on a $10,000 investment,
assuming a 5% annual return, the reinvestment of all dividends and total
operating expenses remain the same.
-19-
<PAGE>
Expense Comparison Table
Class I Shares
<TABLE>
<CAPTION>
Kemper
Horizon 5 Horizon 10+ Horizon 20+ Total Return Pro Forma
Fund Fund Fund Fund (combined) (1)
---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Fees
Maximum Sales Charge (Load) Imposed on Purchases
(as % of offering price)........................ None None None None None
Maximum Contingent Deferred Sales Charge (Load)
(as % of redemption proceeds)................... None None None None None
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees.................................. .58% .58% .58% .53% .53%
Rule 12b-1/ASF Fees.............................. None None None None None
Other Expenses................................... .39% .30% .32% .11% .10%
Total Fund Operating Expenses.................... .97% .88% .90% .64% .63%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period(2)
One Year......................................... $ 99 $ 90 $ 92 $ 65 $ 64
Three Years...................................... $ 309 $ 281 $ 287 $205 $202
Five Years....................................... $ 536 $ 488 $ 498 $357 $351
Ten Years........................................ $1,190 $1,084 $1,108 $798 $786
</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 and total
operating expenses remain the same.
Financial Highlights
The financial highlights table for Kemper Total Return Fund, which is
intended to help you understand Kemper Total Return Fund's financial performance
for the past five years, is included in Kemper Total Return Fund's prospectus
dated February 1, 2001, which is included in the materials that have been
provided to you with this document.
Distribution and Services Fees
Pursuant to an underwriting and distribution services agreement with Kemper
Total Return Fund, KDI, 222 South Riverside Plaza, Chicago, Illinois 60606, an
affiliate of the Investment Manager, will act as the principal underwriter and
distributor of the Class A, Class B, Class C and Class I shares of that Fund and
will act as agent of the Fund in the continuing offer of such shares. Kemper
Total Return Fund
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<PAGE>
also has adopted distribution plans on behalf of each class in accordance with
Rule 12b-1 under the 1940 Act that are substantially identical to the existing
distribution plans adopted by the Funds, with one exception. As under the
current distribution plans for each Fund, Kemper Total Return Fund will pay KDI
an asset-based fee at an annual rate of 0.75% of Class B and Class C shares.
Pending approval of the shareholders of Kemper Total Return Fund, at the time of
the Closing it is anticipated that the distribution plans for Kemper Total
Return Fund, however, unlike the distribution plans for the Funds, will
authorize the payment to KDI of the 0.25% services fee with respect to the Class
A, Class B and Class C shares pursuant to the services agreement described
below. Neither KDI nor the Trustees of the Funds believe that the services
performed by KDI under the services agreement have been primarily intended to
result in sales of fund shares (i.e., "distribution" services) as defined in
Rule 12b-1, but rather are post-sale administrative and other services provided
to existing shareholders. Nonetheless, to avoid legal uncertainties due to the
ambiguity of the language contained in Rule 12b-1 and eliminate any doubt that
may arise in the future regarding whether the services performed by KDI under
the services agreement are "distribution" services, the distribution plans for
Kemper Total Return Fund will authorize the payment of the services fee. The
fact that the services fee will be authorized by Kemper Total Return Fund's
distribution plans will not change the fee rate nor will it affect the nature or
quality of the services provided by KDI.
Pursuant to the services agreement with Kemper Total Return Fund, which is
substantially identical to the current services agreement with the Funds, KDI
will receive a services fee of up to 0.25% per year with respect to the Class A,
Class B and Class C shares. KDI will use the services fee to compensate
financial services firms ("firms") for providing personal services and
maintenance of accounts for their customers that hold those classes of shares of
Kemper Total Return Fund, and may retain any portion of the fee not paid to
firms to compensate itself for administrative functions performed for the Fund.
All fee amounts are payable monthly and are based on the average daily net
assets of each Fund attributable to the relevant class of shares.
Purchases, Exchanges, and Redemptions
Both Funds are part of the Scudder Kemper complex of mutual funds. At the
time of the Closing, the procedures for purchases, exchanges, and redemptions of
Class A, Class B, Class C and Class I shares of Kemper Total Return Fund will be
identical to those of the Funds. Shares of Kemper Total Return Fund will be
exchangeable for shares of the same class of most other open-end funds advised
by Scudder Kemper offering such shares.
Corresponding classes of shares of Kemper Total Return Fund have identical
sales charges to those of the Funds. Kemper Total Return Fund will have a
maximum initial sales charge of 5.75% on Class A shares. Shareholders who
purchase $1 million or more of Class A shares will pay no initial sales charge
but may have to pay a contingent deferred sales charge (a "CDSC") of up to 1% if
the shares are sold within 2 years of the date on which they were purchased.
Class B shares will be sold without a front-end sales charge, but may be subject
to a CDSC upon redemption, depending on the length of time the shares are held.
The CDSC will begin at 4% for shares sold in the first year, will decline to 1%
in the sixth year and is eliminated after the sixth year. After six years, Class
B shares automatically convert to Class A shares. Class C shares will be sold
without a front-end sales charge, but may be subject to a CDSC of up to 1% if
the shares are sold within one year of purchase.
Class A, Class B, Class C and Class I shares of Kemper Total Return Fund
received in the Reorganization will be issued at net asset value, without a
sales charge, and no CDSC will be imposed on any shares of the Funds exchanged
for shares of Kemper Total Return Fund as a result of the Reorganization.
However, following the Reorganization, any CDSC that applies to shares of the
Funds will continue to apply to shares of Kemper Total Return Fund received in
the Reorganization, using the
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original purchase date for such shares to calculate the holding period, rather
than the date such shares are received in the Reorganization.
Services available to shareholders of Kemper Total Return Fund will be
identical to those available to shareholders of the Funds and include the
purchase and redemption of shares through an automated telephone system and over
the Internet, telephone redemptions, and exchanges by telephone to most other
Scudder Kemper funds that offer Class A, Class B, Class C and Class I shares,
and reinvestment privileges. Please see the Funds' prospectus for additional
information.
Dividends and Other Distributions
Each Fund intends to distribute net realized capital gains after
utilization of capital loss carryforwards, if any, in November or December of
each year. An additional distribution may be made if necessary. Dividends and
distributions of each Fund will be invested in additional shares of the same
class of that Fund at net asset value and credited to the shareholder's account
on the payment date or, at the shareholder's election, paid in cash.
If the Plan is approved by a Fund'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.
Other Differences Between the Funds
Trustees and Officers.
The Trustees of the Funds are different from those of Kemper Total
Return Fund. Currently, the Trustees of Kemper Total Return Fund are John W.
Ballentine, Lewis A. Burnham, Linda C. Coughlin, Donald L. Dunaway, Robert B.
Hoffman, Donald R. Jones, Thomas W. Littauer, Shirley D. Peterson and William P.
Sommers. The shareholders of Kemper Total Return Fund will vote on the same
slate of Trustees as in Proposal 1 for the Horizon Fund shareholders. In
addition, the officers of the Funds and Kemper Total Return Fund are not
identical. (See Proposal 1 and the Statement of Additional Information for
further information.)
Fiscal Year.
The Funds' fiscal year-end is July 31. Kemper Total Return Fund's
fiscal year-end is October 31.
Tax Consequences
As a condition to the 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, the
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 the Reorganization constitutes a tax-free reorganization, no gain or loss
will be recognized by any Fund or its shareholders as a direct result of the
Reorganization. See "The Proposed Transaction -- Federal Income Tax
Consequences."
* * *
The preceding is only a summary of certain information contained in this
Proxy Statement/Prospectus relating to the Reorganization. This summary is
qualified by reference to the more complete information contained elsewhere in
this Proxy Statement/Prospectus, the prospectuses and
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<PAGE>
statements of additional information of the Funds, 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 Kemper Total Return Fund and the Funds, there are
also substantial differences in the principal risks of the Funds. The principal
risks of Kemper Total Return Fund are stock market risk, particularly for growth
stocks, interest rate risk, credit risk and foreign stock risk. The principal
risks of Horizon 5 Fund are bond market risk, interest rate risk, credit risk
and stock market risk. The principal risks of Horizon 10+ Fund are stock market
risk, foreign stock risk, bond market risk, interest rate risk and credit risk.
The principal risks of Horizon 20+ Fund 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 Fund and the Horizon Funds 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 Fund may invest more heavily in high yield securities
or "junk bonds" than the Horizon Funds 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.
For a further discussion of the investment techniques and risk factors
applicable to the Funds, see the "Investment Objectives, Policies and
Restrictions of the Funds" above, and the prospectuses and statements of
additional information for the Funds, which are incorporated by reference
herein.
III. THE PROPOSED TRANSACTION
Description of the Plan
As stated above, the Plan provides for the transfer of all or substantially
all of the assets of each Fund to Kemper Total Return Fund in exchange for that
number of full and fractional Class A, Class B, Class C and Class I shares
having an aggregate net asset value equal to the aggregate net asset value of
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<PAGE>
the relevant Fund as of the close of business on the Valuation Date. Kemper
Total Return Fund will assume all of the liabilities of each Fund. Each Fund
will distribute the Class A, Class B, Class C and Class I shares received in the
exchange to the shareholders of the relevant Fund in complete liquidation of
that Fund. That Fund will then be terminated.
Upon completion of the Reorganization, each shareholder of each Fund will
own that number of full and fractional Class A, Class B, Class C and Class I
Shares having an aggregate net asset value equal to the aggregate net asset
value of such shareholder's shares of the corresponding class held in that Fund
as of the close of business on the Valuation Date. Such shares will be held in
an account with Kemper Total Return Fund identical in all material respects to
the account currently maintained by the relevant Fund for such shareholder. In
the interest of economy and convenience, Class A, Class B, Class C and Class I
shares issued to the Funds' shareholders in the Reorganization will be in
uncertificated form. If Class A, Class B, Class C or Class I shares of any Fund
are represented by certificates prior to the Closing, such certificates should
be returned to the Funds' shareholder servicing agent. Any Class A, Class B,
Class C or Class I shares of Kemper Total Return Fund distributed in the
Reorganization to shareholders in exchange for certificated shares of the Funds
may not be transferred, exchanged or redeemed without delivery of such
certificates.
Until the Closing, shareholders of the Funds 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 Class A, Class B,
Class C or Class I shares of Kemper Total Return Fund received by the
shareholder in connection with the Reorganization.
The obligations of each Trust on behalf of the respective Funds under the
Plan are subject to various conditions, as stated therein. The Plan also
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 unforseen events, the Plan may be terminated: (i) by the mutual agreement
of the parties; (ii) by either party if the Closing has not occurred by [
], 2001, unless such date is extended by mutual agreement of the parties; or
(iii) by either 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 the 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 Fund to be issued to the Funds in
the Plan to the detriment of the Funds' shareholders without their approval.
For a complete description of the terms and conditions of the Reorganization,
please refer to the Plan at Exhibit A.
Board Approval of the Proposed Transaction
As discussed above, the Reorganization is 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 Reorganization to the Trustees of the Funds at a meeting held on May 24,
2000, see "Synopsis--Background of the Reorganization" above. This initiative
includes five 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;
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<PAGE>
(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.
The Independent Trustees of the Funds reviewed the potential implications
of these proposals for each Fund 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 Trustees of the Funds, 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 the Reorganization and certain
related proposals. The Trustees have also unanimously agreed to recommend that
the Reorganization be approved by each Fund's shareholders.
In determining whether to recommend that the shareholders of each Fund
approve the Reorganization, the Board of Trustees considered that:
. Given the Horizon Funds' relatively small size and Scudder Kemper's
commitment to a streamlined family of funds, each Reorganization would
allow shareholders to continue their investment in another fund and would
be effected on a tax-free basis, as opposed to liquidation, which would be
a taxable transaction.
. The fixed rate under the Administration Agreement is expected to be less
than the estimated current applicable operating expenses such classes would
otherwise pay.
. It is a condition of the Reorganization that each Fund receive an opinion
of tax counsel that the transaction would be a tax-free transaction.
. Scudder Kemper agreed to bear a portion of the costs of the Reorganization
allocable to Class I shares of each Horizon Fund. Class A, B and C shares
of each Horizon Fund will bear all of the costs of the Reorganization
allocable to such class. The portion of the costs of the Reorganization
paid by each class is estimated to be recoverable from lower overall
expense rates within six months of completion of each Reorganization.
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<PAGE>
As part of their deliberations, the Trustees considered, among other
things: (a) the fees and expense ratios of the Funds, including comparisons
between the expenses of each Fund and the estimated operating expenses of Kemper
Total Return Fund after the Reorganization, and between the estimated operating
expenses of Kemper Total Return Fund and other mutual funds with similar
investment objectives; (b) the terms and conditions of the 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 Fund 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 the Reorganization to
be borne by existing shareholders; (b) the potential costs of any necessary
rebalancing of each Fund's portfolio; and (c) the potential tax consequences to
shareholders as a result of differences in the Funds' realized or unrealized
capital gains or losses and capital loss carry-forwards.
Costs. The anticipated costs of the Reorganization, which
includes board meeting fees, legal, accounting and other
consultant fees, and proxy solicitation costs, are as follows:
$72,524 for Horizon 20+ Fund, $59,065 for Horizon 10+ Fund, and
$32,272 for Horizon 5 Fund. These costs are allocated to
shareholders by class as follows:
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<TABLE>
<CAPTION>
Costs
Costs Allocated to
Allocated to Scudder
Fund Total Costs Class % Kemper %
Horizon 20+
-----------
<S> <C> <C> <C> <C> <C>
Class A $ 19,760 $ 19,760 100% $ 0 0%
Class B $ 43,305 $ 43,305 100% $ 0 0%
Class C $ 8,384 $ 8,384 100% $ 0 0%
Class I $ 1,075 $ 745 69.3% $ 330 30.7%
Horizon 10+
-----------
Class A $ 18,253 $ 18,253 100% $ 0 0%
Class B $ 31,926 $ 31,926 100% $ 0 0%
Class C $ 7,557 $ 7,557 100% $ 0 0%
Class I $ 1,059 $ 242 22.9% $ 817 77.1%
Horizon 5
---------
Class A $ 10,614 $ 10,614 100% $ 0 0%
Class B $ 15,741 $ 15,741 100% $ 0 0%
Class C $ 4,848 $ 4,848 100% $ 0 0%
Class I $ 1,069 $ 329 30.8% $ 740 69.2%
Kemper
Total Return
------------
Class A $575,699 $ 21,836 3.8% $553,863 96.2%
Class B $176,927 $176,927 100% $ 0 0%
Class C $ 16,010 $ 972 6.1% $ 15,037 93.9%
Class I $ 1,049 $ 587 56% $ 462 44%
</TABLE>
Kemper Total Return Fund is bearing the SEC and state
registration and notice fees which are estimated to be
$_________ and $_________.
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<PAGE>
[The costs of the Reorganization borne by the Funds have
been (or will soon be) expensed, resulting in a reduction of
each Class of shares' net asset value per share of $_______.
Management of the Funds expects that reduced operating
expenses resulting from the Reorganization should allow for
recovery of the costs of the Reorganization within 6 months
after the Closing.]
Portfolio Transaction Costs. To consider the potential costs
of any necessary rebalancing of each Fund's portfolio as a
result of the Reorganization, the Independent Trustees asked
for, and Scudder Kemper provided, an estimate of the
expected turnover of the securities of each Fund, as a
percentage of the assets of the combined Fund, as a result
of the 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
$.0004 per share for each Horizon Fund (less than $0.01 per
share of the Fund), 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.
Potential Tax Consequences. Although the Reorganizations
will be achieved on a Federally tax-free basis (see "Federal
Income Tax Considerations" below), there are differences in
the Funds' realized or unrealized capital gains or losses
and capital loss carry forwards, which at [ ], 2000 were as
follows (although they may differ at the time of the
Closing):
[Charts to be inserted.]
As noted above, under the terms of the Plan, shareholders of
each Fund will receive shares of Kemper Total Return Fund in
an amount equal to the relative net asset value of their
Fund shares. The Trustees considered whether an adjustment
in this formula should be made for the above tax
differentials. The Trustees determined that no adjustment
should be made because the potential tax consequences were
not material, quantifiable or predictable because of (1)
uncertainties as to the amounts of any actual future
realization of capital gains or losses in view of future
changes in portfolio values, (2) the exemption of some
shareholders from Federal income taxation, and (3) the
differing consequences of Federal and various other income
taxation upon a distribution received by each shareholder
whose tax liability (if any) is determined by the net effect
of a multitude of considerations that are individual to the
shareholder. Shareholders should, however, review their own
tax situation to determine what effect, if any, these
potential tax differences may have on them.
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal.
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<PAGE>
Based on all the foregoing, the Board concluded that each Fund's
participation in the Reorganization would be in the best interests of that Fund
and would not dilute the interests of that Fund's shareholders. The Board of
Trustees, including the Independent Trustees, unanimously recommends that
shareholders of each Fund approve the Reorganization.
Description of the Securities to Be Issued
Kemper Total Return Fund, the Acquiring Trust, is a Massachusetts business
trust established under a Declaration of Trust dated October 24, 1985, as
amended. The Acquiring Trust's authorized capital consists of an unlimited
number of shares of beneficial interest, without par value. The Trustees of the
Acquiring Trust are authorized to divide the Acquiring Trust's shares into
separate series, but have not currently created separate series. The Trustees of
the Acquiring Trust are also authorized to further divide the shares of the
series of the Acquiring Trust into classes. The shares of Kemper Total Return
Fund are currently divided into four classes, Class A, Class B, Class C and
Class I. Although shareholders of different classes of a series have an interest
in the same portfolio of assets, shareholders of different classes bear
different expense levels because distribution costs and certain other expenses
approved by the Trustees of the Acquiring Trust are borne directly by the class
incurring such expenses.
Each share of each class of Kemper Total Return Fund represents an interest
in Kemper Total Return Fund that is equal to and proportionate with each other
share of that class of Kemper Total Return Fund. Kemper Total Return Fund
shareholders 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 material differences between the rights of
shareholders of the Funds and the rights of shareholders of Kemper Total Return
Fund.
Federal Income Tax Consequences
The Reorganization is conditioned upon the receipt by each Fund 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 Fund of all or
substantially all of the assets of each Fund in exchange solely for Class A,
Class B, Class C and Class I shares and the assumption by Kemper Total Return
Fund of all of the liabilities of each Fund, followed by the distribution of
such shares to the relevant Fund's shareholders in exchange for their shares of
that Fund in complete liquidation of that Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and Kemper
Total Return Fund and each 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 any Fund upon the transfer of all or substantially all of its
assets to Kemper Total Return Fund in exchange solely for Class A, Class B,
Class C and Class I shares and the assumption by Kemper Total Return Fund of all
of the liabilities of each Fund or upon the distribution of the Class A, Class
B, Class C and Class I shares to shareholders of that Fund in exchange for their
shares of that Fund; (iii) the basis of the assets of each Fund in the hands of
Kemper Total Return Fund will be the same as the basis of such assets of that
Fund immediately prior to the transfer; (iv) the holding period of the assets of
each Fund in the hands of Kemper Total Return Fund will include the period
during which such assets were held by that Fund; (v) no gain or loss will be
recognized by Kemper Total Return Fund upon the receipt of the assets of a Fund
in exchange for Class A, Class B, Class C and Class I shares and the assumption
by Kemper Total Return Fund of all of the liabilities of that Fund; (vi) no gain
or loss will be recognized by the shareholders of a Fund upon the receipt of the
Class A, Class B, Class C and Class I shares solely in exchange for their shares
of that Fund as part of the transaction; (vii) the basis of the Class A, Class
B, Class C and Class I shares received by each shareholder of each Fund will be
the same as the basis of the shares of that Fund exchanged therefor; and (viii)
the holding period of Class A, Class B, Class C and Class I shares received by
each shareholder of each Fund will include the holding period during which the
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<PAGE>
shares of that Fund exchanged therefor were held, provided that at the time of
the exchange the shares of that Fund were held as capital assets in the hands of
such shareholder of that Fund.
After the Closing, Kemper Total Return Fund may dispose of certain
securities received by it from the Funds in connection with the Reorganization,
which may result in transaction costs and capital gains.
While the Funds are not aware of any adverse state or local tax
consequences of the proposed Reorganization, 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
Reorganization will be passed on by Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019. Certain legal matters concerning the issuance
of shares of Kemper Total Return Fund 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 Fund and each Fund as of September 30, 2000 and on a pro
forma basis as of that date, giving effect to each Reorganization:
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<PAGE>
PRO FORMA CAPITALIZATION (UNAUDITED)
The following table sets forth the unaudited capitalization of Kemper Total
Return Fund, Kemper Horizon 5, Kemper Horizon 10+ and Kemper Horizon 20+, as of
September 30, 2000 as adjusted giving effect to each Reorganization./(1)/
<TABLE>
<CAPTION>
Kemper Kemper Kemper Kemper Pro Forma Pro Forma
Total Return Horizon 5 Horizon 10+ Horizon 20+ Adjustments (Combined)
-------------- ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Assets
Class A Shares $2,903,168,060 $36,397,618 $43,620,995 $42,870,402 --/(3)/ $ 3,026,057,075
Class B Shares $ 579,372,710 $17,820,064 $38,780,501 $39,671,937 --/(4)/ $ 675,645,212
Class C Shares $ 60,784,292 $ 4,445,004 $ 9,159,803 $ 9,222,260 --/(5)/ $ 83,611,379
Class I Shares $ 11,329,193 $ 141,449 $ 132,449 $ 356,067 --/(6)/ 11,959,158
---------------
Total Net Assets $ 3,797,272,824 /(2)/
---------------
Shares Outstanding
Class A Shares 254,015,636 3,418,337 3,853,286 3,468,560 11,262 264,767,081
Class B Shares 50,659,560 1,673,422 3,432,202 3,289,678 20,126 59,074,988
Class C Shares 5,323,859 417,762 814,298 767,637 (828) 7,322,728
Class I Shares 988,474 13,292 11,696 28,658 1,325 1,043,445
Net Asset Value per Share
Class A Shares $ 11.43 $ 10.65 $ 11.32 $ 12.36 $ 11.43
Class B Shares $ 11.44 $ 10.65 $ 11.30 $ 12.06 $ 11.44
Class C Shares $ 11.42 $ 10.64 $ 11.25 $ 12.01 $ 11.42
Class I Shares $ 11.46 $ 10.64 $ 11.32 $ 12.42 $ 11.46
</TABLE>
(1) Assumes each Reorganization 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 Fund will be received by the
shareholders of each Kemper Horizon 5 Portfolio, Kemper Horizon 10+
Portfolio or Kemper Horizon 20+ Portfolio on the date each Reorganization
takes place, and the foregoing should not be relied upon to reflect the
number of shares of Kemper Total Return Fund that actually will be received
on or after such date.
(2) Pro forma combined net assets do not reflect expense reductions that would
result from the implementation of an administrative fee for the Acquiring
Trust.
(3) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Class A Shares.
(4) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Class B Shares.
(5) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Class C Shares.
(6) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Class I Shares.
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<PAGE>
The Board of Trustees unanimously recommends that the shareholders of each
Fund vote the Proposal that relates to the Reorganization of their Fund.
PROPOSAL 5: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Trustees, including a majority of the Independent Trustees,
has selected Ernst & Young LLP to act as independent auditors of the Fund for
the Fund'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
Fund vote in favor of this Proposal 5.
ADDITIONAL INFORMATION
Information about the Funds
Additional information about the Trusts, the Funds and the Reorganization
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 Trusts are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith,
file reports, proxy material and other information about each of the Funds with
the SEC. Such reports, proxy material and other information filed by the
Acquiring Trust, and those filed by the Acquired 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 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) which contains the prospectuses and
statements of additional information for the Funds, materials that are
incorporated by reference into the prospectuses and statements of additional
information, and other information about the Trusts and the Funds.
General
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. See "The Proposed
Transaction - Board Approval of the Proposed Transaction." In addition to
solicitation by mail, certain officers and representatives of the Acquired
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, telegram or personally.
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<PAGE>
Any shareholder of a Fund giving a proxy has the power to revoke it by mail
(addressed to the Secretary at the principal executive office of that Fund, 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
Fund. 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.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of at least 30% of the shares of the Acquired Trust (for a trust-wide
vote) or a Fund (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 Acquired Trust's (for a trust-wide vote) or
a Fund'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 which have not been voted. Broker non-
votes are proxies received by a Fund 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 Acquired Trust voting on such election.
Approval of Proposal 2, with respect to each Fund, requires the affirmative vote
of the holders of a majority of that Fund's shares outstanding and entitled to
vote thereon. Approval of Proposal 3, with respect to each Fund, requires the
affirmative vote of a majority of the shares of that Fund 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 3, and will have the effect of a "no" vote
on Proposal 2.
Holders of record of the shares of each Fund at the close of business on
March 5, 2001 will be entitled to one vote per share on all business of the
Meeting. As of February 5, 2001, there were [ ] Class A shares, [ ] Class B
shares, [ ] Class C shares and [ ] Class I shares of Kemper Horizon 5, [ ]
Class A shares, [ ] Class B shares, [ ] Class C shares and [ ] Class I
shares of Kemper Horizon 10+, and [ ] Class A shares, [ ] Class B shares,
[ ] Class C shares and [ ] Class I shares of Kemper Horizon 20+,
outstanding.
[As of December 31, 2000, the officers and Trustees of the Acquiring Trust
as a group owned beneficially less than 1% of the outstanding shares of Kemper
Total Return Fund.] Appendix 2 hereto sets forth the beneficial owners of more
than 5% of each Fund's shares, as well as the beneficial owners of more than 5%
of the shares of each other series of the Acquired Trust. To the best of each
Trust's knowledge, as of December 31, 2000, no person owned beneficially more
than 5% of any Fund's outstanding shares or the shares of any other series of
the Acquired Trust, except as stated on Appendix 2.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies, at an estimated cost of $[ ]. As the
Meeting date approaches, certain shareholders of the Funds may receive a
telephone call from a representative of SCC if their votes have not yet been
received. Authorization to permit SCC to execute proxies may be obtained by
telephonic or electronically
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<PAGE>
transmitted instructions from shareholders of the Funds. Proxies that are
obtained telephonically will be recorded in accordance with the procedures
described below. The Trustees believe that these procedures are reasonably
designed to ensure that both the identity of the shareholder casting the vote
and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name and address, or the last
four digits of the shareholder's social security or employer identification
number, or both, and to confirm that the shareholder has received the proxy
materials in the mail. If the shareholder is a corporation or other entity, the
SCC representative is required to ask for the person's title and confirmation
that the person is authorized to direct the voting of the shares. If the
information solicited agrees with the information provided to SCC, then the SCC
representative has the responsibility to explain the process, read the Proposals
on the proxy card(s), and ask for the shareholder's instructions on the
Proposals. Although the SCC representative is permitted to answer questions
about the process, he or she is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement/Prospectus. SCC will record the shareholder's instructions on the
card. Within 72 hours, the shareholder will be sent a letter or mailgram to
confirm his or her vote and asking the shareholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
Shareholders may also provide their voting instructions through telephone
touch-tone voting or Internet voting. These options require shareholders to
input a control number which is located on each voting instruction card. After
inputting this number, shareholders will be prompted to provide their voting
instructions on the Proposals. Shareholders will have an opportunity to review
their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their telephone call or Internet link.
Shareholders who vote on the Internet, in addition to confirming their voting
instructions prior to submission, will also receive an e-mail confirming their
instructions.
If a shareholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone or electronically, the shareholder may still submit
the proxy card(s) originally sent with the Proxy Statement/Prospectus or attend
in person. 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.
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 Acquired 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 Acquired Trust and/or
the Funds.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE ADVANTAGE
OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
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<PAGE>
INDEX OF EXHIBITS AND APPENDICES
EXHIBIT A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION.....................
EXHIBIT B: MANAGEMENT'S DISCUSSION OF KEMPER TOTAL RETURN FUND'S
PERFORMANCE......................................................
APPENDIX 1: TRUSTEE AND NOMINEE SHAREHOLDINGS................................
APPENDIX 2: BENEFICIAL OWNERS OF FUND SHARES.................................
<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 Total Return Fund (the
"Acquiring Trust"), a Massachusetts business trust, on behalf of Kemper Total
Return Fund (the "Acquiring Fund"), a separate series of the Acquiring Trust,
Kemper Horizon Fund (the "Acquired Trust" and, together with the Acquiring
Trust, each a "Trust" and collectively the "Trusts"), a Massachusetts business
trust, on behalf of Kemper Horizon 5 Portfolio, Kemper Horizon 10+ Portfolio,
and Kemper 20+ Portfolio, each a separate series of the Acquired Trust (each, an
"Acquired Fund" and together, the "Acquired Funds") (each Acquired Fund or
Acquiring Fund referred to as a "Fund" and together, the "Funds"), and Scudder
Kemper Investments, Inc. ("Scudder Kemper"), investment adviser to the Funds
(for purposes of Paragraph 10.2 of the Agreement only). The principal place of
business of the Acquiring Trust is 222 South Riverside Plaza, Chicago, Illinois
60606 and the principal place of business of the Acquired Trust is 222 South
Riverside Plaza, Chicago, Illinois 60606.
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 reorganization (the "Reorganization")
will consist of the transfer of all or substantially all of the assets of the
Acquired Funds to the Acquiring Fund in exchange solely for Class A, Class B,
Class C and Class I voting shares of beneficial interest of (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 the Acquired Funds and the
distribution of the Acquiring Funds Shares to the Class A, Class B, Class C and
Class I shareholders of each 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 Acquiring
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 Class A, Class B, Class C and Class I Acquiring Fund Shares
determined by dividing the value of the Acquired Fund's assets net of any
liabilities of the Acquired Fund with respect to the Class A, Class B, Class C
and Class I shares of each 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 of the corresponding class, 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
each Acquired Fund, including, but not limited to, any deferred compensation to
Acquired Funds 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-
<PAGE>
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 each 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 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 with respect to each class of its shares (the "Acquired Fund
Shareholders"), determined as of the Valuation Time (as defined in section 2.1),
on a pro rata basis within that class, the Acquiring Fund Shares of the same
class received by such Acquired Fund pursuant to section 1.1 and will completely
liquidate. Such distribution and liquidation will be accomplished with respect
to each class of each Acquired Fund by the transfer of the Acquiring Fund Shares
then credited to the account of the 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 Class A, Class B, Class C and Class I Acquiring Fund Shares to be
so credited to the Class A, Class B, Class C and Class I Acquired Fund
Shareholders shall, with respect to each class, be equal to the aggregate net
asset value of the applicable Acquired Fund shares of the same class owned by
such shareholders as of the Valuation Time. All issued and outstanding shares of
each Acquired Fund will simultaneously be cancelled on the books of the Acquired
Fund, although share certificates representing interests in Class A, Class B,
Class C and Class I 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.
-2-
<PAGE>
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 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 Acquiring Fund's 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 a Class A, Class B, Class C and Class I
Acquiring Fund Share shall be the net asset value per share computed with
respect to that class as of the Valuation Time using the valuation procedures
referred to in section 2.1
2.3. The number of the Class A, Class B, Class C and Class I Acquiring Fund
Shares to be issued (including fractional shares, if any) in exchange for the
Assets shall be determined with respect to each such class by dividing the value
of the Assets with respect to Class A, Class B, Class C and Class I shares of
each Acquired Fund, as the case may be, determined in accordance with section
2.1 by the net asset value of an Acquiring Fund Share of the same class
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 [ ], 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 such 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
-3-
<PAGE>
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. State Street, 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
Funds Shareholders and the number and percentage ownership (to three decimal
places) of outstanding Class A, Class B, Class C and Class I 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 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 Class A, Class B, Class C and Class I 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 Acquired Trust, on behalf of each Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired 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 Acquired 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 each Acquired Fund, to carry out the
Agreement. Each Acquired Fund is a separate series of the Acquired Trust duly
designated in accordance with the applicable provisions of the Acquired Trust's
Declaration of Trust. Each Acquired Fund is a separate series of the Acquired
Trust duly designated in accordance with the applicable provisions of the
Acquired Trust's Declaration of Trust. The Acquired Trust and each 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 Acquired Trust or Acquired Fund. Each
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;
-4-
<PAGE>
(b) The Acquired 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 each 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 Acquired Trust is not, and the execution, delivery and
performance of this Agreement by the Acquired Trust will not result (i) in
violation of Massachusetts law or of the Acquired 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 [ ], 200[ ], 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 [ ], 200[ ], 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)
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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 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 State Street, 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 Acquired 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 Acquired 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
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<PAGE>
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.
4.2. The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Acquiring 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 Acquiring 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 Acquiring Trust
duly designated in accordance with the applicable provisions of the Acquiring
Trust's Declaration of Trust. The Acquiring 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 Acquiring 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 Acquiring 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 Acquiring Trust is not, and the execution, delivery and
performance of this Agreement by the Acquiring Trust will not result (i) in
violation of Massachusetts law or of the Acquiring 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;
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<PAGE>
(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 [ ], 200[ ], have been
audited by PricewaterhouseCoopers LLP, independent accountants, 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 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 [ ], 200[ ], 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 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
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
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<PAGE>
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 Acquiring 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 Acquiring Trust, on behalf
of the Acquiring 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;
(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. The Acquiring Fund and each Acquired 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
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<PAGE>
and warranties set forth in this Agreement being or becoming untrue in any
material respect. Each Acquired Fund and Acquiring Fund covenant and agree to
coordinate the respective portfolios of such 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 such Acquired Fund and to ensure that the
representations and warranties made by each Acquired Fund are accurate.
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 [ ], 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, the Acquiring Fund and
each Acquired Fund will each 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.
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<PAGE>
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 each 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.
5.12. The Acquiring Fund and each Acquired Fund shall each 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 any 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 Acquiring Trust, on
behalf of each 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 Acquired Trust, on behalf of
the Acquiring 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
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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 Funds, and dated
as of the Closing Date, to the effect that:
(a) The Acquiring 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 Acquiring Trust, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding obligation of the
Acquiring 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 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
Acquiring 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
Acquiring Trust is not subject to any litigation or other proceedings that might
have a materially adverse effect on the operations of the Acquiring Trust, (ii)
the Acquiring 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 each of the Acquiring
Trust and the Acquired Trust.
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.
6.5. The Acquiring Fund shall have (i) adopted a new investment management
agreement, (ii) entered into an administrative services agreement with Scudder
Kemper Investments, Inc. ("Scudder Kemper") and (iii) adopted security valuation
procedures identical to each Acquired Fund's, each in a form reasonably
satisfactory to the Acquired Fund.
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 Acquired 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 an Acquired Fund which an
Acquired Fund reasonably believes might result in such litigation.
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<PAGE>
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 Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquired 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:
(a) The Acquired 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 Acquired
Trust's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquired Trust, on behalf of the
Acquired Fund, and constitutes a valid and legally binding obligation of the
Acquired 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
Acquired 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
Acquired Trust is not subject to any litigation or other proceedings that might
have a materially adverse effect on the operations of the Acquired Trust, (ii)
the Acquired 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 each of the Acquiring
Trust and the Acquired Trust.
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 each 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 each 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 each 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 Acquired 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
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anything herein to the contrary, neither the Acquiring Fund nor an 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 an 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 adverse effect on the assets or properties of the
Acquiring Fund or an 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 each 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 each of the Acquiring Fund and Acquired
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.
-14-
<PAGE>
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 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. Each of the Acquiring Fund on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of each Acquired Fund, represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2. Each Fund will pay its own allocable share of expenses associated
with the Reorganization, except that Scudder Kemper will bear any such expenses
in excess of $[ ] for the Acquiring Fund and $[ ] for the Acquired Fund
(approximately $[ ] and $[ ] per share, respectively, based on [ ], 200[ ]
net assets for each Fund). 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 Acquired Fund 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 party 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
-15-
<PAGE>
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 the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the 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.
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
Acquired Funds, 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 an 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 each
Trust hereunder shall not be binding upon any of the Board members,
shareholders, nominees, officers, agents, or employees of the Trusts or the
Funds personally, but bind only the respective property of the Funds, as
provided in each Trust's Declaration of Trust. Moreover, no series of either
Trust other than the Funds shall be responsible for the obligations of the
Trusts hereunder, and all persons shall look only to the assets of the Funds to
-16-
<PAGE>
satisfy the obligations of the Trusts hereunder. The execution and the delivery
of this Agreement have been authorized by each 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 each 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 Trusts 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.
15.5. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State 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 TOTAL RETURN FUND
_________________________
Secretary
_______________________________
By:____________________________
Its:___________________________
Attest: KEMPER HORIZON FUND
on behalf of Kemper Horizon 5 Portfolio,
Kemper Horizon 10+ Portfolio and Kemper
Horizon 20+ Portfolio
_________________________
Secretary
_______________________________
By:____________________________
Its:___________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
_________________________
By:______________________
Its:_____________________
-17-
<PAGE>
EXHIBIT B
MANAGEMENT'S DISCUSSION OF KEMPER TOTAL RETURN FUND'S PERFORMANCE
[To be provided]
<PAGE>
APPENDIX 1
Trustee and Nominee Shareholdings
The following table sets forth, for each Nominee and Trustee, the number of
shares owned in each series of the Acquired Trust as of December 31, 2000.
[Each nominee's and Trustee's individual shareholdings of any series of the
Acquired Trust constitute less than 1% of the outstanding shares of such fund.]
[As a group, the Trustees and officers own less than 1% of the shares of any
series of the Acquired Trust.]
[To be provided]
<PAGE>
APPENDIX 2
Beneficial Owners of Fund Shares
<PAGE>
This proxy statement/prospectus is accompanied by Kemper Total Return
Fund's prospectus dated February 1, 2001, which was previously filed with the
Commission via EDGAR on November 30, 2000 (File No. 811-1236) and is
incorporated by reference herein.
Kemper Total Return Fund's statement of additional information dated
February 1, 2001, which was previously filed with the Commission via EDGAR on
November 30, 2000 (File No. 811-1236), is incorporated by reference herein.
The Horizon Funds' statement of additional information dated December 1,
2000, which was previously filed with the Commission via EDGAR on November 30,
2000 (File No. 811-7365), is incorporated by reference herein.
<PAGE>
PART B
KEMPER TOTAL RETURN FUND
-------------------------------------
Statement of Additional Information
March [ ], 2001
-------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Kemper Horizon 5, Kemper Total Return Fund (the "Acquiring Trust"),
Kemper Horizon 10+, and 222 South Riverside Plaza
Kemper Horizon 20+, Chicago, IL 60606
each a series of
Kemper Horizon Fund
222 South Riverside Plaza
Chicago, IL 60606
This Statement of Additional Information is available to the shareholders
of Kemper Total Return Fund in connection with a proposed transaction whereby
Kemper Total Return Fund will acquire all or substantially all of the assets and
all of the liabilities of Kemper Horizon Fund in exchange for shares of the
Acquiring Fund (the "Reorganization").
This Statement of Additional Information of the Acquiring Trust contains
material which may be of interest to investors but which is not included in the
Proxy Statement/Prospectus of the Acquiring Trust relating to the
Reorganization. This Statement of Additional Information consists of this cover
page and the following documents:
1. Kemper Total Return Fund's statement of additional information dated
February 1, 2001, which was previously filed with the Securities and Exchange
Commission (the "Commission") via EDGAR on November 30, 2000 (File No. 811-1236)
and is incorporated by reference herein.
2. Kemper Total Return Fund's annual report to shareholders for the fiscal
year ended October 31, 1999, which was previously filed with the Commission via
EDGAR on January 5, 2000 (File No. 811-1236) and is incorporated by reference
herein.
3. Kemper Total Return Fund's semi-annual report to shareholders for the
period ended April 30, 2000, which was previously filed with the Commission via
EDGAR on June 29, 2000 (File No. 811-1236) and is incorporated by reference
herein.
4. Kemper Horizon Fund's prospectus dated December 1, 2000, which was
previously filed with the Commission via EDGAR on November 30, 2000 (File No.
811-7365) and is incorporated by reference herein .
5. Kemper Horizon Fund's statement of additional information dated December 1,
2000, which was previously filed with the Commission via EDGAR on November 30,
2000 (File No. 811-7365) and is incorporated by reference herein.
6. Kemper Horizon Fund's annual report to shareholders for the fiscal year
ended July 31, 2000, which was previously filed with the Commission via EDGAR on
September 27, 2000 (File No. 811-7365) and is incorporated by reference herein.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated March [ ], 2000 relating to the Reorganization may
be obtained by writing Kemper Total Return Fund 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.
SAI-1
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification.
-------- ----------------
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 23(a) 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 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. (Incorporated by reference to Post-
Effective Amendment No. 49 to Registrant's
Registration Statement on Form N-1A which was
filed on January 30, 1996.)
<PAGE>
(a)(2) Text of Share Certificate. (Incorporated by
reference to Post-Effective Amendment No. 49 to
the Registrant's Registration Statement on Form N-
1A which was filed on January 30, 1996.)
(a)(3) Written Instrument Establishing and Designating
Separate Classes of Shares. (Incorporated by
reference to Post-Effective Amendment No. 49 to
the Registrant's Registration Statement on Form N-
1A which was filed on January 30, 1996.)
(a)(4) Amended and Restated Written Instrument
Establishing and Designating Separate Classes of
Shares. (Incorporated by reference to Post-
Effective Amendment No. 50 to the Registrant's
Registration Statement on Form N-1A which was
filed on December 24, 1996.)
(2) (b)(1) By laws. (Incorporated by reference to Post-
Effective Amendment No. 49 to Registrant's
Registration Statement on Form N-1A which was
filed on January 30, 1996.)
(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 Advisory Contract (IMA) between the
Registrant, on behalf of Kemper Total Return Fund,
and Scudder Kemper Investments, Inc. dated
September 7, 1998 is incorporated by reference to
Post-Effective Amendment No. 52 to Registrant's
Registration Statement on Form N-1A which was
filed on December 3, 1998).
(7) (e)(1) Underwriting and Distribution Services Agreement
between the Registrant, on behalf of Kemper Total
Return Fund, and Kemper Distributors, Inc. dated
October 1, 1999 is incorporated by reference to
Post-Effective Amendment No. 52 to Registrant's
Registration Statement on Form N-1A which was
filed on December 3, 1998).
(8) Inapplicable.
(9) (g)(1) Custodian Agreement between the Registrant, on
behalf of Kemper Total Return Fund, and Investors
Fiduciary Trust Company is incorporated by
reference to Post-Effective Amendment No. 49 to
Registrant's Registration Statement on Form N-1A
which was filed on January 30, 1996).
<PAGE>
(g)(2) Foreign Custody Agreement between the Registrant,
on behalf of Kemper Total Return Fund, and The
Chase Manhattan Bank. (Incorporated by reference
to Post-Effective Amendment No. 49 to Registrant's
Registration Statement on Form N-1A which was
filed on January 30, 1996.)
(10) (m)(1) Rule 12b-1 Plan between Kemper Total Return Fund
(Class B Shares) and Kemper Distributors, Inc.
dated August 1, 1998. (Incorporated by reference
to Post-Effective Amendment No. 52 to the
Registrant's Registration Statement on Form N-1A
which was filed on December 3, 1998.)
(m)(2) Rule 12b-1 Plan between Kemper Total Return Fund
(Class C Shares) and Kemper Distributors, Inc.
dated August 1, 1998. (Incorporated by reference
to Post-Effective Amendment No. 52 to the
Registrant's Registration Statement on Form N-1A
which was filed on December 3, 1998.)
(m)(3) Rule 18f-3 Plan. (Incorporated by reference to
Post-Effective Amendment No. 50 to Registrant's
Registration Statement on Form N-1A which was
filed on December 24, 1996.)
(m)(4) Amended and Restated Rule 18F-3 Plan is filed
herein.
(11) Opinion and Consent of Dechert is filed herein.
(12) Opinion and Consent of Willkie Farr & Gallagher is
to be filed by post-effective amendment.
(13) (h)(1) Agency Agreement. (Incorporated by reference to
Post-Effective Amendment No. 49 to Registrant's
Registration Statement on Form N-1A which was
filed on January 30, 1996.)
(h)(2) Administrative Services Agreement between the
Registrant and Kemper Distributors, Inc. dated
April 1, 1997. (Incorporated by reference to Post-
Effective Amendment No. 51 to the Registrant's
Registration Statement on Form N-1A which was
filed on January 27, 1998.)
(h)(3) Supplement to Agency Agreement between Registrant
and Investors Fiduciary Trust Company dated June
1, 1997. (Incorporated by reference to Post-
Effective Amendment No. 51 to the Registrant's
Registration Statement on Form N-1A which was
filed on January 27, 1998.)
(h)(4) Fund Accounting Agreement between Kemper Total
Return Fund and Scudder Fund Accounting
Corporation dated December 31, 1997. (Incorporated
by reference to Post-Effective Amendment No. 51 to
the Registrant's Registration Statement on Form N-
1A which was filed on January 27, 1998.)
(14) Consent of Independent Auditors is filed herein.
<PAGE>
(15) Inapplicable.
(16) Powers of Attorney are filed herein.
(17) Form of Proxy is filed herein.
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 C-8 350 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 Total Return Fund 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 6th day of December, 2000.
KEMPER TOTAL RETURN FUND
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 6, 2000
-----------------------
Mark S. Casady
/s/ John W. Ballantine* Trustee December 6, 2000
-----------------------
John W. Ballantine
/s/ Lewis A. Burnham* Trustee December 6, 2000
---------------------
Lewis A. Burnham
/s/ Linda C. Coughlin* Trustee December 6, 2000
----------------------
Linda C. Coughlin
/s/ Donald L. Dunaway* Trustee December 6, 2000
----------------------
Donald L. Dunaway
/s/ Robert B. Hoffman* Trustee December 6, 2000
----------------------
Robert B. Hoffman
/s/ Donald R. Jones* Trustee December 6, 2000
--------------------
Donald R. Jones
/s/Thomas W. Littauer* Chairman and Trustee December 6, 2000
----------------------
Thomas W. Littauer
/s/ Shirley D. Peterson* Trustee December 6, 2000
------------------------
Shirley D. Peterson
/s/ William P. Sommers* Trustee December 6, 2000
-----------------------
William P. Sommers
/s/ John R. Hebble Treasurer (Principal Financial and December 6, 2000
------------------
</TABLE>
<PAGE>
John R. Hebble Accounting Officer)
*By: /s/ Caroline Pearson * December 6, 2000
----------------------------
Caroline Pearson, Attorney-in-fact
*Executed pursuant to powers of attorney filed herein as an exhibit to the
Registration Statement.
