<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEMPER EUROPE FUND
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
<PAGE> 1
September 1997
Kemper
Important News
for Kemper Funds Shareholders
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE IS A BRIEF OVERVIEW OF MAJOR MATTERS TO BE VOTED UPON.
================================================================================
Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A Zurich Insurance Company, the parent of your Fund's investment manager (Zurich
Kemper Investments, Inc. or "ZKI" or, for Kemper Value Fund, Inc., Zurich Kemper
Value Advisors, Inc. or "ZKVA") has entered into an agreement with Scudder,
Stevens & Clark, Inc. ("Scudder") whereby Zurich will acquire approximately 70%
of Scudder. Upon completion of the transaction, Scudder will change its name to
Scudder Kemper Investments, Inc. ("SKI") and ZKI and ZKVA will be combined with
SKI. Because of the transaction, it is necessary for your Fund to approve a new
investment management agreement.
The following pages elaborate on Scudder, the proposed new investment management
agreement and the Fund Board's evaluation of Zurich and Scudder. A vote is also
being sought on a Rule 12b-1 plan (the provisions of which are the same as in
the current Rule 12b-1 plan) for the Class B shares and Class C shares of each
Fund except Kemper Target Equity Fund, the election of Board members, the
selection of independent auditors, and a change in investment policies to permit
a master/feeder fund structure in the future for each Fund except Kemper Target
Equity Fund.
Q WHAT IS SCUDDER?
A Scudder is one of America's oldest and largest investment management firms. It
manages assets invested in equities, fixed income and money market instruments
in both developed and emerging markets. Scudder provides investment services for
open-end and closed-end funds, and private and institutional clients.
Q WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A The Investment Company Act of 1940 requires a vote whenever there is a change
in control of an investment manager. The Zurich/Scudder transaction is such a
change of control and requires a fund shareholder vote upon a new investment
management agreement with each Fund. A vote upon the Rule 12b-1 distribution
plan with each Fund (except Kemper Target Equity Fund), by shareholders of Class
B and Class C shares only, is also required.
Q HOW WILL THE ZURICH/SCUDDER TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A Your Fund and your Fund investment will not change. You will still own
[KEMPER LOGO]
<PAGE> 2
the same shares in the same Fund. If the new investment management agreement and
Rule 12b-1 plans are approved, your Fund shares will not change, the advisory
fees charged to your Fund will not change, and, if applicable, the fee rate
payable under your Fund's 12b-1 plan will not change.
Zurich and Scudder have committed to provide all resources necessary to provide
your Fund with top quality investment management and shareholder services.
Q WILL THE INVESTMENT
ADVISORY AND RULE 12B-1 FEES
BE THE SAME?
A Yes, the investment advisory
and Rule 12b-1 fees paid by
your Fund will remain the
same.
Q WILL THE BRAND IDENTITY OF
THE KEMPER FUNDS SURVIVE?
A Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper Funds. They are also committed to strengthening and enhancing the Kemper
Funds brand and distribution channels, while maintaining its separate brand
identity.
Q WHAT IS A MASTER/FEEDER FUND?
A Rather than investing directly in a portfolio of securities, a feeder fund is
authorized to pool its assets with other mutual funds managed by its investment
manager for investment in a master fund. A purpose of a master/feeder fund
structure is to achieve operational efficiencies.
Q HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A After careful consideration, the board members of your Fund, including all of
the independent members, recommend that you vote "For" all the items on the
enclosed proxy card.
Q WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?
A ZKI -- not your Fund --is paying all costs of the Funds' shareholder meeting
and proxy solicitation.
Q WHOM DO I CALL FOR MORE INFORMATION?
A Please call Shareholder Services at l-800-537-1988.
ABOUT THE PROXY CARD
Because each Fund must vote separately, you are being sent a
proxy card for each Fund account that you have.
Please vote all issues shown on each proxy card that you receive.
Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each proxy card. On Item 1 (election of Board
members), mark--For All, Withhold All or For All Except. If you mark an X in
the For All Except box, you should print the number(s) relating to the
individual(s) for whom you wish to withhold authority. On all other Items,
mark--For, Against or Abstain. Then sign, date and return each of your proxy
cards in the accompanying postage-paid envelope. All registered owners of an
account, as shown in the address on the proxy card, must sign the proxy card.
If you are signing for a corporation, trust or estate, please indicate your
title or position.
We appreciate your continuing support and look forward to serving your future
investment needs.
THANK YOU FOR MAILING YOUR
PROXY CARD PROMPTLY!
[PROXY CARD SAMPLE]
<PAGE> 3
KEMPER FUNDS
================================================================================
KEMPER VALUE FUND, INC.
- - Kemper Contrarian Fund
- - Kemper-Dreman High Return Equity Fund
- - Kemper Small Cap Value Fund
KEMPER HORIZON FUND
- - Kemper Horizon 20+ Portfolio
- - Kemper Horizon 10+ Portfolio
- - Kemper Horizon 5 Portfolio
KEMPER EUROPE FUND
KEMPER TARGET EQUITY FUND
- - Kemper Retirement Fund -- Series I
- - Kemper Retirement Fund -- Series II
- - Kemper Retirement Fund -- Series III
- - Kemper Retirement Fund -- Series IV
- - Kemper Retirement Fund -- Series V
- - Kemper Retirement Fund -- Series VI
- - Kemper Retirement Fund -- Series VII
- - Kemper Worldwide 2004 Fund
(LOGO)Printed on recycled paper
<PAGE> 4
KEMPER VALUE FUND, INC.
KEMPER HORIZON FUND
KEMPER EUROPE FUND
KEMPER TARGET EQUITY FUND
222 South Riverside Plaza Chicago, Illinois 60606
Telephone (800) 621-1048
, 1997
Dear Kemper Fund Shareholder:
As you read in the Questions and Answers (Q & A) on the outside cover, Zurich
Insurance Company ("Zurich") has entered into an agreement with Scudder, Stevens
& Clark, Inc. ("Scudder") pursuant to which Zurich will acquire approximately
70% of Scudder. Upon completion of the transaction, Scudder will change its name
to Scudder Kemper Investments, Inc. ("SKI"), and your Fund's investment manager
(Zurich Kemper Investments, Inc. or "ZKI" or, for Kemper Value Fund, Inc.,
Zurich Kemper Value Advisors, Inc. or "ZKVA") will be combined with SKI. Because
of the transaction, it is necessary for your Fund to approve new investment
management agreement and, except for Kemper Target Equity Fund, a new Rule 12b-1
Plan for Class B and Class C shares.
If the new investment management agreement and Rule 12b-1 Plan are approved,
YOUR FUND SHARES WILL NOT CHANGE, THE ADVISORY FEES CHARGED TO YOUR FUND WILL
NOT CHANGE, AND, IF APPLICABLE, THE FEE RATE PAYABLE UNDER YOUR FUND'S RULE
12B-1 PLAN WILL NOT CHANGE. FURTHER, YOU SHOULD CONTINUE TO RECEIVE THE HIGH
QUALITY INVESTMENT MANAGEMENT AND SHAREHOLDER SERVICES THAT YOU HAVE COME TO
EXPECT OVER THE YEARS.
Your Fund Board has unanimously approved the proposals and recommends them for
your approval. I encourage you to vote in favor of the proposals.
As always, we thank you for your confidence and support.
Sincerely,
/s/ Stephen B. Timbers
Stephen B. Timbers
President KEMPER LOGO
<PAGE> 5
KEMPER FUNDS
222 South Riverside Plaza Chicago, Illinois 60606
Telephone (800) 621-1048
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997 AND PROXY STATEMENT
, 1997
To the Shareholders:
You are invited to attend a joint special meeting of shareholders of the
following Kemper Funds (each a "Fund" and collectively the "Funds"):
KEMPER VALUE FUND, INC. ("KVF")
KEMPER HORIZON FUND ("KHF")
KEMPER EUROPE FUND ("KEUF")
KEMPER TARGET EQUITY FUND ("KTEF")
The meeting will be held in the Presentation Room on the 32nd Floor at the
offices of the Funds, 222 South Riverside Plaza, Chicago, Illinois on Wednesday,
December 3, 1997 at 2:30 p.m., Chicago time, for the following purposes and to
transact such other business as may properly come before the meeting or any
adjournment of the meeting:
1. To elect eight (8) board members to the Board of Trustees, or the Board of
Directors in the case of KVF.
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the current fiscal year.
3. To approve or disapprove a new investment management agreement with Scudder
Kemper Investments, Inc. ("SKI") (or, in the case of KHF, KEUF and KTEF, with
Zurich Kemper Investments, Inc. ("ZKI") transferable to SKI or, in the case
of KVF, with Zurich Kemper Value Advisors, Inc. ("ZKVA") transferable to
SKI).
4. To approve or disapprove a new sub-advisory agreement with Zurich Investment
Management Limited ("ZIML") (including approval of a subsequent assignment)
[for KEUF and Kemper Worldwide 2004 Fund, a series of KTEF, only].
5. To approve or disapprove a new sub-advisory agreement with Zurich Kemper
Value Advisors, Inc. ("ZKVA") [for KHF only].
6. To approve or disapprove a new sub-advisory agreement with Dreman Value
Management, L.L.C. ("DVM") [for Kemper-Dreman High Return Equity Fund, a
series of KVF, only].
<PAGE> 6
7. For Class B and Class C shareholders only, to approve or disapprove a new
Rule 12b-1 distribution plan with Zurich Kemper Distributors, Inc. ("ZKDI")
[for KVF, KHF and KEUF only].
8. To approve or disapprove changes in the Fund's fundamental investment
policies to permit a master/feeder fund structure [for KVF, KHF and KEUF
only].
The Board of each Fund has selected the close of business on September 22, 1997
as the record date for the determination of shareholders of each Fund entitled
to notice of and to vote at the meeting. Shareholders are entitled to one vote
for each share held.
- ------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
- ------------------------------------------------------------------------------
<PAGE> 7
The accompanying proxy is solicited by the Boards of Trustees or the Board of
Directors (the "Boards") of the Funds for voting at the joint special meeting of
shareholders of the Funds to be held on Wednesday, December 3, 1997, and at any
and all adjournments thereof (the "Meeting"). This proxy statement was first
mailed to shareholders on or about , 1997.
THE SERIES FUNDS. Each of KVF, KHF and KTEF is a "series company" that issues
various series of shares. (Each series also is sometimes described herein as a
"Fund.") Each series has its own investment objective and policies and operates
independently for purposes of investments, dividends and redemptions.
The series of KVF are Kemper Contrarian Fund ("KCF"), Kemper-Dreman High
Return Equity Fund ("KDHRF"), Kemper Small Cap Value Fund ("KSCVF") and
Kemper Mid-Cap Value Fund ("KMCVF"). As of September 22, 1997, KMCVF had
not commenced operations and did not have any shareholders.
The series of KHF are Kemper Horizon 20+ Portfolio ("KH20P"), Kemper
Horizon 10+ Portfolio ("KH10P") and Kemper Horizon 5 Portfolio ("KH5P").
The series of KTEF are Kemper Retirement Fund-Series I ("KRF-I"), Kemper
Retirement Fund-Series II ("KRF-II"), Kemper Retirement Fund-Series III
("KRF-III"), Kemper Retirement Fund-Series IV ("KRF-IV"), Kemper Retirement
Fund-Series V ("KRF-V"), Kemper Retirement Fund-Series VI ("KRF-VI"),
Kemper Retirement Fund-Series VII ("KRF-VII"), and Kemper Worldwide 2004
Fund ("KWF-4").
Each Fund (and each series of each series company) except for KTEF, are divided
into four classes of shares, including Class A Shares, Class B Shares, Class C
Shares and Class I shares. Shares of each class represent a proportionate
interest in that class.
The shareholders of each Fund are being asked to vote on three to six items. On
Item 1 (election of board members) and Item 2 (ratification of selection of
auditors), each Fund will vote in the aggregate and not by series or class. On
Item 3 (approval of new investment management agreement), KEUF will vote
separately and, for KVF, KHF and KTEF, each series will vote separately. On Item
4 (approval of new sub-advisory agreement with ZIML), KEUF and KWF-4 will vote
separately. On Item 5 (approval of new sub-advisory agreement with ZKVA) each
series of KHF will vote separately. On Item 6 (approval of new sub-advisory
agreement with DVM), KDHRF will vote separately. On Item 7 (approval of new Rule
12b-1 Plan), the Class B Shares and the Class C Shares of KVF, KHF and KEUF (or
in the case of KVF and KHF, of each
2
<PAGE> 8
series) will each vote separately. On Item 8 (approval of a change in the Fund's
fundamental investment policies to permit a master/feeder fund), KEUF will vote
separately and, for KVF and KHF, each series will vote separately. The Board of
each Fund recommends an affirmative vote on all items. The vote required to
approve each item is described under the section of this proxy statement
entitled "Miscellaneous."
3
<PAGE> 9
The following table indicates which shareholders are solicited with respect to
each Item:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ITEM KCF KDHRF KSCVF KH20P KH10P KH5P KEUF KRF-I KRF-II KRF-III
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
1. Elect Board Members X X X X X X X X X X
- ----------------------------------------------------------------------------------------------------------------------------
2. Ratify selection of auditors X X X X X X X X X X
- ----------------------------------------------------------------------------------------------------------------------------
3. Approval of New Investment Management X X X X X X X X X X
Agreement with Scudder Kemper Investments,
Inc.
- ----------------------------------------------------------------------------------------------------------------------------
4. Approval of New Sub-Advisory Agreement X
with Zurich Investment Management Limited
- ----------------------------------------------------------------------------------------------------------------------------
5. Approval of New Sub-Advisory Agreement X X X
with Zurich Kemper Value Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
6. Approval of New Sub-Advisory Agreement X
with Dreman Value Management, L.L.C.
- ----------------------------------------------------------------------------------------------------------------------------
7. Approval of New Rule 12b-1 Plan X X X X X X X
- ----------------------------------------------------------------------------------------------------------------------------
8. Approval of changes in fundamental X X X X X X X
investment policies to permit master/feeder
structure
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------- ------------------------------------------
ITEM KRF-IV KRF-V KRF-VI KRF-VII KWF-4
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
1. Elect Board Members X X X X X
- ----------------------------------------------
2. Ratify selection of auditors X X X X X
- ----------------------------------------------
3. Approval of New Investment Management X X X X X
Agreement with Scudder Kemper Investments,
Inc.
- ----------------------------------------------
4. Approval of New Sub-Advisory Agreement X
with Zurich Investment Management Limited
- ----------------------------------------------
5. Approval of New Sub-Advisory Agreement
with Zurich Kemper Value Advisors, Inc.
- ----------------------------------------------
6. Approval of New Sub-Advisory Agreement
with Dreman Value Management, L.L.C.
- ----------------------------------------------
7. Approval of New Rule 12b-1 Plan
- ----------------------------------------------
8. Approval of changes in fundamental
investment policies to permit master/feeder
structure
- ----------------------------------------------
</TABLE>
4
<PAGE> 10
The Board of each Fund has fixed the close of business on September 22, 1997 as
the record date for the determination of shareholders of each Fund entitled to
notice of and to vote at the Meeting. As of September 22, 1997, each Fund had
shares issued and outstanding as set forth in Exhibit A.
INTRODUCTION
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 will become the
majority stockholder in Scudder with an approximately 70% interest, and ZKI will
become a wholly-owned subsidiary of, or be combined with, Scudder
("Transaction"). Upon completion of the Transaction, Scudder will change its
name to Scudder Kemper Investments, Inc. ("SKI"). Scudder, a New York-based
investment adviser and the investment manager for the Scudder and AARP Funds,
has approximately $125 billion under management. ZKI, a Chicago-based investment
adviser and the investment manager for the Kemper Funds, and its affiliates have
approximately $85 billion under management. The headquarters of SKI will be in
New York. Edmond D. Villani, Scudder's Chief Executive Officer, will continue as
Chief Executive Officer of SKI and will become a member of Zurich's Corporate
Executive Board. Some of the terms of the Transaction are also set forth in a
form of second amended and restated Security Holders Agreement ("New SHA") to be
entered into among the beneficial owners of the capital stock of Scudder, the
Scudder Representatives, Scudder, Zurich, ZKIH and the Scudder Kemper
Investments, Inc. Executive Defined Contribution Plan Trust.
Consummation of the Transaction would constitute an "assignment," as that term
is defined in the Investment Company Act of 1940 ("1940 Act"), of each Fund's
current investment management agreement with ZKI (or, in the case of KVF, with
Zurich Kemper Value Advisors, Inc. ("ZKVA")). As required by the 1940 Act, each
current investment management agreement provides for its automatic termination
in the event of its assignment. Accordingly, as discussed further below, a new
investment management agreement between each Fund and SKI is being proposed for
approval by shareholders of each Fund.
DESCRIPTION OF THE TRANSACTION.
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a
5
<PAGE> 11
79.1% fully diluted equity interest in the combined business. Zurich will then
transfer a 9.6% fully diluted equity interest in SKI to a defined contribution
plan for the benefit of Scudder and ZKI employees, as well as cash and warrants
on Zurich shares for award to Scudder employees, in each case subject to
five-year vesting schedules. After giving effect to the Transaction, current
Scudder stockholders will have a 29.6% fully diluted equity interest in SKI and
Zurich will have a 69.5% fully diluted interest in SKI. Scudder's name will be
changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transaction is subject to
adjustment based on the effect on revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of SKI will enter into the New
SHA. Under the New SHA, Scudder stockholders will be entitled to designate three
of the seven members of the SKI board and two of the four members of an
Executive Committee, which will be the primary management-level committee of
SKI. Zurich will be entitled to designate the other four members of the SKI
board and the other two members of the Executive Committee.
The names, addresses and principal occupations of the initial Scudder-designated
directors of SKI are as follows: LYNN S. BIRDSONG, 345 Park Avenue, New York,
New York, Managing Director of Scudder; CORNELIA M. SMALL, 345 Park Avenue, New
York, New York, Managing Director of Scudder; and EDMOND D. VILLANI, 345 Park
Avenue, New York, New York, President, Chief Executive Officer and Managing
Director of Scudder.
The names, addresses and principal occupations of the initial Zurich-designated
directors of SKI are as follows: LAWRENCE W. CHENG, Mythenquai 2, Zurich,
Switzerland, Chief Investment Officer for Investments and Institutional Asset
Management and the corporate functions of Securities and Real Estate for Zurich
and a member of the Corporate Executive Board of Zurich; STEVEN M. GLUCKSTERN,
Mythenquai 2, Zurich, Switzerland, responsible for Reinsurance, Structured
Finance, Capital Market Products and Strategic Investments, and a member of the
Corporate Executive Board of Zurich; ROLF HUEPPI, Mythenquai 2, Zurich,
Switzerland, Chairman of the Board and Chief Executive Officer of Zurich; and
MARKUS ROHRBASSER, Mythenquai 2, Zurich, Switzerland, Chief Financial Officer
and a member of the Corporate Executive Board of Zurich.
6
<PAGE> 12
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of SKI, effecting a
public offering before April 15, 2005, causing SKI to engage substantially in
non-investment management and related business, making material acquisitions or
divestitures, making changes in SKI's capital structure, dissolving or
liquidating SKI, or entering into certain affiliated transactions with Zurich.
The New SHA also provides for various put and call rights with respect to SKI
stock held by current Scudder employees, limitations on Zurich's ability to
purchase other asset management companies outside of SKI, rights of Zurich to
repurchase SKI stock upon termination of employment of SKI personnel, and
registration rights for stock held by continuing Scudder stockholders.
The Transaction is subject to a number of conditions, including approval by
Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI being
at least 75%; Scudder and ZKI having obtained director and stockholder approvals
from U.S.-registered funds representing 90% of the assets of such funds under
management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transaction, or any litigation challenging the
Transaction that is reasonably likely to result in an injunction or invalidation
of the Transaction; and the continued accuracy of the representations and
warranties contained in the Transaction Agreement. The Transaction is expected
to close during the fourth quarter of 1997.
Subsequent to the execution of the Transaction Agreement, Zurich agreed to cause
ownership of Zurich Investment Management Limited ("ZIML") to be transferred by
Zurich (or a direct or indirect wholly-owned subsidiary of Zurich) to SKI (or a
direct or indirect wholly-owned subsidiary of SKI). ZIML is a sub-adviser for
certain of the Funds. While the amount of consideration payable to Zurich for
ZIML has not yet been finally agreed upon, it is expected that such
consideration would in no event exceed $50 million, payable in cash or shares of
SKI stock or some combination thereof at the closing of the Transaction or over
some period of time after the closing of the Transaction. Following the
transfer, which is expected to take place at the same time as the closing of the
Transaction, ZIML's board of directors would comprise representatives of Scudder
and Zurich. The capital stock of ZIML initially may be transferred to one or
more wholly-owned subsidiaries of Zurich, but ultimately will be transferred to
SKI or one of its wholly-owned subsidiaries (the "ZIML Transaction"). The ZIML
Transaction will result in an assignment of the sub-advisory agreement under the
1940 Act.
7
<PAGE> 13
ITEM 1. ELECTION OF BOARD MEMBERS
At the Meeting, eight (8) Board members are to be elected to constitute the
Board of each Fund. All the nominees, except Messrs. Daniel Pierce and Edmond
Villani, were elected to the Boards of KTEF and KVF at special meetings of
shareholders held on September 19, 1995 and , 1995, respectively, and to
the Boards of KHF and KEUF, by the initial shareholder (i.e., ZKI) immediately
prior to their commencement of operations.
It is intended that the proxies will be voted for the election of the nominees
described below. The nominees, if elected, will take office upon consummation of
the Transaction and their election and qualification is contingent upon
consummation of the Transaction. The term of each person elected as a Board
member will be from the date of the consummation of the Transaction until the
next meeting of shareholders, if any, called for the purpose of electing Board
members and until the election and qualification of a successor or until such
Board member sooner dies, resigns or is removed as provided in the Agreement and
Declaration of Trust or the Articles of Incorporation of each Fund ("Declaration
of Trust" or "Articles"). If the transaction is not consummated, the current
Board members will continue to serve as each Fund's Board (which are those
identified as such below, along with Mr. Stephen B. Timbers, the president and
chief executive officer of ZKI). Since the Funds do not hold annual meetings,
Board members will hold office for an indeterminate period.
All the nominees listed below have consented to serve as Board members of the
respective Funds, if elected. In case any nominee shall be unable or shall fail
to act as a Board member by virtue of an unexpected occurrence, the proxies may
be voted for such other person(s) as shall be determined by the persons acting
under the proxies in their discretion.
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
James B. Akins (10/15/26) 19 -- KVF; 19 -- KHF; 19 --
Consultant on International, KEUF; 1995 -- KTEF.
Political and Economic Affairs;
formerly, a career United States
Foreign Service Officer; Energy
Adviser for the White House; United
States Ambassador to Saudi Arabia.
</TABLE>
8
<PAGE> 14
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
Arthur R. Gottschalk (02/13/25) 19 -- KVF; 19 -- KHF; 19 --
Retired; formerly, President, KEUF; 1989 -- KTEF.
Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical
Center; Member, Board of Governors,
Heartland Institute/Illinois;
formerly, Illinois State Senator;
formerly, Vice President, The Ruben
H. Donnelly Corp.
Frederick T. Kelsey (04/25/27) 19 -- KVF; 19 -- KHF; 19 --
Retired; formerly, Consultant to KEUF; 1989 -- KTEF.
Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of
Institutional Liquid Assets and its
affiliated mutual funds; Trustee of
the Benchmark Funds and the Pilot
Funds.
*Daniel Pierce (03/18/34) Nominee
Chairman of the Board and Managing
Director, Scudder; Director,
Fiduciary Trust Company; Director,
Fiduciary Company Incorporated; Board
member of 14 investment companies
advised by Scudder.
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
Fred B. Renwick (02/01/30) 19 -- KVF; 19 -- KHF; 19 --
Professor of Finance, New York KEUF; 1995 -- KTEF.
University, Stern School of Business;
Director, TIFF Industrial Program,
Inc.; Director, the Wartburg Home
Foundation; Chairman, Investment
Committee of Morehouse College Board
of Trustees; Chairman, [Director]
American Bible Society Investment
Committee; formerly, member of the
Investment Committee of Atlanta
University Board of Trustees;
formerly, Director of Board of
Pensions Evangelical Lutheran Church
of America.
John B. Tingleff (05/04/35) 19 -- KVF; 19 -- KHF; 19 --
Retired; formerly, President, KEUF; 1991 -- KTEF.
Tingleff & Associates (management
consulting firm); formerly, Senior
Vice President, Continental Illinois
National Bank & Trust Company.
*Edmond D. Villani (03/04/47) Nominee
President, Chief Executive Officer
and Managing Director, Scudder.
John G. Weithers (08/08/33) 19 -- KVF; 19 -- KHF; 19 --
Retired; formerly, Chairman of the KEUF; 1993 -- KTEF.
Board and Chief Executive Officer,
Chicago Stock Exchange; Director,
Federal Life Insurance Company;
President of the Members of the
Corporation and Trustee, DePaul
University; Director, Systems
Imagineering, Inc.
</TABLE>
- ---------------
* Interested persons of Scudder as defined in the Investment Company Act of
1940.
10
<PAGE> 16
All the nominees, except Messrs. Pierce and Villani, serve as board members of
thirteen Kemper Funds. Mr. Pierce and Mr. Villani have each been nominated to
serve as a board member of thirty-nine Kemper Funds. A "Kemper Fund" is an
investment company for which ZKI, ZKVA or their affiliates serve as investment
manager.
Each Board has an audit and governance committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Renwick, Tingleff and Weithers. The committee of each
Fund met times during each Fund's most recently completed fiscal year. In
1997, KTEF changed fiscal years from June 30 to July 31. The information
included in this proxy statement is for KTEF's fiscal year ended June 30, 1997
and does not include information for its short fiscal period (one-month) ended
July 31, 1997. The committee makes recommendations regarding the selection of
independent auditors for the Fund, confers with the independent auditors
regarding the Fund's financial statements, the results of audits and related
matters, seeks and reviews Board nominees and performs such other tasks as the
respective Board assigns. The committee proposed the nominees for election as
Board members by the shareholders, and the Board, including non-interested Board
members, concurred. Shareholders wishing to submit the name of a candidate for
consideration by the committee should submit their recommendations to the
secretary of the applicable Fund.
Each Fund pays Board members who are not "interested persons" of such Fund an
annual retainer plus expenses, and an attendance fee for each Board meeting and
committee meeting attended. As reflected above, the Board members currently
serve as board members of various investment companies for which ZKI, ZKVA or an
affiliate serves as investment manager. Board members or officers who are
"interested persons" receive no compensation from such Fund. The Board of each
Fund met times during the most recently completed fiscal year. Each then
current Board member attended 75% or more of the respective meetings of the
Board and the audit and governance committee (if then a member thereof) held
during the most recently completed fiscal year.
The table below shows, for each Board member entitled to receive compensation
from the Funds, the aggregate compensation paid or accrued during each Fund's
most recently completed fiscal year and the
11
<PAGE> 17
total compensation that the Kemper Funds paid or accrued during calendar year
1996.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
KEMPER FUNDS
PAID TO
NAME OF BOARD MEMBER KVF KHF KEUF KTEF BOARD MEMBERS(2)
-------------------- --- --- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
James E. Akins......... 6,800 5,600 1,500 94,300
Arthur R.
Gottschalk(1)........ 6,900 5,600 1,400 102,700
Frederick T.
Kelsey(1)............ 6,800 5,600 1,200 106,800
Fred B. Renwick........ 6,800 5,600 1,500 94,300
John B. Tingleff....... 6,800 5,600 1,500 94,300
John G. Weithers....... 6,800 5,600 1,500 94,300
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Funds. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds--Zurich Money
Market Fund.
(2) Includes compensation for service on the boards of 13 Kemper Funds with 36
fund portfolios. Each Board member currently serves as Board member of 13
Kemper Funds with 46 fund portfolios.
FUND OFFICERS. Information about the executive officers of the Funds, with their
respective dates of birth and terms of office indicated, is set forth below.
Daniel J. Bukowski (05/06/63), vice president of KHF since
, is senior vice president and director of quantitative
research.
Tracy M. Chester (09/27/54), vice president of KTEF since 12/7/94, is senior
vice president of ZKI since September 1994; prior thereto, was senior vice
president and portfolio manager of investment management company; and prior
thereto, managed private accounts.
Phillip J. Collora (11/15/45) vice president of KTEF since 2/1/90, KVF since
, KHF since and KEUF since , and
secretary of each Fund since [3/2/95], is senior vice president and assistant
secretary of ZKI.
Jerome L. Duffy (06/29/36), treasurer of KTEF since 08/03/88, KVF since
, KHF since and KEUF since , is senior vice
president of ZKI.
Thomas H. Forester ( ), vice president of KVF since , is
.
12
<PAGE> 18
Jonathan Kay ( ), vice president of KVF since , is
.
William M. Knapp (04/23/61), vice president of KHF since , is
first vice president of ZKI.
Charles R. Manzoni, Jr. (01/23/47), vice president of each Fund since 09/04/96,
is executive vice president, secretary and general counsel of ZKI; secretary,
ZKI Holding Corp.; secretary, ZKI Agency, Inc., and formerly, Partner, Gardner,
Carton & Douglas (attorneys).
John E. Neal (03/09/50), vice president of each Fund since ,
is president of Kemper Funds Group, a unit of ZKI, and director of ZKI, ZKVA and
ZKDI.
Steven H. Reynolds (09/11/43), vice president of KTEF, KHF and KEUF since
, is executive vice president, chief investment officer-equities
of ZKI.
Steven T. Stokes (07/18/62) vice president of KVF since , is
of ZKVA.
Stephen B. Timbers (08/08/44), president of each Fund since 03/11/95, is
president, chief executive officer, chief investment officer and director of ZKI
and director of ZKDI, ZKVA and LTV Corporation. Mr. Timbers is also Board member
of each of the Funds.
Elizabeth C. Werth (10/01/47), assistant secretary of each Fund since
[07/26/90], is vice president and director of state registrations of ZKI.
The officers of each Fund are elected by the Board of the Fund on an annual
basis to serve until their successors are elected and qualified. It is
anticipated that, after consummation of the Transaction, the Boards of the Funds
will elect new officers who are expected to include persons currently affiliated
with Scudder.
SHAREHOLDINGS
Set forth in Exhibit B is the number of shares of each Fund owned beneficially
by each Board member and nominee as of , 1997.
As of , 1997, no person is known to the Funds to own beneficially
more than five percent of the shares of any class of any Fund, except as shown
in Exhibit B.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
A majority of the members of each Board who are not "interested" persons of the
Fund has selected Ernst & Young LLP, independent
13
<PAGE> 19
auditors, to audit the books and records of the Fund for the current fiscal
year. This firm has served in this capacity for each Fund since the Fund was
organized and has no direct or indirect financial interest in a Fund except as
independent auditors. The selection of Ernst & Young LLP as independent auditors
of each Fund is being submitted to the shareholders for ratification. A
representative of Ernst & Young LLP is expected to be present at the Meeting and
will be available to respond to any appropriate questions raised at the Meeting
and may make a statement.
BOARD RECOMMENDATION
The Board of each Fund recommends that shareholders vote FOR the ratification of
the selection of independent auditors.
ITEM 3. NEW INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Zurich Kemper Investments, Inc. ("ZKI") is the investment adviser and manager
for KHF, KEUF and KTEF and Zurich Kemper Value Advisors, Inc. ("ZKVA") is the
investment adviser and manager for KVF. ZKI and its indirect parent, Zurich
Insurance Company ("Zurich"), entered into a transaction agreement with Scudder,
Stevens & Clark, Inc. ("Scudder") whereby Zurich will acquire approximately 70%
of Scudder. Upon completion of the Transaction, Scudder will change its name to
Scudder Kemper Investments, Inc. ("SKI") and ZKI and ZKVA will be combined with
SKI.
As discussed above, consummation of the Transaction would constitute an
"assignment," as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"), of each Fund's current investment management agreement with ZKI (or
ZKVA in the case of KVF). As required by the 1940 Act, each current investment
management agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transaction, a new investment management
agreement ("management agreement") between each Fund and SKI is being proposed
for approval by shareholders of each Fund. (Depending on the timing of the
combination of the Scudder, ZKI and ZKVA organizations, the new investment
management agreement may initially be between the Fund and ZKI (or ZKVA in the
case of KVF) for some period following the Transaction and then be transferred
to SKI without further action required on the part of shareholders of the Fund.
SKI, ZKI or ZKVA, as party to the new investment management agreement, is
sometimes referred to in this proxy statement as the "investment manager.") A
copy of the form of the new management agreement is attached hereto as Exhibit
C.
14
<PAGE> 20
BOARD RECOMMENDATION
The Board of each Fund met on July 8, 1997, July 15, 1997, August 18-19, 1997
and September 19-20, 1997 to consider the Transaction and its anticipated
effects upon ZKI and ZKVA and the investment management and other services
provided to the Funds by ZKI, ZKVA and their affiliates. In addition, the
Independent Board members also met separately with counsel on a number of
occasions to discuss the Transaction. On September 20, 1997 the Board of each
Fund, including a majority of the Board members who are not parties to such
agreement or interested persons of any such party, voted unanimously to approve
the new management agreement and to recommend it to shareholders for their
approval.
For information about each Board's deliberations and the reasons for its
recommendation, please see "Board Evaluation" near the end of this Item 3.
The Board of each Fund recommends that shareholders vote FOR approval of the new
management agreement.
THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Each current management agreement provides that the Fund's investment manager
acts as investment adviser, manages the Fund's investments, administers the
Fund's business affairs, furnishes offices, necessary facilities and equipment,
provides clerical, bookkeeping and administrative services, provides shareholder
and information services and permits any of its officers or employees to serve
without compensation as trustees or officers of the Fund if duly elected to such
positions. Under the current management agreement, the Fund agrees to assume and
pay the charges and expenses of its operations including, by way of example, the
compensation of the trustees other than those affiliated with the investment
manager, charges and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, of any registrar of the Fund and of the
custodian (including fees for safekeeping of securities), costs of calculating
net asset value, all costs of acquiring and disposing of portfolio securities,
interest, if any, on obligations incurred by the Fund, costs of share
certificates, membership dues in the Investment Company Institute or any similar
organization, reports and notices to shareholders, other like miscellaneous
expenses and all taxes and fees to federal, state or other governmental
agencies.
For the services and facilities furnished, KTEF pays an annual investment
management fee for each series (except for KWF-4) of .50 of 1% of average daily
net assets of the series. For KWF-4, the Fund pays ZKI .60 of 1% of average
daily net assets of the series. Listed below is the annual management fee rate
as a percentage of average daily net assets payable
15
<PAGE> 21
under the current management agreement for each of KVF, KHF and KEUF. Exhibit K
shows the management fees paid by each Fund for the Fund's most recently
completed fiscal year.
<TABLE>
<CAPTION>
APPLICABLE ASSETS ($000) KVF KHF KEUF
------------------------ --- --- ----
<S> <C> <C> <C>
$0 - $250,000................................ .75% .58% .75%
$250,000 - $1,000,000........................ .72 .55 .72
$1,000,000 - $2,500,000...................... .70 .53 .70
$2,500,000 - $5,000,000...................... .68 .51 .68
$5,000,000 - $7,500,000...................... .65 .48 .65
$7,500,000 - $10,000,000..................... .64 .46 .64
$10,000,000 - $12,500,000.................... .63 .44 .63
Over $12,500,000............................. .62 .42 .62
</TABLE>
Each management agreement provides that the Fund's investment manager will
reimburse the Fund should the operating expenses of the Fund, including the
investment management fee, but excluding taxes, interest, distribution fees,
extraordinary expenses and brokerage commissions or transaction costs, and any
other properly excludable expenses, exceed on an annual basis the applicable
state expense limitations. Currently, there are no state expense limitations in
effect. For this purpose, operating expenses include the investment management
fee but exclude interest, taxes, extraordinary expenses, brokerage commissions
and transaction costs and distribution fees. The investment management fee and
the expense limitation are computed based upon average daily net assets of each
series.
Each management agreement provides that the Fund's investment manager shall not
be liable for any error of judgment or of law, or for any loss suffered by the
Fund in connection with the matters to which the management agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Fund's investment manager in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under the management agreement.
Each management agreement may be terminated for such Fund or series thereof
without penalty upon sixty (60) days written notice by either party, or by a
majority vote of the outstanding shares of the Fund or series thereof, and
automatically terminates in the event of its assignment.
ZKI has acted as investment adviser and manager for KHF, KEUF and KTEF since
each Fund commenced public offering of its shares as shown below. ZKVA has acted
as investment adviser and manager for KVF since , 1995. Prior
thereto, Dreman Value Management, L.P. served as the Fund's investment manager.
Also shown is the date of each current management agreement, the date when the
current management
16
<PAGE> 22
agreement was last approved by the Board members and the shareholders of each
series, the purpose of the last submission to shareholders of the current
management agreement and the date to which the current management agreement
continues.
<TABLE>
<CAPTION>
APPROVAL OF CURRENT
AGREEMENT BY CURRENT
COMMENCEMENT DATE OF ----------------------- AGREEMENT
OF INVESTMENT CURRENT BOARD CONTINUED BY
FUND OPERATIONS AGREEMENT MEMBERS SHAREHOLDERS BOARD TO
---- ------------- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
KVF
KCF................ (a) 01/04/96 03/11/97 08/01/95(b) 04/01/98
KDHRF.............. (a) 01/04/96 03/11/97 08/01/95(b) 04/01/98
KSCVF.............. (a) 01/04/96 03/11/97 08/01/95(b) 04/01/98
KHF
KH20P.............. 12/29/95 01/04/96 03/11/97 (d) 04/01/98
KH10P.............. 12/29/95 01/04/96 03/11/97 (d) 04/01/98
KH5P............... 12/29/95 01/04/96 03/11/97 (d) 04/01/98
KEUF................. 05/01/96 03/11/97 (c) 04/01/98
KTEF
KRF-I.............. 02/05/90 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-II............. 09/11/90 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-III............ 04/10/92 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-IV............. 01/15/93 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-V.............. 11/15/93 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-VI............. 05/01/95 01/04/96 03/11/97 09/19/95(c) 04/01/98
KRF-VII............ (d) 04/01/98
KWF-4.............. 05/03/94 01/04/96 03/11/97 09/19/95(c) 04/01/98
</TABLE>
- ---------------
(a) Date ZKVA assumed investment management.
(b) The current management agreement was last submitted to shareholders for
approval in connection with the acquisition of Dreman Value Management, L.P.
(the Fund's prior investment manager) by ZKVA and the subsequent acquisition
of the parent of ZKVA by Zurich.
(c) The current management agreement was last submitted to shareholders for
approval in connection with the Zurich/Kemper merger.
(d) The current management agreement was last submitted to shareholders for
approval by the initial shareholder (i.e., ZKI) immediately prior to the
commencement of the public offering of Shares.
SUB-ADVISER--ZIML
KHF, KEUF and KTEF each use the investment management services of Zurich
Investment Management Limited ("ZIML"), 1 Fleet Place, London, UK, ECM4 7RQ, an
indirect subsidiary of Zurich and an affiliate of ZKI, with respect to
investments in foreign securities pursuant to the sub-advisory agreements
between ZKI and ZIML described below. The
17
<PAGE> 23
current sub-advisory agreements are dated December 1, 1996, and will continue,
unless replaced or otherwise terminated, until April 1, 1998.
As with the investment management agreements, the sub-advisory agreements with
ZIML will terminate upon consummation of the Transaction. As discussed below,
new sub-advisory agreements are proposed for KEUF and KWF-4 (a series of KTEF).
(See "Item 4. New Sub-Advisory Agreement with Zurich Investment Management
Limited.") For KHF and the other series of KTEF, however, new sub-advisory
agreements are not being proposed; and the investment manager would assume
responsibility for the portion of those Fund's assets invested in foreign
securities. In addition, as described above, it is expected that ownership of
ZIML will be transferred to SKI or to a direct or indirect wholly-owned
subsidiary of SKI upon consummation of the Transaction.
Under the terms of the Sub-Advisory Agreement for a Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management of foreign securities, including foreign currency transactions and
related investments. For its services, ZIML receives from ZKI (not from the
Funds) a monthly fee at the annual rate of .35% on the portion of the average
daily net assets allocated by ZKI to ZIML for management.
Each Sub-Advisory Agreement provides that ZIML will not be liable for any error
of judgment or mistake of law or for any loss suffered by any Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZIML in the performance of its duties or from reckless disregard by ZIML of its
obligations and duties under the Sub-Advisory Agreement.
Each Sub-Advisory Agreement continues in effect from year to year so long as its
continuation is approved at least annually (a) by a majority of the Board
members who are not parties to such agreement or interested persons of any such
party except in their capacity as Board members of the Fund and (b) by the
shareholders or the Board. Each Sub-Advisory Agreement may be terminated at any
time for a Fund upon 60 days notice by ZKI, ZIML or the Board or by a majority
vote of the outstanding shares of the Fund, and will terminate automatically
upon assignment or upon the termination of the Fund's investment management
agreement. No sub-advisory fees were paid by ZKI to ZIML for each Fund's 1996
fiscal year, although in prior fiscal years ZKI has paid ZIML for its services
to ZKI with respect to foreign securities investments of certain Funds. For
KHF's and KTEF's 1997 fiscal years, ZKI paid ZIML sub-advisory fees as set forth
in Exhibit K.
18
<PAGE> 24
SUB-ADVISER--KHF
KHF uses the investment management services of Zurich Kemper Value Advisors,
Inc. ("ZKVA") with respect to investments in the value portion of each series of
KHF pursuant to the sub-advisory agreement between ZKI and ZKVA described below.
ZKVA is a wholly-owned subsidiary of ZKI and is located at 280 Park Avenue, New
York, New York 10017. The current sub-advisory agreement is dated
, 19 , was approved on , 19 , by ZKI as the
initial shareholder, was last approved for continuation by the Board on March
11, 1997, and will continue, unless replaced or otherwise terminated, until
April 1, 1998.
As with the investment management agreements, upon consummation of the
Transaction, the sub-advisory agreement with ZKVA will terminate. As discussed
below, a new sub-advisory agreement with ZKVA is being proposed. (See "Item 5.
New Sub-Advisory Agreement with Zurich Kemper Value Advisors, Inc.") However, it
is expected that, upon consummation of the Transaction or soon thereafter, ZKVA
will be combined with SKI, the separate sub-advisory agreement with ZKVA will be
terminated, and all ZKVA functions will be provided by SKI.
Under the terms of the Sub-Advisory Agreement, ZKVA manages the value portion of
each Fund's portfolio and provides such investment advice, research and
assistance as ZKI may, from time to time, reasonably request. For its services,
ZKVA receives from ZKI (not from the Fund) a monthly fee at the annual rate of
.25% on the portion of each Fund's average daily net assets allocated by ZKI to
ZKVA.
The Sub-Advisory Agreement provides that ZKVA will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZKVA in the performance of its duties or from reckless disregard by ZKVA of its
obligations and duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement continues by its terms from year to year if such
continuance is specifically approved at least annually (a) by a majority of
Board members who are not parties to such agreement or interested persons of any
such party except in their capacity as Board members of KHF, and (b) by the
shareholders or the Board of KHF. The Sub-Advisory Agreement may be terminated
at any time upon 60 days' notice by ZKI, ZKVA or the Board of KHF or by a
majority vote of the outstanding shares of a Fund, and will terminate
automatically upon assignment or upon termination of KHF's investment management
agreement.
19
<PAGE> 25
The sub-advisory fees paid by ZKI to ZKVA for the fiscal year ended July 31,
1997 were $ , $ , and $ for KH20P, KH10P and KH5P,
respectively.
SUB-ADVISER--DVM
KDHRF uses the investment management services of Dreman Value Management, L.L.C.
("DVM") pursuant to the sub-advisory agreement between ZKVA and DVM described
below. As with the investment management agreements, upon consummation of the
Transaction, the sub-advisory agreement with DVM will terminate. As discussed
below, a new sub-advisory agreement with DVM is being proposed. (See "Item 6.
New Sub-Advisory Agreement with Dreman Value Management, L.L.C.")
The sub-advisory agreement provides that DVM shall manage the investment and
reinvestment of the Fund's assets in accordance with the investment objectives,
policies and limitations and subject to the supervision of ZKVA and the Board.
In connection therewith, the sub-advisory agreement provides that DVM will
furnish related office facilities and equipment and clerical, bookkeeping and
administrative services for the Fund. Under the sub-advisory agreement, DVM
agrees to assume and pay all costs and expenses of performing its obligations
under the agreement, and ZKVA agrees to pay to DVM a monthly fee at the
following annual rates applied to the average daily net assets of the Fund:
<TABLE>
<CAPTION>
APPLICABLE AVERAGE
DAILY NET ASSETS
(THOUSANDS) ANNUAL RATE
------------------ -----------
<S> <C>
$0 - $250,000....................................... .240 of 1%
$250,000 - $1,000,000............................... .230 of 1%
$1,000,000 - $2,500,000............................. .224 of 1%
$2,500,000 - $5,000,000............................. .218 of 1%
$5,000,000 - $7,500,000............................. .208 of 1%
$7,500,000 - $10,000,000............................ .205 of 1%
$10,000,000 - $12,500,000........................... .202 of 1%
Over $12,500,000.................................... .198 of 1%
</TABLE>
In addition, ZKVA has guaranteed the following minimum payments to DVM during
the following calendar years that DVM serves as sub-adviser: $1.0 million for
1997, $8.0 million in each of 2000, 2001 and 2002.
The sub-advisory agreement is dated , 1997, was approved on July
29, 1997 by shareholders and will remain in effect until December 31, 2002
unless sooner terminated or not annually approved as described below.
Notwithstanding the foregoing, the sub-advisory
20
<PAGE> 26
agreement shall continue in effect through December 31, 2002 and year to year
thereafter, but only as long as such continuance is specially approved at least
annually and in the manner required by the 1940 Act and the rules and
regulations thereunder with the first annual renewal to be coincident with the
next renewal of the investment management agreement.
The sub-advisory agreement may be terminated at any time without the payment by
the Fund of any penalty, by the Board or by vote of a majority of the
outstanding voting securities of the Fund, or by ZKVA, in each case upon sixty
(60) days written notice; and it automatically terminates in the event of its
assignment or in the event of the termination of the investment management
agreement. ZKVA also has the right to terminate the sub-advisory agreement upon
immediate notice if DVM becomes statutorily disqualified from performing its
duties under the sub-advisory agreement or otherwise is legally prohibited from
operating as an investment adviser. DVM may not terminate the sub-advisory
agreement prior to its third anniversary, and thereafter termination requires
ninety (90) days written notice.
The sub-advisory agreement provides that DVM shall not be liable for any error
of judgment or of law or for any loss suffered by KVF or the Fund in connection
with the matters to which the sub-advisory agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
DVM in the performance of its obligations and duties under the sub-advisory
agreement.
The sub-advisory agreement provides that DVM agrees to indemnify and hold
harmless ZKVA and KVF against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which ZKVA or KVF
may become subject arising out of or based upon the breach or alleged breach by
DVM of any provisions of the sub-advisory agreement. Similarly, ZKVA agrees to
indemnify and hold harmless DVM against any losses, expenses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which DVM may
become subject arising out of or based upon the breach or alleged breach by ZKVA
of any provisions of the sub-advisory agreement or the investment management
agreement, or any wrongful action or alleged wrongful action by ZKVA or its
affiliates in the distribution of KVF's shares, or any wrongful action or
alleged wrongful action by KVF other than wrongful action or alleged wrongful
action that was caused by the breach by DVM of the provisions of the
sub-advisory agreement.
NEW INVESTMENT MANAGEMENT AGREEMENT
The new investment management agreement for each Fund is substantially similar
to the current investment management agreement. While the form of the agreement
is different (i.e., a form generally used by
21
<PAGE> 27
Scudder), there is no material difference in the substance of the obligations of
the investment manager under the agreement except that, under a separate
agreement with Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of
Scudder, SFAC, rather than SKI as investment manager, will compute the net asset
value for each Fund. SFAC will not charge the Funds for this service and has no
current intention to do so; however, subject to Board approval, at some time in
the future, SFAC may seek payment for its services under the agreement. In
addition, the expense limitation has been deleted because there are no longer
any state expense limitations in effect.
The new management agreement for each Fund will be dated as of the date of the
consummation of the Transaction, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The new
management agreement will be for an initial term ending on the same date as
would the current management agreement but for the Transaction, and may continue
thereafter from year to year if specifically approved at least annually by the
vote of "a majority of the outstanding voting securities" of such Fund, as
defined under the 1940 Act, or by the Board and, in either event, the vote of a
majority of the Board members who are not parties to the agreement or interested
persons of any such party, cast in person at a meeting called for such purpose.
BOARD EVALUATION
On June 27, 1997, the Board of each Fund was informed of the Transaction.
Thereafter, each Board was given extensive information about the Transaction and
Scudder. The Boards met with senior management personnel of Zurich and Scudder
and had extended discussions regarding Zurich's and Scudder's plans for ZKI,
ZKVA, SKI and the Funds. Throughout the process, the Independent Trustees of
each Board had the assistance of legal counsel, who prepared, among other
things, an analysis of the Board's fiduciary obligations. The Boards met on July
8, 1997, July 15, 1997, August 18-19, 1997 and September 19-20, 1997 to consider
the Transaction and its effects on the Funds. The Independent Board members also
met separately with counsel on a number of occasions to discuss the Transaction.
As a result of its review and consideration of the Transaction and the proposed
new management agreements, at its meeting on September 20, 1997, the Board of
each Fund voted unanimously to approve the new management agreement and to
recommend it to the shareholders of each Fund for their approval.
In connection with its review, each Board obtained substantial information
regarding: the management, financial position and business of Scudder; the
history of Scudder's business and operations; the investment performance of the
investment companies and private accounts advised by Scudder; the anticipated
effect of the Transaction on the Funds and
22
<PAGE> 28
their shareholders; and future plans of Zurich and Scudder with respect to ZKI,
ZKVA, SKI and the Funds. Each Board also received information regarding the
terms of the Transaction and comprehensive financial information, including:
employment agreements with senior Scudder executives; incentive stock
compensation to be given to key ZKI personnel; and anticipated SKI management
and board of directors.
In connection with their deliberations, the Boards of the Funds obtained certain
assurances from Zurich and Scudder, including the following:
- - Zurich and Scudder have provided to the Boards such information as is
reasonably necessary to evaluate the new management and other agreements.
- - Zurich looks upon SKI as the core of Zurich's global asset management
strategy. With that focus, Zurich will devote to SKI and its affairs all
attention and resources that are necessary to provide for each Fund top
quality investment management, shareholder, administrative and product
distribution services.
- - Scudder looks upon the Kemper Funds as a core part of Scudder's global asset
management strategy. With that focus, Scudder will devote to the Kemper Funds
and their affairs all attention and resources that are necessary to provide
for each Fund top quality investment management, shareholder, administrative
and product distribution services.
- - The Transaction will not result in any change in any Fund's investment
objectives or policies.
- - The Transaction is not expected to result in any adverse change in the
investment management or operations of the Funds; and neither Zurich nor
Scudder plans to make any material change in the manner in which investment
advisory services or other services are rendered to each Fund which has the
potential to have a material adverse effect upon any Fund.
- - Zurich and Scudder are committed to the continuance, without interruption, of
services to the Funds of the type and quality currently provided by ZKI and
its subsidiaries, or superior thereto.
- - Zurich and Scudder plan to maintain or enhance the SKI facilities and
organization.
- - In order to retain and attract key personnel, Zurich and Scudder intend for
SKI to maintain overall compensation policies and practices at market levels
or better.
- - Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper and Scudder Funds and are committed to strengthening
23
<PAGE> 29
and enhancing both brands and the distribution channels for both families of
Funds, while maintaining their separate brand identity.
- - Scudder has in place a detailed and comprehensive plan of action to
effectively deal with the year 2000 issue for all SKI operations. The Kemper
Funds will not be transferred from their current systems unless certain
conditions are met.
- - Zurich and Scudder will promptly advise the Boards of decisions materially
affecting the SKI organization as they relate to the Funds. Neither this, nor
any of the other above commitments will be altered by Zurich or Scudder
without the Board's prior consideration.
Zurich and Scudder assured each Board that they intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of its affiliated persons to
receive any amount or benefit in connection with a change in control of the
investment adviser so long as two conditions are met. First, for a period of
three years after the Transaction, at least 75% of the board members of the
investment company must not be "interested persons" of such investment adviser.
The composition of the Board of each Fund, currently and as proposed, would be
in compliance with this provision of Section 15(f). (See Item 1--"Election of
Board Members.") Second, an "unfair burden" must not be imposed upon the
investment company as a result of such transaction or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair burden"
is defined in Section 15(f) to include any arrangement during the two-year
period after the Transaction whereby the investment adviser, or any interested
person of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its shareholders (other
than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). Zurich and
Scudder are not aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on any Fund as a result of
the Transaction. Zurich and Scudder have agreed that they, and their affiliates,
will take no action that would have the effect of imposing an "unfair burden" on
any Fund as a result of the Transaction. In furtherance thereof, ZKI has
undertaken to pay the costs of preparing and distributing proxy materials to and
of holding the meetings of the Funds' shareholders as well as other fees and
expenses in connection with the Transaction, including the fees and expenses of
legal counsel to the Funds and the Independent Board members, and Zurich has
agreed to indemnify each Fund and the Independent Board members for and against
any liability and expenses based upon any action or omission by the
24
<PAGE> 30
Independent Board members in connection with their consideration of and action
with respect to the Transaction. In addition, Scudder has agreed to indemnify
each Fund and the Independent Board members for and against any liability and
expenses based upon any misstatements or omissions by Scudder to the Independent
Board members in connection with their consideration of the Transaction.
In evaluating each new management agreement, each Board took into account that
the fees and expenses payable by each Fund under the new management agreement
are the same as under the current management agreement, that the services
provided to the Fund are the same (except for services to be provided under a
separate Fund accounting Agreement as described above) and that the other terms
are substantially similar. Each Board also took into consideration the extent to
which portfolio managers and research personnel would continue their functions
with SKI. Each Board also considered Scudder's representation that the Funds'
shareholder service providers and the terms of the shareholder service
agreements or not being proposed to be changed. Each Board noted that, in
previously approving the continuation of the current management agreements, the
Board had considered a number of factors, including the nature and quality of
services provided by ZKI and ZKVA; investment performance, both of the Fund
itself and relative to that of competitive investment companies; investment
management fees and expense ratios of the Fund and competitive investment
companies; ZKI profitability from managing the Funds; fall-out benefits to ZKI
from its relationship to the Funds, including revenues derived from services
provided to the Funds by affiliates of ZKI; and the potential benefits to ZKI
and to the Funds and their shareholders of receiving research services from
broker/dealer firms in connection with the allocation of portfolio transactions
to such firms. The Board also considered that Scudder has a current policy of
not paying higher brokerage commissions solely for receipt of market,
statistical and other research services, and that SKI is expected to adopt the
same policy.
The Board discussed the Transaction with the senior management of ZKI, Scudder
and Zurich and among themselves. The Board considered that Zurich is a large,
well-established company with substantial resources, and, as noted above, has
undertaken to devote such resources to SKI as are necessary to provide each Fund
with top quality services. The Board also considered that Scudder is a large,
well-established investment advisory firm with a substantial number of highly
rated funds.
As a result of their review and consideration of the Transaction and the new
management agreements, at its meeting on September 20, 1997, the Board of each
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of the Fund for their approval.
25
<PAGE> 31
The Board of each Fund recommends that shareholders vote FOR approval of the new
management agreement.
ITEM 4. NEW SUB-ADVISORY AGREEMENT
WITH ZURICH INVESTMENT MANAGEMENT LIMITED
(FOR KEUF AND KWF-4 ONLY.)
Zurich Investment Management Limited ("ZIML") is the sub-adviser for KEUF and
KWF-4. As noted above, the consummation of the Transaction and the ZIML
Transaction each would constitute an "assignment," as defined in the 1940 Act,
of each Fund's current sub-advisory agreement with ZIML. As required by the 1940
Act, each current sub-advisory agreement provides for its automatic termination
in the event of its assignment. In anticipation of the Transaction and the ZIML
Transaction, a new sub-advisory agreement with ZIML is being proposed for
approval by the shareholders of each Fund. The new sub-advisory agreement with
ZIML is on the same terms as the current sub-advisory agreement. A vote in favor
of Item 4 will approve both the new sub-advisory agreement with ZIML to be
effective at the time of the Transaction as well as the sub-advisory agreement
with ZIML to be effective at the time of the ZIML Transaction. A copy of the new
sub-advisory agreement is attached hereto as Exhibit D.
A new sub-advisory agreement will be dated as of the date of the consummation of
the Transaction or the ZIML Transaction and will be in effect for an initial
term ending on the same date as would the current sub-advisory agreement but for
the Transaction (or ZIML Transaction), and may continue thereafter from year to
year if such continuance is specifically approved at least annually by the vote
of a "majority of the outstanding voting securities" of each of the Funds, as
defined under the 1940 Act, or the Board, including, in either event, the vote
of a majority of the Board members who are not parties to the agreement or
interested persons of any such party, cast in person at a meeting called for
such a purpose.
BOARD RECOMMENDATION
The Board of each Fund recommends that shareholders vote FOR approval of the new
sub-advisory agreement with ZIML.
ITEM 5. NEW SUB-ADVISORY AGREEMENT WITH
ZURICH KEMPER VALUE ADVISORS, INC.
(FOR KHF ONLY.)
Zurich Kemper Value Advisors, Inc. ("ZKVA") is the sub-adviser for KHF. As noted
above, the consummation of the Transaction would constitute an "assignment," as
defined in the 1940 Act, of KHF's current
26
<PAGE> 32
sub-advisory agreement with ZKVA. As required by the 1940 Act, the current
sub-advisory agreement provides for its automatic termination in the event of
its assignment. In anticipation of the Transaction, a new sub-advisory agreement
with ZKVA is being proposed for approval by the shareholders of KHF. The new
sub-advisory agreement with ZKVA is on the same terms as the current
sub-advisory agreement. A copy of the new sub-advisory agreement is attached
hereto as Exhibit E.
The new sub-advisory agreement for each Fund will be dated as of the date of the
consummation of the Transaction and will be in effect for an initial term ending
on the same date as would the current sub-advisory agreement but for the
Transaction, and may continue thereafter from year to year if such continuance
is specifically approved at least annually by vote of a "majority of the
outstanding voting securities" of the Fund, as defined under the 1940 Act, or
the Board, including, in either event, the vote of a majority of the Board
members who are not parties to the agreement or interested persons of any such
party, cast in person at a meeting called for such purpose. It is expected,
however, that upon consummation of the Transaction or soon thereafter, ZKVA will
be combined with SKI, the separate sub-advisory agreement with ZKVA will be
terminated and all ZKVA functions will be provided by SKI.
BOARD RECOMMENDATION
The Board of KHF recommends that shareholders vote FOR approval of the new
sub-advisory agreement with ZKVA.
ITEM 6. NEW SUB-ADVISORY AGREEMENT WITH
DREMAN VALUE MANAGEMENT, L.L.C.
(FOR KDHRF ONLY.)
Dreman Value Management, L.L.C. ("DVM") is the sub-adviser for KDHRF. As noted
above, the consummation of the Transaction would constitute an "assignment," as
defined in the 1940 Act, of the Fund's investment management agreement with
ZKVA. Under the terms of the sub-advisory agreement with DVM, the sub-advisory
agreement automatically terminates in the event the investment management
agreement is terminated. In anticipation of the Transaction, a new sub-advisory
agreement with DVM is being proposed for the approval of KDHRF's shareholders.
The new sub-advisory agreement with DVM is on the same terms as the current
sub-advisory agreement between ZKVA and DVM. A copy of the new sub-advisory
agreement is attached hereto as Exhibit F.
The new sub-advisory agreement will be dated as of the date of the consummation
of the Transaction and will be in effect on the same terms as would the current
sub-advisory agreement but for the Transaction.
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<PAGE> 33
BOARD RECOMMENDATION
The Board of KVF recommends that shareholders vote FOR approval of the new
sub-advisory agreement with DVM.
ITEM 7. NEW RULE 12B-1 DISTRIBUTION PLAN
(FOR KVF, KHF AND KEUF ONLY.)
(FOR CLASS B AND CLASS C SHAREHOLDERS ONLY)
INTRODUCTION
Rule 12b-1 under the 1940 Act (the "Rule"), provides, among other things, that
an investment company (mutual fund) may bear expenses of distributing its shares
only pursuant to a plan (a "Rule 12b-1 Plan") adopted in accordance with the
Rule. Zurich Kemper Distributors, Inc. ("ZKDI"), acting as principal underwriter
and distributor for KVF, KHF and KEUF, distributes each Fund's Class B Shares
and Class C Shares pursuant to a Rule 12b-1 Plan.
Consummation of the Transaction may constitute an "assignment," as that term is
defined in the 1940 Act, of each Fund's Rule 12b-1 Plan, which provides for its
automatic termination in the event of its assignment. In anticipation of the
Transaction a new Rule 12b-1 Plan is being submitted for shareholder approval of
each Fund's Class B and Class C shareholders. THE NEW RULE 12B-1 PLAN IS ON THE
SAME TERMS AS THE FUND'S CURRENT RULE 12B-1 PLAN. A form of the new Rule 12b-1
Plan for each Fund is attached hereto as Exhibit G. NO CHANGE IN FEES IS BEING
PROPOSED.
On September 20, 1997, the Board of each Fund, including a majority of the
"non-interested" Board members, voted unanimously to approve the new Rule 12b-1
Plan for each Fund, and directed that it be submitted to the Class B and Class C
shareholders of each Fund at the Meeting, along with a recommendation that they
approve the Rule 12b-1 Plan.
If the new Rule 12b-1 Plan is approved by a class, it will become effective for
that class and will replace the current Rule 12b-1 Plan upon consummation of the
Transaction.
DESCRIPTION OF THE NEW RULE 12B-1 PLAN
As noted above, a form of the new Rule 12b-1 Plan is attached as Exhibit G and
this summary is qualified in its entirety by reference to Exhibit G. THE NEW
RULE 12B-1 PLAN DESCRIBED BELOW IS ON THE SAME TERMS AS THE CURRENT RULE 12B-1
PLAN FOR EACH FUND.
Under each Fund's Rule 12b-1 Plan, ZKDI receives a distribution fee, payable as
an expense of the Class B Shares and the Class C Shares, which ZKDI uses to pay
for distribution services for those classes. ZKDI bears
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<PAGE> 34
all the expenses of providing such services, including the payment of any
commissions or distribution fees. ZKDI provides for the preparation of
advertising or sales literature and bears the cost of printing and mailing
prospectuses to persons other than shareholders. ZKDI bears the cost of
qualifying and maintaining the qualification of Fund Shares for sale under the
securities laws of the various states, and each Fund bears the expense of
registering its Shares with the SEC. ZKDI may enter into related selling group
agreements with various broker-dealers, including affiliates of ZKDI, that
provide distribution services to investors. ZKDI also may provide some of the
distribution services. (See "Other Information--Underwriter" below.)
CLASS B SHARES. Each Fund's Class B Shares are sold to the public at net asset
value with a contingent deferred sales charge ("CDSC"), and automatic conversion
to Class A after a specified period of time. ZKDI receives a fee from each Fund,
payable monthly, at the annual rate of .75 of 1% of average daily net assets of
each Fund attributable to Class B Shares. This fee is accrued daily as an
expense of Class B Shares. ZKDI also receives any CDSC. ZKDI currently
compensates firms for sales of Class B Shares at a commission rate of 3.75%.
CLASS C SHARES. Each Fund's Class C Shares are sold to the public at net asset
value with a CDSC for shares redeemed during the first year following purchase.
ZKDI receives a fee from each Fund, payable monthly for as long as the shares
are owned, at the annual rate of .75 of 1% of average daily net assets of each
Fund attributable to Class C Shares. This fee is accrued daily as an expense of
Class C Shares ZKDI also receives any CDSC. ZKDI currently pays firms for sales
of Class C Shares a distribution fee, payable quarterly, at an annual rate of
.75 of 1% of net assets attributable to Class C Shares maintained and serviced
by the firm. A firm becomes eligible for the distribution fee based upon assets
in accounts in the month of purchase and the fee continues until terminated by
ZKDI or a Fund.
The table below shows, as to the Rule 12b-1 Plan for the Class B Shares and the
Class C Shares of each Fund, the date adopted, the date of last amendment (if
any), the date last approved by the board members and the date to which it
continues.
<TABLE>
<CAPTION>
CLASS B AND CLASS C RULE 12B-1 PLAN
-------------------------------------------
DATE APPROVAL BY DATE
FUND ADOPTED BOARD CONTINUED TO
---- ------- ----------- ------------
<S> <C> <C> <C>
KVF
KCF..................... 03/11/97 04/01/98
KDHRF................... 03/11/97 04/01/98
KSCVF................... 03/11/97 04/01/98
</TABLE>
29
<PAGE> 35
<TABLE>
<CAPTION>
CLASS B AND CLASS C RULE 12B-1 PLAN
---------------------------------------
DATE APPROVAL BY DATE
FUND ADOPTED BOARD CONTINUED TO
- --------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
KHF
KH20P.......................... 03/11/97 04/01/98
KH10P.......................... 03/11/97 04/01/98
KH5P........................... 03/11/97 04/01/98
KEUF............................. 03/11/97 04/01/98
</TABLE>
The table below shows the distribution fees paid by each Fund to ZKDI for its
Class B Shares and Class C Shares for the most recent fiscal year of that Fund.
<TABLE>
<CAPTION>
FISCAL CLASS B RULE 12B-1 PLAN FEES CLASS C RULE 12B-1 PLAN FEES
FUND YEAR END PAID TO ZKI BY FUND ($000) PAID TO ZKI BY FUND ($000)
---- -------- ---------------------------- ----------------------------
<S> <C> <C> <C>
KVF
KCF................ 12/31/96 $ $
KDHRF.............. 12/31/96 $ $
KSCVF.............. 12/31/96 $ $
KHF
KH20P.............. 07/31/97 $ $
KH10P.............. 07/31/97 $ $
KH5P............... 07/31/97 $ $
KEUF................. 11/30/96 $ $
</TABLE>
The new Rule 12b-1 Plan will be in effect for an initial term ending on the same
date as would the current Rule 12b-1 Plan but for the Transaction and may
continue thereafter from year to year for a class if specifically approved at
least annually by vote of "a majority of the outstanding voting securities" of
that class, as defined under the 1940 Act, or by the Board, including, in either
event, the vote of a majority of the "non-interested" Board members, cast in
person at a meeting called for such purpose.
Pursuant to the new Rule 12b-1 Plan, ZKDI will prepare reports to the Board of a
Fund on a quarterly basis for the Fund's Class B Shares and Class C Shares
showing the amounts paid to the various firms and such other information as from
time to time the Board may reasonably request. The Rule requires the Board to
review such reports at least quarterly.
In approving the new Rule 12b-1 Plan, the Board of each Fund determined, as with
the current Rule 12b-1 Plan, that there is a reasonable likelihood that the new
Rule 12b-1 Plan would benefit the Fund and its shareholders. In doing so, each
Board considered several factors, including that the new Rule 12b-1 Plan would
(i) enable investors to choose the purchasing option best suited to their
individual situations, thereby encouraging current shareholders to make
additional investments
30
<PAGE> 36
in each Fund and attracting new investors and assets to the Funds to the benefit
of each Fund and its shareholders, (ii) facilitate distribution of each Fund's
shares, (iii) help maintain the competitive position of each Fund in relation to
other funds that have implemented or are seeking to implement similar
distribution arrangements, and (iv) permit possible economies of scale through
increased Fund size.
BOARD RECOMMENDATION
As a result of its consideration of the foregoing factors, the Board of each
Fund voted unanimously to approve the new Rule 12b-1 Plans and to submit them to
the shareholders for their approval.
The Board of each Fund recommends that shareholders vote FOR approval of the new
Rule 12b-1 Plan.
ITEM 8. CHANGES TO EACH FUND'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT A
MASTER FUND/FEEDER FUND STRUCTURE [FOR KVF, KHF AND KEUF ONLY.]
For greater investment flexibility, ZKI has recommended that each of KVF, KHF
and KEUF make certain changes to its fundamental investment policies to permit
the Fund to invest all or substantially all of its investable assets, except to
the extent required to remain uninvested to satisfy near-term cash requirements,
in an open-end management investment company managed by the same investment
manager or an affiliate and having the same investment objectives and
substantially similar policies and restrictions as the Fund (a "Master Fund").
The proposed fundamental investment policies are set forth in Exhibit H.
The proposed changes to each Fund's fundamental investment policies would permit
the Fund to adopt a "Master Fund/Feeder Fund Structure." Rather than investing
directly in a portfolio of securities, a Fund would be authorized to pool its
assets with other mutual funds for investment in a Master Fund, making it a
"Feeder Fund." A purpose of such an arrangement is to achieve operational
efficiencies, assuming that the assets of the Master Fund are greater than the
assets of any individual Feeder Fund. While each Board has not determined that
any Fund should convert to a Master Fund/Feeder Fund Structure at this time,
each Board believes it could be in the best interests of some or all Funds at
some future date, and in that case the Board could do so without further
approval by shareholders.
If the proposed changes in the investment policies are approved by shareholders
of a Fund, the Fund's Board could vote at some time in the future to convert
that Fund into a Feeder Fund under which all of the investment assets of the
Fund would be invested in a Master Fund. The Feeder Fund would transfer its
assets to a Master Fund in exchange for an
31
<PAGE> 37
interest in the Master Fund having the same net asset value as the value of the
assets transferred. (The ownership interests of the Fund's shareholders will not
be altered by this change.)
Under KHF's and KEUF's Declaration of Trust, the affirmative vote of the
shareholders of the affected series entitled to vote more than fifty percent of
the votes entitled to be cast on the matter is required to sell or transfer
substantially all of the assets of the Fund. Under KVF's Articles, the sale or
transfer of substantially all of the assets of KVF requires the favorable vote
of the holders of a majority of the outstanding shares of stock entitled to
vote. One way to convert a Fund to a Master Fund/Feeder Fund Structure is
through a sale or transfer of assets. Thus, approval to convert a Fund into a
Master/Feeder Fund Structure through a sale or transfer of assets requires,
under a conservative interpretation of each Fund's Declaration of Trust or
Articles, the affirmative vote of a majority of the shares of the Fund (or the
affected series of the Fund, if applicable). Approval of Item 8 by shareholders
is also, therefore, deemed to constitute approval of the Board's discretionary
authority to convert a Fund into a Master Fund/Feeder Fund Structure through a
sale or transfer of assets.
Any Master Fund in which a Feeder Fund would invest would be required to have
the same investment objective and substantially similar policies and
restrictions as the Feeder Fund. Accordingly, by investing in a Master Fund, a
Feeder Fund would continue to pursue its present investment objectives and
policies in substantially the same manner as it does currently, except that it
would do so through its investment in the Master Fund rather than through direct
investments in the types of securities dictated by its investment objectives and
policies. The Master Fund, whose shares could be offered to institutional
investors in addition to a Feeder Fund, would invest in the same type of
securities in which the Fund would have invested directly, providing
substantially the same investment results to the Feeder Fund's shareholders.
However, the expense ratios, the yields, and the total returns of other
investors in the Master Fund may be different from those of the Feeder Fund due
to differences in Feeder Fund expenses.
By investing substantially all of its assets in a Master Fund, a Feeder Fund may
be in a position to realize directly or indirectly certain economies of scale,
in that a larger investment portfolio resulting from multiple Feeder Funds is
expected to achieve a lower ratio of operating expenses to net assets. A Master
Fund may be offered to an undetermined number of institutional investors.
However, there can be no assurance that any such additional investments in a
Master Fund by other Feeder Funds will take place.
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<PAGE> 38
If a Fund invests substantially all of its assets in a Master Fund, the Fund
will no longer require active portfolio management services. For this reason, if
the shareholders of a Fund approve the proposed policy changes and the Board
converts the Fund into a Feeder Fund, then the existing investment management
agreement may be terminated or no fee would be charged; in such case, the Fund's
Board would likely enter into an administration agreement for the provision of
certain administrative services to the Fund, likely including those currently
provided under the existing investment management agreement, with compensation
at such rates as may be approved by the Board.
MASTER FUNDS. The investment objective of any Master Fund would be the same as
the investment objective of the applicable Feeder Fund that would invest in it.
If a Fund's Board votes to convert a Fund into a Feeder Fund, the Fund's assets
will no longer be directly invested in the securities of multiple issuers, but
rather will be invested in the securities of a single issuer, i.e., the Master
Fund, which would be registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). A Master
Fund may have a different Board than the Feeder Fund.
A Feeder Fund may withdraw its investment in a Master Fund at any time if the
Board determines that it is in the best interest of the shareholders of the
Feeder Fund to do so or if the investment policies or restrictions of the Master
Fund were changed so that they were inconsistent with the policies and
restrictions of the Feeder Fund. Upon any such withdrawal, the Board of the
Feeder Fund would consider what action might be taken, including the investment
of all the assets of the Feeder Fund in another pooled investment entity having
substantially the same investment objective as the Feeder Fund or the retaining
of an investment adviser to directly invest the Fund's assets in accordance with
its investment objective and policies. If another pooled investment vehicle with
substantially the same investment objective could not be found, it might have a
significant impact on the investment of shareholders in the Feeder Fund.
Whenever a Feeder Fund is asked to vote on a proposal by the Master Fund, the
Feeder Fund will hold a meeting of shareholders if required by applicable law or
its policies, and cast its vote with respect to the Master Fund in the same
proportion as its shareholders vote on the proposal.
Once its assets are invested in a Master Fund, a Feeder Fund will value its
holdings (i.e., shares issued by the Master Fund) at their fair value, which
will be based upon the daily net asset value of the Master Fund. The net income
of the Feeder Fund will be determined at the same time and on the same days as
the net income of the Master Fund is determined, which are the same time and
days that the Feeder Fund uses for this purpose.
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<PAGE> 39
TAX CONSIDERATIONS. The implementation of the proposed new Master Fund/Feeder
Fund structure is not expected to have any adverse tax effects on the Fund or
its shareholders.
Each Feeder Fund would be expected to intend to continue to qualify and elect to
be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To so qualify, a Feeder
Fund must meet certain income, distribution, and diversification requirements.
It is expected that any Feeder Fund's investment in a Master Fund will satisfy
these requirements. Provided each Feeder Fund meets these requirements and
distributes all of its net investment income and realized capital gains to its
shareholders in accordance with the timing requirements imposed by the Code, the
Feeder Fund will not pay any Federal income or excise taxes.
BOARD RECOMMENDATION
As a result of its consideration of the foregoing facts, the Board of each Fund
voted unanimously to approve the change in fundamental investment policies to
permit a Master/Feeder fund structure conversion at the Board's discretion and
to submit them to the shareholders for their approval.
The Board of each Fund recommends that shareholders vote FOR approval of the new
fundamental investment policies permitting a Master Fund/Feeder Fund structure.
OTHER INFORMATION
ZKI. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside Plaza,
Chicago, Illinois 60606, is the investment manager of each Fund (except KVF) and
provides each Fund with continuous professional investment supervision. ZKI is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-nine years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $85 billion
under management. ZKI acts as investment manager or principal underwriter for 32
open-end and seven closed-end investment companies, with 86 separate investment
portfolios, representing more than 2.5 million shareholder accounts. ZKI is an
indirect subsidiary of Zurich Insurance Company, a leading internationally
recognized provider of insurance and financial services in property/casualty and
life insurance, reinsurance and structured financial solutions as well as asset
management ("Zurich").
34
<PAGE> 40
The investment companies to which ZKI and its affiliates render investment
management services, and the related management fees, are identified in Exhibit
I.
The names, addresses and principal occupations of the principal executive
officer and the directors of ZKI are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Stephen B. Timbers, Chief Executive President, Chief Executive
Officer Officer and Chief Investment
and Director Officer, ZKI
222 South Riverside Plaza
Chicago, Illinois 60606
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
William E. Chapman II, Director President, Kemper Retirement
222 South Riverside Plaza Plans Group
Chicago, Illinois 60606
</TABLE>
ZIML. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place, London, U.K.
EC4M 7RQ, is an indirect subsidiary of Zurich. The names, addresses and
principal occupations of the principal executive officer and the directors of
ZIML are as follows:
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
ZKVA. Zurich Kemper Value Advisors, Inc. ("ZKVA"), 280 Park Avenue, New York,
New York 10017, the investment manager for KVF, is a wholly-owned subsidiary of
ZKI. The names, addresses and principal occupations of the principal executive
officer and the directors of ZKVA are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
George Keith, Chief Executive Officer President and Chief Executive
280 Park Avenue Officer, ZKVA
40th Floor
New York, New York 10017
Stephen B. Timbers, Director President, Chief Executive
222 South Riverside Plaza Officer and Chief Investment
Chicago, Illinois 60606 Officer, ZKI
</TABLE>
35
<PAGE> 41
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
</TABLE>
DVM. Dreman Value Management, L.L.C. ("DVM"), Three Harding Road, Red Bank, New
Jersey, 07701, is the sub-adviser for KDHRF. DVM is controlled by David N.
Dreman. Mr. Dreman owns 10% of DVM's shares of beneficial interest but has 100%
of the voting control. The remaining 90% equity interest in DVM is held by
Cheryl Hershberg and Holly Dreman as trustees of an irrevocable trust created
under the laws of the State of New York, for the benefit of David N. Dreman, Jr.
and Meredith W. Dreman. The trust has no voting rights with respect to directing
or managing DVM other than the right to vote to dissolve DVM or to amend its
operating agreement. The names, addresses and principal occupations of the
principal executive officers of DVM are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
David N. Dreman Chairman, DVM.
Three Harding Road
Red Bank, New Jersey 07701
Nelson P. Woodard Managing Director, DVM; Research
7 Navesink Court Fellow,
Long Branch, New Jersey 07740 Dreman Foundation.
Dorothy Silverman Senior Vice President, DVM.
396 Brighton Avenue
Long Branch, New Jersey 07740
Rock Albers Senior Vice President, DVM.
4 Lexington Avenue
New York, New York 10010
Michael M. Hemberger Vice President, DVM.
1617 76th Street
North Bergen, New Jersey 07047
Peter B. Seligman Vice President, DVM.
9 Post Road
Rumson, New Jersey 07760
</TABLE>
DVM does not serve as investment manager or sub-adviser for any investment
company (other than for the KDHRF).
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City,
36
<PAGE> 42
Missouri 64105, as custodian, and State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02210, as sub-custodian, have custody of
all securities and cash of each Fund maintained in the United States. For Funds
that invest in foreign securities, The Chase Manhattan Bank, Chase Metro Tech
Center, Brooklyn, New York 11245, as custodian, has custody of all securities
and cash of the Funds held outside the United States. IFTC also is the Funds'
transfer agent and dividend-paying agent. Pursuant to a services agreement with
IFTC, Zurich Kemper Service Company ("ZKSC"), an affiliate of ZKI, serves as
"Shareholder Service Agent" of the Funds and, as such, performs all of IFTC's
duties as transfer agent and dividend-paying agent.
IFTC receives an annual fee as custodian for each Fund, payable monthly, at a
rate of $.10 per $1,000 of average monthly net assets of the Fund plus certain
transaction charges and out-of-pocket expense reimbursement. IFTC receives as
transfer agent, and pays to ZKSC, annual account fees of $6 per account plus
account set up, maintenance, transaction and out-of-pocket expense
reimbursement. IFTC's fee is reduced by certain earnings credits in favor of the
Funds.
For the most recently completed fiscal year IFTC remitted shareholder service
fees to ZKSC as set forth in Exhibit K. It is anticipated that ZKSC will
continue to provide transfer agent services after consummation of the
Transaction.
ADMINISTRATIVE SERVICES. Zurich Kemper Distributors, Inc. ("ZKDI") provides
information and administrative services for shareholders of the Funds pursuant
to administrative services agreements ("administrative agreements"). ZKDI may
enter into related arrangements with various broker-dealer firms and other
service or administrative firms ("firms"), that provide services and facilities
for their customers or clients who are investors of the Funds. Such
administrative services and assistance may include, but are not limited to,
establishing and maintaining shareholder accounts and records, processing
purchase and redemption transactions, answering routine inquiries regarding the
Funds, assistance to clients in changing dividend and investment options,
account designations and addresses and such other administrative services as may
be agreed upon from time to time and permitted by applicable statute, rule or
regulation. ZKDI bears all its expenses of providing services pursuant to the
administrative agreement, including the payment of any service fees. For
services under the administrative agreements, each Fund pays ZKDI a fee, payable
monthly, at the annual rate of up to .25 of 1% of average daily net assets of
the Fund (Class A, B and C shares only in the case of KVF, KHF and KEUF). For
KTEF, ZKDI then pays each firm a service fee, payable quarterly, at an annual
rate of up to .25 of 1% of net assets in the Funds' accounts that it maintains
and services. For KVF, KHF and KEUF, with respect to Class A shares, ZKDI pays
each firm a service fee, payable
37
<PAGE> 43
quarterly, at an annual rate of up to .25% of the net assets in the Funds'
accounts that it maintains and services attributable to Class A shares,
commencing with the month after investment. With respect to Class B and Class C
shares, ZKDI currently advances to firms the first-year service fee at a rate of
up to .25% of the purchase price of such shares. For periods after the first
year, ZKDI currently intends to pay firms a service fee at a rate of up to .25%
(calculated monthly and paid quarterly) of the net assets attributable to Class
B and C shares maintained and serviced by the firm. After the first year, a firm
becomes eligible for the quarterly service fee and the fee continues until
terminated by ZKDI or the Fund. Firms to which service fees may be paid include
broker-dealers affiliated with ZKDI.
ZKDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreements not paid to firms to compensate
itself for administrative functions performed for the Funds. Currently, however,
the administrative services fee payable to ZKDI is based only upon Fund assets
in accounts for which there is a firm listed on a Fund's records and it is
intended that ZKDI will pay all the administrative services fee that it receives
from each Fund to firms in the form of service fees. The effective
administrative services fee rate to be charged against all assets of the Funds
while this procedure is in effect will depend upon the proportion of Fund assets
in accounts for which there is a firm of record. The Board of a Fund may, in the
future, approve basing the fee to ZKDI on all Fund assets.
Set forth in Exhibit K are the administrative services fees paid by each Fund to
ZKDI during the most recent fiscal year and the effective rate at which each
Fund paid administrative services fees. It is anticipated that ZKDI will
continue to provide administrative services after consummation of the
Transaction.
PRINCIPAL UNDERWRITER--KVF, KHF AND KEUF. Pursuant to an underwriting and
distribution services agreement ("distribution agreement") with KVF, KHF and
KEUF, ZKDI is the principal underwriter and distributor of each Fund's shares
and acts as agent of each Fund in the sale of its shares. ZKDI bears all its
expenses of providing services pursuant to the distribution agreement, including
the payment of any commissions. ZKDI provides for the preparation of sales
literature and bears the cost of printing and mailing prospectuses to persons
other than shareholders. ZKDI bears the cost of qualifying and maintaining the
qualification of the Fund shares for sale under the securities laws of the
various states and each Fund bears the expense of registering its shares with
the Securities and Exchange Commission. ZKDI may enter into related selling
group agreements with various broker-dealers, including affiliates of ZKDI, that
provide distribution services to investors. ZKDI also may provide some of the
distribution services.
38
<PAGE> 44
CLASS A SHARES (KVF, KHF AND KEUF). ZKDI receives no compensation from the Funds
as principal underwriter for Class A Shares and pays all expenses of
distribution of each Fund's Class A shares not otherwise paid by dealers or
other financial services firms. ZKDI retains the sales charge upon the purchase
of shares and pays or allows concessions or discounts to firms for the sale of
each Fund's shares.
CLASS B AND C SHARES (KVF, KHF AND KEUF). See Item 7.--New Rule 12b-1
Distribution Plan.
CLASS I SHARES (KVF, KHF AND KEUF). Each Fund's Class I Shares are sold at net
asset value without a front-end sales load and are not subject to a CDSC,
distribution fee or service fee. Class I Shares are offered only for purchase by
affiliated employee benefit plans and certain institutional investors.
Set forth in Exhibit K as to each Fund during its most recent fiscal year are
the commissions retained by ZKDI and allowed by ZKDI as commissions to financial
services firms affiliated with ZKDI.
UNDERWRITER--KTEF. ZKDI is the principal underwriter for the Fund and acts as
agent in the offering of the Fund's shares. The Fund pays the cost for the
prospectus and shareholder reports to be set in type and printed for existing
shareholders, and ZKDI pays for the printing and distribution of copies thereof
used in connection with the offering of shares to prospective investors. ZKDI
also pays for supplementary sales literature and advertising costs.
PORTFOLIO TRANSACTIONS. ZKI and its affiliates furnish investment management
services for the Kemper Funds and other clients including affiliated insurance
companies. ZKI and its affiliates share some common research and trading
facilities. Zurich Investment Management Limited ("ZIML") is the sub-adviser for
KHF, KEUF and KTEF. ZIML is the sub-adviser for other Kemper Funds as well.
Zurich Kemper Value Advisors, Inc. ("ZKVA") is the investment manager for KVF
the sub-adviser for KHF. ZKVA is the investment manager and sub-adviser for
other Kemper Funds as well. Dreman Value Management L.L.C. ("DVM") is the
sub-adviser for KDHRF. (Each of ZKI, ZIML, ZKVA and DVM are referred to as an
"Adviser.") At times investment decisions may be made to purchase or sell the
same investment securities for a Fund and for one or more of the other clients
managed by an Adviser or its affiliates. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security, through the
same trading facility, the transactions are allocated as to amount and price in
a manner considered equitable to each.
The Advisers, in effecting purchases and sales of portfolio securities for the
account of a Fund, will implement the Fund's policy of seeking best
39
<PAGE> 45
execution of orders. The Advisers may be permitted to pay higher brokerage
commissions for research services as described below. Consistent with this
policy, orders for portfolio transactions are placed with broker-dealer firms
giving consideration to the quality, quantity and nature of each firm's
professional services, which include execution, financial responsibility,
responsiveness, clearance procedures, wire service quotations and statistical
and other research information provided to a Fund and the Advisers and their
affiliates. Subject to seeking best execution of an order, brokerage is
allocated on the basis of all services provided. Any research benefits derived
are available for all clients of the Advisers and their affiliates. In selecting
among firms believed to meet the criteria for handling a particular transaction,
the Advisers may give consideration to those firms that have sold or are selling
shares of the Funds and of other funds managed by the Advisers and their
affiliates, as well as to those firms that provide market, statistical and other
research information to a Fund and the Advisers and their affiliates, although
the Advisers are not authorized to pay higher commissions to firms that provide
such services, except as described below.
The Advisers may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include, among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of the products or services in accordance with the
anticipated research and non-research uses, and the cost attributable to
non-research use is paid by the Adviser or one of its affiliates in cash.
Subject to Section 28(e) and procedures adopted by the Board of Trustees of each
Fund, a Fund could pay a firm that provides research services commissions for
effecting a securities transaction for the Fund in excess of the amount other
firms would have charged for the Transaction if an Adviser determines in good
faith that the greater commission is reasonable in relation to the value of the
brokerage and research services provided by the executing firm viewed in terms
either of a particular transaction or the Adviser's overall responsibilities to
the Fund and other clients. Not all such research services may be useful or of
value in advising a particular Fund. Research benefits will be available for all
clients of the Advisers and their affiliates. The investment management fee paid
by a Fund to an Adviser is not reduced because these research services are
received.
SKI. It is expected that SKI (including ZKI and ZKVA under SKI's ownership) will
implement portfolio transaction policies that are
40
<PAGE> 46
substantially similar to those currently used by the Advisers, except that SKI
does not intend to pay higher brokerage commissions solely for receipt of
market, statistical and other research services as defined in Section 28(e) of
the Securities Exchange Act of 1934 and interpretations thereunder, and, with
respect to the practice of selecting firms to handle a particular transaction
based upon the sales of Kemper Fund shares, SKI currently intends to only
consider sales of shares of the Fund in question. However, ZIML and DVM may
continue their current portfolio transaction policies as described above. In
addition, to the maximum extent feasible, it is expected that SKI will place
orders for portfolio transactions through Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110 ("SIS") (a corporation
registered as a broker/dealer and a subsidiary of Scudder), which will in turn
place orders on behalf of the Funds with issuers, underwriters or other brokers
and dealers. SIS will not receive any commission, fee or other remuneration from
a Fund for this service.
Set forth in Exhibit K are the total brokerage commissions paid by each Fund for
its most recently completed fiscal year, as well as the percentage of such
amounts that was allocated to broker-dealer firms on the basis of research
information.
SCUDDER. Scudder, Stevens & Clark, Inc. ("Scudder"), 345 Park Avenue, New York,
New York 10154, is one of America's oldest and largest investment management
firms. It manages approximately $125 billion in assets globally, about $50
billion of which are invested in equities and the balance in fixed income and
money market investments. Scudder manages approximately $45 billion in a variety
of open-end and closed-end funds for nearly two million shareholder accounts.
The firm also provides investment services for private and institutional
clients, such as trusts, endowments, and corporate employee benefit plans.
Scudder manages more than $22 billion internationally in both developed and
emerging markets. The firm is one of the world's largest managers of pension
fund assets invested overseas.
Scudder manages two families of pure no-load mutual funds. The Scudder Family of
Funds (approximately $23 billion) comprises 46 money market, bond and equity
mutual funds. The AARP Investment Program from Scudder, a family of 15 funds
(approximately $14 billion), is designed to address the needs of the more than
33 million members of the American Association of Retired Persons. The balance
of the funds under management (approximately $7 billion) comprises closed-end,
offshore, variable life insurance and other kinds of funds.
The investment companies to which Scudder renders investment management
services, and the related fees, are identified in Exhibit J.
41
<PAGE> 47
The names, addresses and principal occupations of the principal executive
officer and the directors of Scudder are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Daniel Pierce, Director Chairman of the Board and
Two International Place Managing Director, Scudder
Boston, Massachusetts 02110
Edmond D. Villani, Chief Executive President, Chief Executive
Officer and Director Officer and Managing Director,
345 Park Avenue Scudder
New York, New York 10154
Stephen R. Beckwith, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Lynn S. Birdsong, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Nicholas Bratt, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
E. Michael Brown, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Mark S. Casady, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Linda C. Coughlin, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Margaret D. Hadzima, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Jerard K. Hartman, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Richard A. Holt, Director Managing Director, Scudder
Two Prudential Plaza
180 North Stetson, Suite 5400
Chicago, Illinois
John T. Packard, Director Managing Director, Scudder
101 California Street
San Francisco, California
</TABLE>
42
<PAGE> 48
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Kathryn L. Quirk, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Cornelia M. Small, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Stephen A. Wohler, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
</TABLE>
After consummation of the Transaction, it is anticipated that the principal
executive officer and directors of SKI will be as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
- ---------------- --------------------
<S> <C>
Lynn Birdsong, Director Senior Executive Officer--
345 Park Avenue International Operations, SKI
New York, New York 10154
Lawrence Cheng, Director Member of Corporate Executive
Mythenquai 2 Board and Chief Investment
8002 Zurich, Switzerland Officer for Investments and
International Asset Management,
Zurich
Steven Gluckstern, Director Member of Corporate Executive
Mythenquai 2 Board and responsible for
8002 Zurich, Switzerland Reinsurance, Structured Finance,
Capital Market Products and
Strategic Investments, Zurich
Rolf Hueppi, Director Chairman and Chief Executive
Mythenquai 2 Officer, Zurich; Chairman of
8002 Zurich, Switzerland Board of Directors, SKI
Markus Rohrbasser, Director Chief Financial Officer and
Mythenquai 2 Member of Corporate Executive
8002 Zurich, Switzerland Board, Zurich
Cornelia Small, Director Senior Executive Officer--
345 Park Avenue Investment Management, SKI
New York, New York 10154
Edmond Villani, Chief Executive Chief Executive Officer, SKI
Officer and Director
345 Park Avenue
New York, New York 10154
</TABLE>
43
<PAGE> 49
MISCELLANEOUS
GENERAL
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by ZKI, including any additional solicitation made by
letter, telephone or telegraph. In addition to solicitation by mail, certain
officers and representatives of the Funds, officers and employees of ZKI 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. In addition, ZKI has retained First Data Corp. to
solicit proxies on behalf of each Fund's Board and the boards of the other
Kemper Funds, the fee for which will be borne by ZKI. A COPY OF YOUR FUND'S
ANNUAL REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST BY WRITING TO THE FUND, 222 SOUTH RIVERSIDE PLAZA, CHICAGO,
ILLINOIS 60606 OR BY CALLING 1-800-621-1048.
PROPOSALS OF SHAREHOLDERS
The Funds are not required to hold annual shareholder meetings, but each will
hold special meetings as required or deemed desirable. Since the Funds do not
hold regular meetings of shareholders, the anticipated date of the next special
shareholders meeting cannot be provided. Any shareholder proposal that may
properly be included in the proxy solicitation material for a special
shareholder meeting must be received by the applicable Fund no later than four
months prior to the date when proxy statements are mailed to shareholders.
OTHER MATTERS TO COME BEFORE THE MEETING
The Boards of the Funds are not aware of any matters that will be presented for
action at the Meeting other than the matters set forth herein. 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 Fund.
VOTING, QUORUM
Each share of a Fund is entitled to one vote on each matter submitted to a vote
of the holders of that class of shares of such Fund at the Meeting; no shares
have cumulative voting rights.
Each valid proxy will be voted in accordance with the instructions on the proxy
and as the persons named in the proxy determine on such other
44
<PAGE> 50
business as may come before the Meeting. If no instructions are given, the proxy
will be voted FOR the election of the persons who have been nominated as Board
members for such Fund and FOR Items 2, 3, 4 (if applicable), 5 (if applicable),
6 (if applicable) and 7 (if applicable). Shareholders who execute proxies may
revoke them at any time before they are voted, either by writing to the Fund or
in person at the time of the Meeting. Proxies given by telephone or
electronically transmitted instruments may be counted if obtained pursuant to
procedures designed to verify that such instructions have been authorized.
Item 1 (election of Board members) requires a plurality vote of the shares of
each Fund. This means that the eight nominees receiving the largest number of
votes will be elected. Item 2 (ratification of selection of independent
auditors) requires the affirmative vote of a majority of the shares voting on
the matter. Item 3 (approval of new investment management agreement), Item 4
(approval of new sub-advisory agreement with ZIML), Item 5 (approval of new
sub-advisory agreement with ZKVA), Item 6 (approval of new sub-advisory
agreement with DVM, and Item 7 (approval of new Rule 12b-1 Plan) require the
affirmative vote of a "majority of the outstanding voting securities" of the
applicable Fund. The term "majority of the outstanding voting securities" as
defined in the 1940 Act means: the affirmative vote of the lesser of (1) 67% of
the voting securities of the Fund present at the meeting if more than 50% of the
outstanding shares of the Fund are present in person or by proxy, or (2) more
than 50% of the outstanding shares of the Fund. Item 8 (approval of change in
fundamental investment policies to permit Master Fund/Feeder Fund structure)
requires the affirmative vote of more than 50% of shares of the Fund.
On Items 1 and 2, each Fund will vote in the aggregate and not by series or
class. On Item 3, KEUF will vote separately and, in the case of KVF, KHF and
KTEF, each series will vote separately. On Item 4, KEUF and KWF-4 will vote
separately. On Item 5, each series of KHF will vote separately. On Item 6, KDHRF
will vote separately. On Item 7, the Class B Shares and the Class C Shares of
each applicable Fund (or in the case of KVF and KHF, of each series) will vote
separately. On Item 8, KEUF will vote separately and, for KVF and KHF, each
series will vote separately.
The Declaration of Trust of KHF, KEUF and KTEF each Fund provides that the
presence at a shareholder meeting in person or by proxy of at least 30% of the
shares of a Fund constitutes a quorum for that Fund. The By-Laws of KVF provide
that a quorum shall consist of the holders of a majority of the outstanding
shares of the capital stock of KVF entitled to vote at such meeting. Thus, the
meeting for a particular Fund could not take place on its scheduled date if less
than 30% of the shares of that Fund (or if less than a majority of the
outstanding shares of KVF entitled
45
<PAGE> 51
to vote) were represented. If, by the time scheduled for the meeting, a quorum
of shareholders of a Fund is not present or if a quorum is present but
sufficient votes in favor of any of the items are not received, the persons
named as proxies may propose one or more adjournments of the meeting for that
Fund to permit further soliciting of proxies from its shareholders. Any such
adjournment will require the affirmative vote of a majority of the shares of the
Fund as to which the meeting is being adjourned present (in person or by proxy)
at the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of any such adjournment if they determine that such adjournment
and additional solicitation are reasonable and in the interest of the respective
Fund's shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. On Item 1, abstentions and broker non-votes will have no
effect; the eight nominees receiving the largest number of votes will be
elected. On Item 2, abstentions and broker non-votes will not be counted as
"votes cast" and will have no effect on the result of the vote. On Items 3, 4,
5, 6, 7 and 8 abstentions and broker non-votes will be considered to be both
present at the Meeting and issued and outstanding and, as a result, will have
the effect of being counted as voted against the Items.
The Board of each Fund recommends an affirmative vote on all items.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Boards of Trustees or Board of Directors,
Philip J. Collora
Secretary
46
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<S> <C>
Shares Issued and Outstanding as of September 22,
1997.............................................. Exhibit A
Shareholdings....................................... Exhibit B
(Board Members and Officers)
(Holders of More than 5% of any Class of a Fund's
Shares)
Form of Investment Management Agreement............. Exhibit C
Form of Sub-Advisory Agreement with Zurich
Investment Management Limited..................... Exhibit D
Form of Sub-Advisory Agreement with Zurich Kemper
Value Advisors, Inc............................... Exhibit E
Form of Sub-Advisory Agreement with Dreman Value
Management, L.L.C................................. Exhibit F
Form of Underwriting and Distribution Services
Agreement......................................... Exhibit G
Proposed Fundamental Investment Policies............ Exhibit H
Kemper Funds and Management Fees.................... Exhibit I
Scudder Funds and Fees Rates........................ Exhibit J
Fee and Expenses.................................... Exhibit K
</TABLE>
47
<PAGE> 53
EXHIBIT A
SHARES ISSUED AND OUTSTANDING AS OF SEPTEMBER 22, 1997
<TABLE>
<CAPTION>
FUND CLASS A CLASS B CLASS C CLASS I
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
KVF
KCF
KDHRF
KSCVF
KHF
KH20P
KH10P
KH5P
KEUF
KTEF
KRF-I
KRF-II
KRF-III
KRF-IV
KRF-V
KRF-VI
KRF-VII
KWF-4
</TABLE>
A-1
<PAGE> 54
EXHIBIT B
SHAREHOLDINGS
BOARD MEMBERS AND OFFICERS. Set forth below is the number of shares of each Fund
owned beneficially by each Board member and nominee as of ,
1997. Also shown is the number of shares owned beneficially by the board
members, nominees and officers as a group. In each case, the amounts shown are
less than 1% of the outstanding shares of each class of each Fund or any series
of KVF, KHF or KTEF. All shares shown are Class A shares unless otherwise noted:
<TABLE>
<CAPTION>
BOARD AND
OFFICERS AS A
FUND AKINS GOTTSCHALK KELSEY PIERCE RENWICK TINGLEFF TIMBERS VILLANI WEITHERS GROUP
---- ----- ---------- ------ ------ ------- -------- ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KVF
KCF.................
KDHRF...............
KSCVF...............
KHF
KH20P...............
KH10P...............
KH5P................
KEUF.................
KTEF
KRF-I...............
KRF-II..............
KRF-III.............
KRF-IV..............
KRF-V...............
KRF-VI..............
KRF-VII.............
KWF-4...............
</TABLE>
HOLDERS OF MORE THAN 5% OF ANY CLASS OF A FUND'S SHARES. As of , 1997,
no person is known to the Funds to own beneficially more than five percent of
the Shares of any class of any Fund except as shown below.
<TABLE>
<CAPTION>
NUMBER
FUND NAME AND ADDRESS OF SHARES % OF CLASS
---- ---------------- --------- ----------
<S> <C> <C> <C>
</TABLE>
B-1
<PAGE> 55
EXHIBIT C
FORM OF
INVESTMENT MANAGEMENT AGREEMENT*
[NAME OF TRUST]
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
, 199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF SERIES]
Ladies and Gentlemen:
[Name of Trust] (the "Trust") has been established as a Massachusetts business
Trust to engage in the business of an investment company. Pursuant to the
Trust's Declaration of Trust, as amended from time-to-time (the "Declaration"),
the Board of Trustees is authorized to issue the Trust's shares of beneficial
interest, par value $ per share, (the "Shares") in separate series, or funds.
The Board of Trustees has authorized [name of series] (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. DELIVERY OF DOCUMENTS. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to
- ---------------
* For KVF, any reference to a Trust, Trustees, Declaration of Trust or similar
phrases related to a Massachusetts business trust will be deemed a reference
to a Corporation, Directors, Articles of Incorporation or similar phrases
related to a Maryland corporation.
C-1
<PAGE> 56
time, (the "Registration Statement") filed by the Trust under the Investment
Company Act of 1940, as amended, (the "1940 Act") and the Securities Act of
1933, as amended. Copies of the documents referred to in the preceding sentence
have been furnished to you by the Trust. The Trust has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:
(a) The Declaration dated , 19 , as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated , 19 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. PORTFOLIO MANAGEMENT SERVICES. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant
C-2
<PAGE> 57
to this Agreement which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. ADMINISTRATIVE SERVICES. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained
C-3
<PAGE> 58
for the Fund all books, records and reports and any other information required
under the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications
C-4
<PAGE> 59
expenses; taxes and governmental fees; fees, dues and expenses incurred by the
Fund in connection with membership in investment company trade organizations;
fees and expenses of the Fund's accounting agent for which the Trust is
responsible pursuant to the terms of the Fund Accounting Services Agreement,
custodians, subcustodians, transfer agents, dividend disbursing agents and
registrars; payment for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. MANAGEMENT FEE. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
of 1 percent of the average daily net assets as defined below of the
Fund for such month; [provided that, for any calendar month during which the
average of such values exceeds $ , the fee payable for that month based
on the portion of the average of such values in excess of $ shall be
1/12 of
C-5
<PAGE> 60
of 1 percent of such portion;] [and provided that, for any calendar month during
which the average of such values exceeds $ , the fee payable for that
month based on the portion of the average of such values in excess of
$ shall be 1/12 of of 1 percent of such portion;] [SEE PAGE
OF PROXY STATEMENT FOR EACH FUND'S MANAGEMENT FEE] over (b) any compensation
waived by you from time to time (as more fully described below). You shall be
entitled to receive during any month such interim payments of your fee hereunder
as you shall request, provided that no such payment shall exceed 75 percent of
the amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
C-6
<PAGE> 61
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain in
force until , 19 , and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event
C-7
<PAGE> 62
that it shall have been established by a court of competent jurisdiction that
you or any of your officers or directors has taken any action which results in a
breach of your covenants set forth herein.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. LIMITATION OF LIABILITY FOR CLAIMS. [Not applicable for KVF.] The
Declaration, a copy of which, together with all amendments thereto, is on file
in the Office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "[Name of Trust]" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the Trust,
shall be subject to claims against or obligations of the Trust or of the Fund to
any extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner
C-8
<PAGE> 63
which would cause the Fund to fail to comply with the requirements of Subchapter
M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
[Name of Trust], on behalf of
Kemper Fund
By:
-----------------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
-----------------------------------------------
President
C-9
<PAGE> 64
EXHIBIT D
FORM OF SUB-ADVISORY AGREEMENT
WITH ZURICH INVESTMENT MANAGEMENT LIMITED
AGREEMENT made this day of , 199 , by and between SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH
INVESTMENT MANAGEMENT LIMITED, an English corporation (the "Sub-Adviser").
WHEREAS, [Name of Fund], a Massachusetts business trust (the "Fund") is a
management investment company registered under the Investment Company Act of
1940;
WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services with regard to the Fund's sole series (the "initial
series") pursuant to an Investment Management Agreement (the "Management
Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to render
investment advisory and management services with respect to that portion of the
portfolio of the Fund's initial series allocated to the Sub-Adviser by the
Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, and the Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the initial series of the Fund allocated by the
Adviser in its sole discretion to the Sub-Adviser for management, including
services related to foreign securities, foreign currency transactions and
related investments, in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the Adviser and the
Board of Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the agent of the Fund to
give instructions to the Custodian of the Fund as to the deliveries of
securities and payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such orders, the
Sub-Adviser is directed to seek for the Fund best execution of orders. Subject
to such policies as the Board of Trustees of the Fund determines and subject to
satisfying the requirements of Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser shall not be deemed to
D-1
<PAGE> 65
have acted unlawfully or to have breached any duty, created by this Agreement or
otherwise, solely by reason of its having caused the Fund to pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. The Adviser recognizes that all
research services and research that the Sub-Adviser receives are available for
all clients of the Sub-Adviser, and that the Fund and other clients of the
Sub-Adviser may benefit thereby. The investment of funds shall be subject to all
applicable restrictions of the Agreement and Declaration of Trust and By-Laws of
the Fund as may from time to time be in force.
The Sub-Adviser accepts such employment and agrees during such period to render
such investment management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services for the Fund, to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser. It is understood
and agreed that the Sub-Adviser, by separate agreements with the Fund, may also
serve the Fund in other capacities.
The Sub-Adviser will keep the Fund and the Adviser informed of developments
materially affecting the Fund and shall, on the Sub-Adviser's own initiative and
as reasonably requested by the Adviser or the Fund, furnish to the Fund and the
Adviser from time to time whatever information the Adviser reasonably believes
appropriate for this purpose.
The Sub-Adviser agrees that, in the performance of the duties required of it by
this Agreement, it will comply with the Investment Advisers Act of 1940 and the
Investment Company Act of 1940, and all rules and regulations thereunder, and
all applicable laws and regulations and with any applicable procedures adopted
by the Fund's Board of Trustees and identified in writing to the Sub-Adviser.
The Sub-Adviser shall provide the Adviser with such investment portfolio
accounting and shall maintain and provide such detailed records and reports as
the Adviser may from time to time reasonably request, including without
D-2
<PAGE> 66
limitation, daily processing of investment transactions and cash positions,
periodic valuations of investment portfolio positions as required by the
Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data as
may be required by the Adviser to comply with the obligations imposed upon it
under Management Agreement.
The Sub-Adviser shall provide adequate security with respect to all materials,
records, documents and data relating to any of its responsibilities pursuant to
this Agreement including any means for the effecting of securities transactions.
The Sub-Adviser agrees that it will make available to the Adviser and the Fund
promptly upon their request copies of all of its investment records and ledgers
with respect to the Fund to assist the Adviser and the Fund in monitoring
compliance with the Investment Company Act of 1940 and the Investment Advisers
Act of 1940, as well as other applicable laws. The Sub-Adviser will furnish the
Fund's Board of Trustees such periodic and special reports with respect to the
Fund's portfolio as the Adviser or the Board of Trustees may reasonably request.
In compliance with the requirements of Rule 31a-3 under the Investment Company
Act of 1940, the Sub-Adviser hereby agrees that any records that it maintains
for the Fund are the property of the Fund and further agrees to surrender
promptly to the Fund copies of any such records upon the Fund's request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the Investment Company Act of 1940 any records with respect to the
Sub-Adviser's duties hereunder required to be maintained by Rule 31a-1 under
such Act to the extent that the Sub-Adviser prepares and maintains such records
pursuant to this Agreement and to preserve the records required by Rule 204-2
under the Investment Advisers Act of 1940 for the period specified in that Rule.
The Sub-Adviser agrees that it will immediately notify the Adviser and the Fund
in the event that the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving as an investment
adviser pursuant to this Agreement; or (ii) is or expects to become the subject
of an administrative proceeding or enforcement action by the United States
Securities and Exchange Commission, the Investment Management Regulatory
Organization ("IMRO") or other regulatory authority.
The Sub-Adviser represents that it is an investment adviser registered under the
Investment Advisers Act of 1940 and other applicable laws and it is regulated by
IMRO and will treat the Fund as a Non-Private Customer as defined by IMRO. The
Sub-Adviser agrees to maintain the completeness and accuracy of its registration
on Form ADV in accordance with all legal requirements relating to that Form. The
Sub-Adviser
D-3
<PAGE> 67
acknowledges that it is an "investment adviser" to the Fund within the meaning
of the Investment Company Act of 1940 and the Investment Advisers Act of 1940.
The Sub-Adviser shall be responsible for maintaining an appropriate compliance
program to ensure that the services provided by it under this Agreement are
performed in a manner consistent with applicable laws and the terms of this
Agreement. Furthermore, the Sub-Adviser shall maintain and enforce a Code of
Ethics that is in form and substance satisfactory to the Adviser. Sub-Adviser
agrees to provide such reports and certifications regarding its compliance
program as the Adviser or the Fund shall reasonably request from time to time.
2. In the event that there are, from time to time, one or more additional series
of the Fund with respect to which the Adviser desires to retain the Sub-Adviser
to render investment advisory and management services hereunder, the Adviser
shall notify the Sub-Adviser in writing. If the Sub-Adviser is willing to render
such services, it shall notify the Adviser in writing whereupon such additional
series shall become subject to this Agreement.
3. For the services and facilities described in Section 1, the Adviser will pay
to the Sub-Adviser, at the end of each calendar month, a sub-advisory fee
computed at an annual rate of [see page of the proxy statement for each Fund's
sub-advisory fee] of that portion of the average daily net assets of the initial
series of the Fund that is allocated by the Adviser to the Sub-Adviser for
management.
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
4. The services of the Sub-Adviser under this Agreement are not to be deemed
exclusive, and the Sub-Adviser shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers or
employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law.
6. The net asset value for each series of the Fund subject to this Agreement
shall be calculated as the Board of Trustees of the Fund may determine from time
to time in accordance with the provisions of the Investment Company Act of 1940.
On each day when net asset value is not calculated, the net asset value of a
series shall be deemed to be the net
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<PAGE> 68
asset value of such series as of the close of business on the last day on which
such calculation was made for the purpose of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood that certain
trustees, officers or agents of the Fund are or may be interested in the
Sub-Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Sub-Adviser may be
interested in the Fund otherwise than as a trustee, officer or agent.
8. The Sub-Adviser shall not be liable for any error of judgment or of law or
for any loss suffered by the Fund or the Adviser in connection with the matters
to which this Agreement relates, except loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. This Agreement shall become effective with respect to the initial series of
the Fund on the date hereof and shall remain in full force until
, 199 , unless sooner terminated as hereinafter provided. This
Agreement shall continue in force from year to year thereafter with respect to
each such series, but only as long as such continuance is specifically approved
for each series at least annually in the manner required by the Investment
Company Act of 1940 and the rules and regulations thereunder; provided, however,
that if the continuation of this Agreement is not approved for a series, the
Sub-Adviser may continue to serve in such capacity for such series in the manner
and to the extent permitted by the Investment Company Act of 1940 and the rules
and regulations thereunder.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement and may be
terminated at any time with respect to any series subject to this Agreement
without the payment of any penalty by the Adviser or by the Sub-Adviser on sixty
(60) days written notice to the other party. The Fund may effect termination
with respect to any such series without payment of any penalty by action of the
Board of Trustees or by vote of a majority of the outstanding voting securities
of such series on sixty (60) days written notice to the Adviser and the
Sub-Adviser.
This Agreement may be terminated with respect to any series at any time without
the payment of any penalty by the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of such series or by the Adviser
in the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action which results in a breach of the covenants of the
Sub-Adviser set forth herein.
D-5
<PAGE> 69
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.
SCUDDER KEMPER
INVESTMENTS, INC.
By: _________________________
Title: ________
ZURICH INVESTMENT
MANAGEMENT LIMITED
By: _________________________
Title: ________
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<PAGE> 70
EXHIBIT E
FORM OF SUB-ADVISORY AGREEMENT
WITH ZURICH KEMPER VALUE ADVISORS, INC.
AGREEMENT made this day of , 199 , by and between SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH
KEMPER VALUE ADVISORS, INC., a Delaware corporation (the "Sub-Adviser").
WHEREAS, KEMPER HORIZON FUND, a Massachusetts business trust (the "Fund") is an
open-end management investment company registered under the Investment Company
Act of 1940, the shares of beneficial interest ("Shares") of each series of
which are registered under the Securities Act of 1933;
WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services pursuant to an Investment Management Agreement, dated
, 199 (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to render
investment advisory and management services with respect to that portion of the
portfolio of each series of the Fund allocated to the Sub-Adviser by the Adviser
for management and the Sub-Adviser is willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the Fund allocated by the Adviser in its sole
discretion to the Sub-Adviser for management in accordance with the applicable
investment objectives and policies and limitations and subject to the
supervision of the Adviser and the Board of Trustees of the Fund for the period
and upon the terms herein set forth, and to place orders for the purchase or
sale of portfolio securities for the Fund's account with brokers or dealers
selected by the Sub-Adviser, and, in connection therewith, the Sub-Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to the deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Sub-Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board of Trustees of the
Fund determines, the Sub-Adviser shall not be deemed to have acted unlawfully or
to have breached any duty, created by this Agreement or otherwise, solely by
reason of its having caused the Fund to pay a broker
E-1
<PAGE> 71
or dealer an amount of commission for effecting a securities transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Sub-Adviser determined in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. The Adviser recognizes that all
research services and research that the Sub-Adviser receives or generates are
available for all clients of the Sub-Adviser, and that the Fund and other
clients of the Sub-Adviser may benefit thereby. The investment of funds shall be
subject to all applicable restrictions of the Agreement and Declaration of Trust
and By-Laws of the Fund as may from time to time be in force.
The Sub-Adviser accepts such employment and agrees during such period to render
such investment management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services for the Fund, to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser. It is understood
and agreed that the Sub-Adviser, by separate agreements with the Fund, may also
serve the Fund in other capacities.
2. In the event that the Fund establishes one or more additional series with
respect to which the Adviser desires to retain the Sub-Adviser to render
investment advisory and management services hereunder, the Adviser shall notify
the Sub-Adviser in writing. If the Sub-Adviser is willing to render such
services, it shall notify the Adviser in writing whereupon such series shall
become subject to this agreement.
3. For the services and facilities described in Section 1, the Adviser will pay
to the Sub-Adviser at the end of each calendar month, a sub-advisory fee
computed at an annual rate of .25 of 1% of the portion of the average daily net
assets of each series allocated by the Adviser to the Sub-Adviser for
management.
The fee as computed above shall be computed separately for, and charged as an
expense of, each series of the Fund based upon the average daily net assets of
such series. For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration
E-2
<PAGE> 72
on the basis of the number of days that the Agreement is in effect during the
month and year, respectively.
4. The services of the Sub-Adviser under this Agreement are not to be deemed
exclusive, and the Sub-Adviser shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers or
employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law.
6. The net asset value for each series of the Fund shall be calculated in
accordance with the provisions of the Fund's prospectus or as the trustees may
determine in accordance with the provisions of the Investment Company Act of
1940. On each day when net asset value is not calculated, the net asset value of
a series shall be deemed to be the net asset value of such series as of the
close of business on the last day on which such calculation was made for the
purpose of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood that certain
trustees, officers or agents of the Fund are or may be interested in the
Sub-Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Sub-Adviser may be
interested in the Fund otherwise than as a trustee, officer or agent.
8. The Sub-Adviser shall not be liable for any error of judgment or of law or
for any loss suffered by the Fund or the Adviser in connection with the matters
to which this Agreement relates, except loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. This Agreement shall become effective with respect to the initial series of
the Fund on the date hereof and shall remain in full force until ,
199 , unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to each series, but
only as long as such continuance is specifically approved for each series at
least annually in the manner required by the Investment Company Act of 1940 and
the rules and regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a series, the Sub-Adviser may
continue to serve in such capacity for such Portfolio in the manner and to the
extent permitted by the Investment Company Act of 1940 and the rules and
regulations thereunder.
E-3
<PAGE> 73
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement and may be
terminated at any time with respect to any series without the payment of any
penalty by the Adviser or by the Sub-Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination with respect to any series
without payment of any penalty by action of the Board of Trustees or by vote of
a majority of the outstanding voting securities of such series on sixty (60)
days written notice to the Adviser and the Sub-Adviser.
This Agreement may be terminated with respect to any series at any time without
the payment of any penalty by the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of such series or by the Adviser
in the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action which results in a breach of the covenants of the
Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepared, to the other party at such address as such other
party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
E-4
<PAGE> 74
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.
SCUDDER KEMPER
INVESTMENTS, INC.
By:
--------------------------------------
Title:
-----------------------------------
ATTEST:
-----------------------------
Title:
------------------------------
ZURICH KEMPER VALUE
ADVISORS, INC.
By:
--------------------------------------
Title:
-----------------------------------
ATTEST:
- ------------------------------------
Title:
- ------------------------------------
E-5
<PAGE> 75
EXHIBIT F
FORM OF SUB-ADVISORY AGREEMENT
WITH DREMAN VALUE MANAGEMENT, L.L.C.
F-1
<PAGE> 76
EXHIBIT G
FORM OF UNDERWRITING AND
DISTRIBUTION SERVICES AGREEMENT**
AGREEMENT made this day of , 199 , between KEMPER
, a Massachusetts business trust (the "Fund"), and ZURICH
KEMPER DISTRIBUTORS, INC., a Delaware corporation ("ZKDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints ZKDI to act as agent for the distribution of shares
of beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may (a) issue or
sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which ZKDI shall act as exclusive distributor, who wish to exchange
all or a portion of their investment in shares of such other investment company
for shares of the Fund. ZKDI shall appoint various financial service firms
("Firms") to provide distribution services to investors. The Firms shall provide
such office space and equipment, telephone facilities, personnel, literature
distribution, advertising and promotion as is necessary or beneficial for
providing information and distribution services to existing and potential
clients of the Firms. ZKDI may also provide some of the above services for the
Fund.
ZKDI accepts such appointment as distributor and principal underwriter and
agrees to render such services and to assume the obligations herein set forth
for the compensation herein provided. ZKDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. ZKDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of ZKDI to the Fund under
this Agreement are not to be deemed exclusive, and ZKDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
- ---------------
** For KVF, any reference to a Trust, Trustees, Declaration of Trust or similar
phrases related to a Massachusetts business trust will be deemed a reference
to a Corporation, Directors, Articles of Incorporation or similar phrases
related to a Maryland corporation.
G-1
<PAGE> 77
In carrying out its duties and responsibilities hereunder, ZKDI will, pursuant
to separate written contracts, appoint various Firms to provide advertising,
promotion and other distribution services contemplated hereunder directly to or
for the benefit of existing and potential shareholders who may be clients of
such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by ZKDI and not the Fund.
ZKDI shall use its best efforts with reasonable promptness to sell such part of
the authorized shares of the Fund remaining unissued as from time to time shall
be effectively registered under the Securities Act of 1933 ("Securities Act"),
at prices determined as hereinafter provided and on terms hereinafter set forth,
all subject to applicable federal and state laws and regulations and to the
Agreement and Declaration of Trust of the Fund.
2. ZKDI shall sell shares of the Fund to or through qualified Firms in such
manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the Securities
Act, as ZKDI may determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the Fund without the
prior consent of the Fund. In addition to sales made by it as agent of the Fund,
ZKDI may, in its discretion, also sell shares of the Fund as principal to
persons with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold by ZKDI
shall be so offered or sold at a price per share determined in accordance with
the then current prospectus. The price the Fund shall receive for all shares
purchased from it shall be the net asset value used in determining the public
offering price applicable to the sale of such shares. Any excess of the sales
price over the net asset value of the shares of the Fund sold by ZKDI as agent
shall be retained by ZKDI as a commission for its services hereunder. ZKDI may
compensate Firms for sales of shares at the commission levels provided in the
Fund's prospectus from time to time. ZKDI may pay other commissions, fees or
concessions to Firms, and may pay them to others in its discretion, in such
amounts as ZKDI shall determine from time to time. ZKDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. ZKDI shall also receive any distribution services fee
payable by the Fund as provided in Section 8 hereof.
ZKDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither ZKDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
G-2
<PAGE> 78
3. The Fund will use its best efforts to keep effectively registered under the
Securities Act for sale as herein contemplated such shares as ZKDI shall
reasonably request and as the Securities and Exchange Commission shall permit to
be so registered. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as ZKDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to ZKDI from time to time such information
with respect to the Fund and its shares as ZKDI may reasonably request for use
in connection with the sale of shares of the Fund.
5. ZKDI shall issue and deliver or shall arrange for various Firms to issue and
deliver on behalf of the Fund such confirmations of sales made by it pursuant to
this agreement as may be required. At or prior to the time of issuance of
shares, ZKDI will pay or cause to be paid to the Fund the amount due the Fund
for the sale of such shares. Certificates shall be issued or shares registered
on the transfer books of the Fund in such names and denominations as ZKDI may
specify.
6. ZKDI shall order shares of the Fund from the Fund only to the extent that it
shall have received purchase orders therefor. ZKDI will not make, or authorize
Firms or others to make (a) any short sales of shares of the Fund; or (b) any
sales of such shares to any trustee or officer of the Fund or to any officer or
director of ZKDI or of any corporation or association furnishing investment
advisory, managerial or supervisory services to the Fund, or to any corporation
or association, unless such sales are made in accordance with the then current
prospectus relating to the sale of such shares. ZKDI, as agent of and for the
account of the Fund, may repurchase the shares of the Fund at such prices and
upon such terms and conditions as shall be specified in the current prospectus
of the Fund. In selling or reacquiring shares of the Fund for the account of the
Fund, ZKDI will in all respects conform to the requirements of all state and
federal laws and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., relating to such sale or reacquisition, as the case
may be, and will indemnify and save harmless the Fund from any damage or expense
on account of any wrongful act by ZKDI or any employee, representative or agent
of ZKDI. ZKDI will observe and be bound by all the provisions of the Agreement
and Declaration of Trust of the Fund (and of any fundamental policies adopted by
the Fund pursuant to the
G-3
<PAGE> 79
Investment Company Act of 1940, notice of which shall have been given to ZKDI)
which at the time in any way require, limit, restrict, prohibit or otherwise
regulate any action on the part of ZKDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by ZKDI under this Agreement.
The Fund will pay or cause to be paid expenses (including the fees and
disbursements of its own counsel) of any registration of the Fund and its shares
under the United States securities laws and expenses incident to the issuance of
shares of beneficial interest, such as the cost of share certificates, issue
taxes, and fees of the transfer agent. ZKDI will pay all expenses (other than
expenses which one or more Firms may bear pursuant to any agreement with ZKDI)
incident to the sale and distribution of the shares issued or sold hereunder,
including, without limiting the generality of the foregoing, all (a) expenses of
printing and distributing any prospectus and of preparing, printing and
distributing or disseminating any other literature, advertising and selling aids
in connection with the offering of the shares for sale (except that such
expenses need not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any registration
statement or prospectus, report or other communication to shareholders in their
capacity as such), (b) expenses of advertising in connection with such offering
and (c) expenses (other than the Fund's auditing expenses) of qualifying or
continuing the qualification of the shares for sale and, in connection
therewith, of qualifying or continuing the qualification of the Fund as a dealer
or broker under the laws of such states as may be designated by ZKDI under the
conditions herein specified. No transfer taxes, if any, which may be payable in
connection with the issue or delivery of shares sold as herein contemplated or
of the certificates for such shares shall be borne by the Fund, and ZKDI will
indemnify and hold harmless the Fund against liability for all such transfer
taxes.
8. For the services and facilities described herein in connection with Class B
shares and Class C shares of each series of the Fund, the Fund will pay to ZKDI
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class B
shares and Class C shares of each such series. For the month and year in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in effect
during the month and year, respectively. The foregoing fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by ZKDI under Section 2 hereof.
The net asset value shall be calculated in accordance with the provisions of the
Fund's current prospectus. On each day when net asset value is not
G-4
<PAGE> 80
calculated, the net asset value of a share of any class of any series of the
Fund shall be deemed to be the net asset value of such a share as of the close
of business on the last previous day on which such calculation was made. The
distribution services fee for any class of a series of the Fund shall be based
upon average daily net assets of the series attributable to the class and such
fee shall be charged only to such class.
9. ZKDI shall prepare reports for the Board of Trustees of the Fund on a
quarterly basis in connection with the Fund's distribution plan for Class B
shares and Class C shares showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board of Trustees.
10. To the extent applicable, this Agreement constitutes the plan for the Class
B shares and Class C shares of each series of the Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940; and this Agreement and plan shall be
approved and renewed in accordance with Rule 12b-1 for such Class B shares and
Class C shares separately.
This Agreement shall become effective on the date hereof and shall continue
until , 199 ; and shall continue from year to year
thereafter only so long as such continuance is approved in the manner required
by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its assignment and
may be terminated at any time without the payment of any penalty by the Fund or
by ZKDI on sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any class of any series of the Fund by a vote
of (i) a majority of the Board of Trustees, (ii) a majority of the trustees who
are not interested persons of the Fund and who have no direct or indirect
financial interest in this Agreement or in any agreement related to this
Agreement, or (iii) a majority of the outstanding voting securities of the
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon ZKDI's failure to fulfill
any of its obligations hereunder.
This Agreement may not be amended to increase the amount to be paid to ZKDI by
the Fund for services hereunder with respect to a class of any series of the
Fund without the vote of a majority of the outstanding voting securities of such
class. All material amendments to this Agreement must in any event be approved
by a vote of the Board of Trustees of the Fund including the trustees who are
not interested persons of the Fund and who have no direct or indirect financial
interest in this Agreement or in any agreement related to this Agreement, cast
in person at a meeting called for such purpose.
G-5
<PAGE> 81
The terms "assignment", "interested" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act of 1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of ZKDI to receive
payments on any unpaid balance of the compensation described in Section 8 earned
prior to such termination.
11. ZKDI will not use or distribute, or authorize the use, distribution or
dissemination by Firms or others in connection with the sale of Fund shares any
statements other than those contained in the Fund's current prospectus, except
such supplemental literature or advertising as shall be lawful under federal and
state securities laws and regulations. ZKDI will furnish the Fund with copies of
all such material.
12. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
13. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
14. [Not applicable for KVF.] All parties hereto are expressly put on notice of
the Fund's Agreement and Declaration of Trust, and all amendments thereto, all
of which are on file with the Secretary of the Commonwealth of Massachusetts,
and the limitation of shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Fund individually but are binding upon only the assets and property of the
Fund. With respect to any claim by ZKDI for recovery of any liability of the
Fund arising hereunder allocated to a particular series or class, whether in
accordance with the express terms hereof or otherwise, ZKDI shall have recourse
solely against the assets of that series or class to satisfy such claim and
shall have no recourse against the assets of any other series or class for such
purpose.
15. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
16. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
G-6
<PAGE> 82
IN WITNESS WHEREOF, the Fund and ZKDI have caused this Agreement to be executed
as of the day and year first above written.
[FUND]
By: _____________________
Title: __________________
ATTEST:
_____________________
Title: ______________
ZURICH KEMPER
DISTRIBUTORS, INC.
By: _____________________
Title:
___________________
ATTEST:
___________________
Title: ____________
G-7
<PAGE> 83
EXHIBIT H
PROPOSED FUNDAMENTAL INVESTMENT POLICIES
The following policies are proposed to be changed with respect to each Fund or
their individual Portfolios. The proposed additions are underlined.
The Fund or Portfolio may not:
KVF:
"Purchase securities of any one issuer other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
collectively ("U.S. Government Securities") if immediately thereafter more than
5% of its total assets would be invested in the securities of any one issuer, or
purchase more than 10% of an issuer's outstanding securities, except that up to
25% of each Fund's total assets may be invested without regard to these
limitations, AND EXCEPT THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND
MAY BE INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Purchase any securities which would cause more than 25% of the value of its
total assets at the time of purchase to be invested in the securities of issuers
conducting their principal activities in the same industry, EXCEPT THAT ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER
REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND
SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Invest more than 10% of the value of its net assets in illiquid securities,
including restricted securities and repurchase agreements with remaining
maturities in excess of seven days, and other securities for which market
quotations are not readily available, EXCEPT THAT ALL OR SUBSTANTIALLY ALL OF
THE ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT
POLICIES AS THE FUND."
"Engage in the business of underwriting securities issued by others, except that
each Fund may acquire securities which are subject to restrictions on
disposition ("restricted securities") within the meaning of the Securities Act
of 1933, AND EXCEPT THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY
BE INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
H-1
<PAGE> 84
KHF:
"Purchase securities of any issuer (other than obligations of, or guaranteed by,
the U.S. Government, its agencies or instrumentalities) if, as a result, more
than 5% of the total value of its assets would be invested in securities of that
issuer, EXCEPT THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE
INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Purchase more than 10% of any class of voting securities of any issuer, EXCEPT
THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN
ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND
SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Purchase securities (other than securities of the U.S. Government, its agencies
or instrumentalities) if as a result of such purchase 25% or more of its total
assets would be invested in any one industry, EXCEPT THAT ALL OR SUBSTANTIALLY
ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER REGISTERED INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND SUBSTANTIALLY SIMILAR
INVESTMENT POLICIES AS THE FUND."
"Underwrite securities issued by others except to the extent it may be deemed to
be an underwriter, under the federal securities laws, in connection with the
disposition of portfolio securities, EXCEPT THAT ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT
POLICIES AS THE FUND."
KEUF:
"With respect to 75% of the Fund's total assets, purchase securities of any
issuer (other than securities issued or guaranteed by the U.S. Government or any
of its agencies or instrumentalities) if, as a result, more than 5% of the
Fund's total assets would be invested in securities of that issuer, EXCEPT THAT
ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER
REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND
SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Purchase more than 10% of any class of voting securities of any issuer, EXCEPT
THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN
ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND
SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND."
"Concentrate 25% or more of the Fund's total assets in any one industry, EXCEPT
THAT ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE FUND MAY BE
H-2
<PAGE> 85
INVESTED IN ANOTHER REGISTERED INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AND SUBSTANTIALLY SIMILAR INVESTMENT POLICIES AS THE FUND. Water,
communications, electric and gas utilities shall each be considered a separate
industry. This limitation shall not apply to obligations issued by the U.S.
Government or its agencies or instrumentalities."
"Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of portfolio securities, EXCEPT THAT ALL OR SUBSTANTIALLY
ALL OF THE ASSETS OF THE FUND MAY BE INVESTED IN ANOTHER REGISTERED INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AND SUBSTANTIALLY SIMILAR
INVESTMENT POLICIES AS THE FUND. The Fund may buy and sell securities outside of
the United States which are not registered with the Securities and Exchange
Commission or marketable in the United States."
H-3
<PAGE> 86
EXHIBIT I
KEMPER FUNDS AND MANAGEMENT FEES
I-1
<PAGE> 87
EXHIBIT J
SCUDDER FUNDS AND FEE RATES
J-1
<PAGE> 88
EXHIBIT K
FEES AND EXPENSES
<TABLE>
<CAPTION>
KCF KDHRF KSCVF KH20P KH10P KH5P KEUF KRF-I KRF-II
--- ----- ----- ----- ----- ---- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year End.............. 12/31/96 12/31/96 12/31/96 7/31/97 7/31/97 7/31/97 11/30/96 6/30/97 6/30/97
Management Fees Paid to ZKI
(or ZKVA)...................
Effective Management
Fee Rate....................
Sub-Advisory Fees Paid by ZKI
to ZIML.....................
Shareholder Service Fees Paid
by IFTC to ZKSC.............
Administrative Service Fees
Paid by Fund to ZKDI........
Effective Administrative
Service Fee Rate............
Commissions Retained
by ZKDI.....................
Commissions Allowed to
Affiliates of ZKDI..........
Brokerage Commissions Paid by
Fund........................
Percent of Brokerage
Commissions Paid by Fund
Allocated on Basis of
Research/Sales..............
<CAPTION>
KRF-III KRF-IV KRF-V KRF-VI KRF-VII KRF-4
------- ------ ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year End.............. 6/30/97 6/30/97 6/30/97 06/30/97 06/30/97 06/30/97
Management Fees Paid to ZKI
(or ZKVA)...................
Effective Management
Fee Rate....................
Sub-Advisory Fees Paid by ZKI
to ZIML.....................
Shareholder Service Fees Paid
by IFTC to ZKSC.............
Administrative Service Fees
Paid by Fund to ZKDI........
Effective Administrative
Service Fee Rate............
Commissions Retained
by ZKDI.....................
Commissions Allowed to
Affiliates of ZKDI..........
Brokerage Commissions Paid by
Fund........................
Percent of Brokerage
Commissions Paid by Fund
Allocated on Basis of
Research/Sales..............
</TABLE>
- ---------------
(a) ZKI waived its management fee and absorbed certain operating expenses for
.
K-1
<PAGE> 3
[KEMPER FUNDS LOGO]
PROXY SERVICES
P.O. BOX 9148
FARMINGDALE, NY 11735
KEMPER EUROPE FUND
FOR THE JOINT SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997
The signers of this proxy hereby appoint
Arthur R. Gottschalk and Stephen B. Timbers and
each of them, attorneys and proxies, with power
of substitution in each, to vote all shares for
the signers at the Joint Special Meeting of
Shareholders to be held December 3, 1997, and at
any adjournments thereof, as specified herein,
and in accordance with their best judgment, on
any other business that may properly come before
this meeting. If no specification is made
herein, all shares will be voted "FOR" the
proposals set forth on this proxy.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
- --------------------------------------------------------------------------------
KEMPER EUROPE FUND
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote below and sign in the space provided.
THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.
<TABLE>
<S><C>
1. To elect the following as trustees: For Withhold For All
All All Except
/ / / / / /
01) James B. Akins, 02) Arthur R. Gottschalk, 03) Frederick T. Kelsey,
04) Daniel Pierce, 05) Fred B. Renwick, 06) John B. Tingleff, 07) Edmond D. Villani,
08) John G. Weithers
-----------------------------------------------------------------------------------------
To withhold authority to vote on any individual nominee(s), please print the number(s)
on the line above.
2. To ratify the selection of Ernst & Young LLP
as independent auditors for the For Against Abstain
current fiscal year. / / / / / /
3. To approve a new investment management
agreement with Scudder Kemper Investments,
Inc. ("SKI") (or with Zurich Kemper Investments, For Against Abstain
Inc. transferable to SKI). / / / / / /
4. To approve a new sub-advisory agreement with
Zurich Investment Management Limited (including For Against Abstain
approval of a subsequent agreement). / / / / / /
7. For Class B and Class C shareholders
only, to approve a new Rule 12b-1 For Against Abstain
Kemper Distributors, Inc. / / / / / /
8. To approve changes in the Fund's fundamental
investment policies to permit a master/feeder For Against Abstain
fund structure. / / / / / /
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" ALL ITEMS.
Signature(s) (All registered owners of accounts shown above must sign.
If signing for a corporation, estate or trust, please indicate your capacity or
title.)
- ------------------------------------- ---------- ---------------------------------------- ----------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
- --------------------------------------------------------------------------------
