As filed with the Securities and Exchange Commission on September 28, 1999
1933 Act Registration No. 333-21187
1940 Act Registration No. 811-8047
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
----
Post-Effective Amendment No. 5
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6
----
ZURICH YIELDWISE FUNDS
----------------------
(Exact name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
-------------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Secretary With a copy to:
Zurich YieldWise Money Fund Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606-5808 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
--------
on _______________, 1999 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
--------
X on December 1, 1999 pursuant to paragraph (a)(1)
--------
75 days after filing pursuant to paragraph (a)(2)
--------
on _______________ pursuant to paragraph (a)(2) of Rule 485
--------
If appropriate, check the following:
-------- this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
<PAGE>
[LOGO]
Zurich YieldWise Funds
prospectus
December 1, 1999
Zurich YieldWise Money Fund
Zurich YieldWise Government
Money Fund
Zurich YieldWise Municipal
Money Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
table of contents
how the funds work
2 Zurich YieldWise Money Fund
6 Zurich YieldWise Government Money Fund
10 Zurich YieldWise Municipal Money Fund
14 Other Policies
15 Who Manages the Funds
16 Financial Highlights
how to invest in the funds
20 How to Buy Shares
22 How to Sell Shares
23 Policies You Should Know About
28 Understanding Distributions and Taxes
<PAGE>
how the funds work
These funds are money funds, meaning that they seek to maintain a stable $1.00
share price in order to preserve the value of your investment.
Each fund takes its own approach to money fund investing. One emphasizes yield,
while another emphasizes government securities for even higher credit quality
than money fund rules require. A third fund invests for federally tax-free
income. In exchange for certain transaction fees and higher minimums, the funds
seek to offer higher yields by lowering expenses.
Remember that money funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government organization. Their
$1.00 share prices aren't guaranteed, so be aware that you could lose money.
<PAGE>
ticker symbol o OOOOO
Zurich YieldWise Money Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing exclusively in high quality short-term
securities, as well as repurchase agreements that are backed by these
securities.
The fund may buy securities from many types of issuers, including the U.S.
government, corporations, and municipalities. The fund may invest in securities
from foreign banks, and may invest more than 25% of total assets in obligations
of U.S. banks. However, everything the fund buys must meet the rules for money
market fund investments (see sidebar). In addition, the fund is stricter than
the rules in that it only buys securities that are in the top credit grade for
short-term securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must operate within strict
federal rules. Designed to help maintain a stable share price, these rules limit
money funds to particular types of securities. Some of the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
- --------------------------------------------------------------------------------
2 Zurich YieldWise Money Fund
<PAGE>
[ICON] This fund, a broadly diversified money fund with an equal
emphasis on credit quality, yield, and stability, could serve
investors who want a versatile money fund with potentially higher
yield.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yields tend to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
Zurich YieldWise Money Fund 3
<PAGE>
The Fund's Track Record
The bar chart shows how the total returns for the fund's shares have varied from
year to year, which may give some idea of risk. The table shows how the fund's
returns over different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich YieldWise Money Fund
Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31 each year
0.00
----
`98
Best quarter: 0.00%, Q0 1990
Worst quarter: 0.00%, Q0 1990
YTD total return: 0.00%, as of 9/30/1999
Average Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31/1998
Since
1 Year inception
- --------------------------------------------------------------------------------
0.00 0.00*
* Inception: 4/17/1997
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
4 Zurich YieldWise Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly. Keep in
mind that the fund also charges transaction fees, which are discusssed in more
detail in "Policies You Should Know About."
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Although the example is based on a $10,000 investment (as required by SEC
rules), be aware that the minimum investment for this particular fund is
$25,000.
Zurich YieldWise Money Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich YieldWise Money Fund 5
<PAGE>
ticker symbol o OOOOO
Zurich YieldWise
Government Money Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing primarily in:
o short-term securities that are issued or guaranteed by the U.S. government
or its agencies or instrumentalities
o repurchase agreements backed by these securities
The securities the fund may buy range from U.S. Treasury obligations, which are
backed by the full faith and credit of the U.S. government, to securities of
issuers such as the Federal Home Loan Bank that carry no formal government
guarantees. Everything the fund buys must meet the rules for money market fund
investments (see sidebar). In addition, the fund is stricter than the rules in
that it only buys securities that are in the top credit grade for short-term
securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlook and
possible interest rate movements. The managers may adjust the fund's exposure to
interest rate risk, typically seeking to take advantage of possible rises in
interest rates and to preserve yield when interest rates appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must
operate within strict federal rules. Designed to help maintain a stable share
price, these rules limit money funds to particular types of securities. Some of
the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
6 Zurich YieldWise Government Money Fund
<PAGE>
[ICON] Investors whose primary concerns are credit quality, stability,
and potentially higher yield may want to consider this fund.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yields tend to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. While the
risk of default is generally considered remote for any securities guaranteed by
the U.S. government, not all of the fund's securities carry this guarantee; some
are guaranteed only by the agency or instrumentality that issues them. Also,
bear in mind that any guarantees on securities the fund owns do not extend to
shares of the fund itself.
Because of the fund's high credit standards, its yield may be lower than the
yields of money funds that don't limit their investments to U.S. government and
agency securities.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
Zurich YieldWise Government Money Fund 7
<PAGE>
The Fund's Track Record
Because this is a new fund, it did not have a full calendar year of performance
to report as of the date of this prospectus.
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
8 Zurich YieldWise Government Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly. Keep in
mind that the fund also charges transaction fees, which are discusssed in more
detail in "Policies You Should Know About."
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Although the example is based on a $10,000 investment (as required by SEC
rules), be aware that the minimum investment for this particular fund is
$25,000.
Zurich YieldWise
Government Money Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich YieldWise Government Money Fund 9
<PAGE>
ticker symbol o OOOOO
Zurich YieldWise
Municipal Money Fund
The fund seeks maximum current income that is exempt from regular federal income
taxes to the extent consistent with stability of principal.
Investment Approach
The fund pursues its goal by investing at least 80% of total assets in high
quality short-term municipal securities. The income from these securities is
free from regular federal income tax and from alternative minimum tax (AMT). The
fund may buy many types of municipal securities. However, everything the fund
buys must meet the rules for money market fund investments (see sidebar). In
addition, the fund is stricter than the rules in that it only buys securities in
the top credit grade for short-term securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must
operate within strict federal rules. Designed to help maintain a stable share
price, these rules limit money funds to particular types of securities. Some of
the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
10 Zurich YieldWise Municipal Money Fund
<PAGE>
[ICON] This fund could make sense for investors looking for federally
tax-free income along with the liquidity and stability a money
fund is designed to offer -- plus potentially higher yield.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor is market interest
rates. The fund's yield tends to reflect current interest rates, which means
that when these rates fall, the fund's yield generally falls as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain geographic regions or sectors of the
short-term securities market, the fund increases its exposure to factors
affecting these regions or sectors.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
Zurich YieldWise Municipal Money Fund 11
<PAGE>
The Fund's Track Record
Because this is a new fund, it did not have a full calendar year of performance
to report as of the date of this prospectus.
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
12 Zurich YieldWise Municipal Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly. Keep in
mind that the fund also charges transaction fees, which are discusssed in more
detail in "Policies You Should Know About."
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Although the example is based on a $10,000 investment (as required by SEC
rules), be aware that the minimum investment for this particular fund is
$25,000.
Zurich YieldWise
Municipal Money Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich YieldWise Municipal Money Fund 13
<PAGE>
other policies
While the fund-by-fund sections on the previous pages describe the main points
of each fund's strategy and risks, there are a few other issues to know about:
o As a temporary defensive measure, Zurich YieldWise Municipal Money Fund could
shift up to 100% of assets into cash or into investments such as taxable
money market securities. This would mean that the fund was not pursuing its
goal.
o The funds' investment advisor establishes a security's credit grade at the
time it buys securities, using independent ratings or, for unrated
securities, its own credit ratings. If a security's credit quality falls, the
security will be sold unless the advisor or the Board believes this would not
be in the shareholders' best interests.
Year 2000 Readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. The investment advisor has a year
2000 readiness program designed to address this problem, and is also researching
the readiness of suppliers and business partners as well as issuers of
securities the funds own. Still, there's some risk that the year 2000 problem
could materially affect a fund's operations (such as its ability to calculate
net asset value and process purchases and redemptions), its investments, or
securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING TWO PARAGRAPHS.
- --------------------------------------------------------------------------------
For More Information
This prospectus doesn't tell you about every policy or risk of investing in the
funds.
If you want more information on a fund's allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the Statement of Additional Information (the back cover has
information on how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
- --------------------------------------------------------------------------------
14 Other Policies
<PAGE>
who manages the funds
The Investment Advisor
The investment advisor for these funds is Scudder Kemper Investments, Inc.,
located at 345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more
than 70 years of experience managing mutual funds, and currently has more than
$xxx billion in assets under management.
Each fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders, and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment advisor, Scudder Kemper receives a
management fee from each fund. Below are the actual rates paid by each fund for
the 12 months through the most recent fiscal year end, as a percentage of its
average daily net assets:
Fund Name Fee Paid
- --------------------------------------------------------------------------------
Zurich YieldWise Money Fund 0.00%
- --------------------------------------------------------------------------------
Zurich YieldWise Government Money Fund 0.00%
- --------------------------------------------------------------------------------
Zurich YieldWise Municipal Money Fund 0.00%
The Portfolio Manager
The portfolio managers handle the day-to-day management of the funds. The lead
manager for each of these funds is Frank Rachwalski. Mr. Rachwalski, who began
his investment career when he joined the advisor in 1973, has managed each of
the funds since its inception.
[ICON] Scudder Kemper, the company with overall responsibility for
managing the funds, takes a team approach to asset management.
Who Manages the Funds 15
<PAGE>
financial highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with each fund's financial statements, is
included in that fund's annual report (see "Shareholder reports" on the back
cover).
Zurich YieldWise Money Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
16 Financial Highlights
<PAGE>
Zurich YieldWise Government Money Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- -----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
Financial Highlights 17
<PAGE>
Zurich YieldWise Municipal Money Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- ---------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
18 Financial Highlights
<PAGE>
how to invest in the funds
The following pages tell you how to invest in these funds and what to expect as
a shareholder. If you're investing directly with Zurich, all of this information
applies to you.
If you're investing through a "third party provider" -- for example, a financial
adviser or workplace retirement plan -- your provider may have its own policies
or instructions, and you should follow those.
<PAGE>
how to buy shares
INITIAL INVESTMENT
- --------------------------------------------------------------------------------
$25,000 or more for regular accounts
$10,000 or more for IRAs
$500 or more with an Automatic Purchase Plan
Make out your check to "Zurich YieldWise Funds"
- --------------------------------------------------------------------------------
By mail o Fill out and sign an application
o Send the application and an investment check to:
Kemper Service Company, P.O. Box 219356,
Kansas City, MO 64121-9356
- --------------------------------------------------------------------------------
By wire o Call 1-800-537-6001
o Give your account registration instructions to the
representative, who will give you a new account number
o Wire your investment using the wire instructions for
additional investments on the following page
- --------------------------------------------------------------------------------
With an o For investing directly from your bank account, paycheck or
automatic government check
purchase plan
o Call 1-800-537-6001 to set up a plan
- --------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a Kemper
fund or another Zurich fund, call 1-888-ZURICH-1
- --------------------------------------------------------------------------------
On the o See the instructions at www.zurichfunds.com
internet
o Click on "New Account Kit"
- --------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most
financial convenient for you
planner
[ICON] Zurich telephone representatives are available on business
days from 7 a.m. to 6 p.m. Central time and on Saturdays from
8 a.m. to 3 p.m. Call toll-free 1-888-ZURICH-1 (that's
1-888-987-4241).
20 How to Buy Shares
<PAGE>
Additional investments
- --------------------------------------------------------------------------------
$1,000 or more for regular accounts
$1,000 or more for IRAs
$500 or more a month with an Automatic Purchase Plan
Make out your check to "Zurich YieldWise Funds"
- --------------------------------------------------------------------------------
By mail o Send a check and a Zurich investment slip to:
Kemper Service Company, P.O. Box 219154,
Kansas City, MO 64121-7197
o No investment slip? Enclose a letter with your name, account
number, full fund name, and your investment instructions
- --------------------------------------------------------------------------------
By wire o Have your bank wire your investment to: Zurich YieldWise
Funds, United Missouri Bank of Kansas City, N.A.
ABA# 1010-0069-5
o You will also need to provide your name, account number, and
the name and routing number for the fund of your choice:
o Zurich YieldWise Money Fund: 98-7083-881-8
o Zurich YieldWise Government Money Fund: 98-7096-453-8
o Zurich YieldWise Municipal Money Fund: 98-7096-455-4
- --------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-ZURICH-1 to make sure EZ-Transfer is set up on
your account; once it is, you can use it to make regular
investments or other transfers from your bank account by
calling 1-888-ZURICH-1
- --------------------------------------------------------------------------------
With an o For investing directly from your bank account, pay check or
automatic government check
purchase plan
o Call 1-888-ZURICH-1 to set up a plan
- --------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a Kemper
fund or another Zurich fund, call 1-888-ZURICH-1
- --------------------------------------------------------------------------------
On the o See the instructions at www.zurichfunds.com
internet
o Click on "Account Access"
- --------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most
financial convenient for you
planner
[ICON] Sending an investment by express, registered, or certified mail?
Use this address: Kemper Service Company, 811 Main Street, Kansas
City, MO 64105-2005
How to Buy Shares 21
<PAGE>
how to sell shares
<TABLE>
<CAPTION>
Selling Shares
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Some transactions, including most for over Fee per
$50,000, can only be ordered in writing;for more information, Transaction
see page 26
- --------------------------------------------------------------------------------------------------
By check o Write a check on your account for at least $1,000 $2*
- --------------------------------------------------------------------------------------------------
By phone o Call 1-888-ZURICH-1 for instructions; a check will be mailed $5
to the address of record
- --------------------------------------------------------------------------------------------------
By wire o Call 1-888-ZURICH-1 to make sure that wire transfer is set up` $10
on your account; if it is, you can request a wire to your
bank account
- --------------------------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-ZURICH-1 to make sure that EZ-Transfer is set up $2
on your account; if it is, you can request a transfer to your
bank account of any amount between $100 and $50,000
- --------------------------------------------------------------------------------------------------
By exchange o To sell shares in a Kemper fund or another Zurich fund and $5
invest in one of these funds, call 1-888-ZURICH-1
- --------------------------------------------------------------------------------------------------
By mail o Write a letter that includes: $5
o the fund and account number from which you want
to sell shares
o the dollar amount you want to sell
o your name(s), signature(s), and address, exactly as
on your account
o Send the letter to: Kemper Service Company,
P.O. Box 219557, Kansas City, MO 64121-9557
- --------------------------------------------------------------------------------------------------
With an o To set up regular exchanges or withdrawals among Kemper or $5
automatic Zurich funds, call 1-888-ZURICH-1
exchange or
withdrawal
plan
- --------------------------------------------------------------------------------------------------
On the o Follow the instructions at www.zurichfunds.com Varies
internet
o Click on "Account Access"
- --------------------------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most Varies
financial convenient for you
planner
</TABLE>
* $12 for each check under $1,000
22 How to Sell Shares
<PAGE>
policies you should know about
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The funds charge transaction fees as noted on the previous page. This fee
structure is intended to help the fund lower its annual expenses and, in doing
so, to pursue higher returns. If you have an account balance of $100,000 or
more, you won't be charged these fees.
Please note that there is also a $5 fee for closing a non-IRA account ($10 if
you close the account within one year of opening it). There are also fees for
low balances, which are described under "Other Rights We Reserve."
The funds are open for business whenever the New York Stock Exchange is open.
The Money and Government Fund calculate their share price three times every
business day, first at 11 a.m. Central time then at 1 p.m. Central time and
again as of the close of regular trading on the Exchange (typically 3 p.m.
Central time, but sometimes earlier, as in the case of scheduled half-day
trading or unscheduled suspensions of trading). The Municipal Money Fund
calculates its share price at 11 a.m. and again as of the close of regular
trading on the Exchange.
[ICON] Zurich telephone representatives are available on business days
from 7 a.m. to 6 p.m. Central time and on Saturdays from 8 a.m.
to 3 p.m. Call toll-free 1-888-ZURICH-1 (that's 1-888-987-4241).
Policies You Should Know About 23
<PAGE>
Although shares trade during business hours, you can place orders anytime. Once
an order is received by Kemper Service Company, and they have determined that it
is a "good order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
Ordinarily, your investment will start to accrue dividends the next business day
after your purchase is processed. However, wire transactions that arrive by 1
p.m. Central time (11 a.m. for the Municipal Money Fund) will receive that day's
dividend.
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11 a.m. Central time
and the request calls for proceeds to be sent out by wire, we will wire you the
proceeds on the same day. However, you won't receive that day's dividend.
EZ-Transfer lets you set up a link between a Zurich account and a bank account.
Once this link is in place, you can move money between the two with a phone
call. You'll need to make sure your bank has Automated Clearing House (ACH)
services. Transactions take two to three days to be completed, and there is a
$100 minimum. To set up EZ-Transfer on a new account, see the account
application; to add it to an existing account, call 1-888-ZURICH-1
(1-888-987-4241).
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
24 Policies You Should Know About
<PAGE>
[ICON] If you ever have difficulty placing an order by phone, you can
always send us your order in writing.
Checkwriting lets you sell fund shares by writing a check. Your investment keeps
earning dividends until your check clears. Please note that you'll be charged a
$10 service fee when you write a check that's larger than your balance at the
time the check is presented to us, and we will not be able to honor the check.
We also cannot honor any check for more than $5,000,000, or any check written on
an account on which there is a Power of Attorney. It's not a good idea to close
out an account using a check because the account balance could change between
the time you write the check and the time it is processed.
When you call us to sell shares, we may record the call, ask you for certain
information, or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that your bank may charge
fees in addition to those charged by the fund. Wire transactions are completed
within 24 hours. The funds can only accept wires of $1,000 or more.
Exchanges between these funds and other Zurich funds, as well as most Kemper
funds, are an option for most shareholders. Exchanges are a shareholder
privilege, not a right: we may reject any exchange order, particularly when
there appears to be a pattern of "market timing" or other frequent purchases and
sales. We may also reject purchase orders, for these or other reasons.
Policies You Should Know About 25
<PAGE>
When you want to sell more than $50,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages
and most banks, savings institutions, and credit unions. Note that you can't get
a signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
How the funds calculate share price
For each fund in this prospectus, the share price is the net asset value per
share, or NAV. To calculate NAV, the funds use the following equation:
Total assets - total liabilities
---------------------------------- = NAV
Total Number of shares outstanding
As noted earlier, each fund seeks to maintain a stable $1.00 share price.
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
26 Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if you have been
notified by the IRS that you are subject to backup withholding, or if you
fail to provide us with a correct taxpayer ID number or certification that
you are exempt from backup withholding
o charge you $1 a month if your account balance is below $10,000 for the last
30 days; this policy doesn't apply to retirement accounts, or to funds with
an automatic investment plan
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been opened, we
may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving you
marketable securities (which typically will involve brokerage costs for you
to liquidate) rather than cash; in most cases, a fund won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the fund's assets, whichever is less
o change, add, or withdraw various services, fees, and account policies (for
example, we may change or terminate the exchange privilege at any time)
o reject or limit purchases of shares for any reason
Policies You Should Know About 27
<PAGE>
understanding distributions
and taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The funds intend to declare income dividends daily, and pay them monthly. Zurich
YieldWise Municipal Money Fund may make short- or long-term capital gains
distributions in November or December. The taxable money funds may take into
account capital gains and losses (other than net long-term capital gains) in
their daily dividend declarations. The funds may make additional distributions
for tax purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all sent to you by check.
Tell us your preference on your application. If you don't indicate a preference,
your dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Dividends from Zurich YieldWise Money Fund and Zurich YieldWise Government Money
Fund are generally taxed at ordinary income rates. Any long-term capital gains
distributions are generally taxed at capital gains rates, although the funds
typically don't expect to make long-term capital gains distributions. Also,
because each fund seeks to maintain a stable share price, you are unlikely to
have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
28 Understanding Distributions and Taxes
<PAGE>
Dividends from Zurich YieldWise Municipal Money Fund are generally free from
federal income tax for most shareholders, and a portion of dividends from Zurich
Government Money Fund are generally free from state and local income tax.
However, there are a few exceptions:
o a portion of a fund's dividends may be taxable as ordinary income if it
came from investments in taxable securities, tax-exempt market discount
bonds, or as the result of short-term capital gains
o with Zurich YieldWise Municipal Money Fund, because the fund can invest up
to 20% of assets in securities whose income is subject to the federal
alternative minimum tax (AMT), you may owe taxes on a portion of your
dividends if you are among those investors who must pay AMT
o with Zurich Government Money Fund, shareholders who live in certain states
and localities may not be eligible for the tax exemptions that shareholders
in most locations are
Each fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions and Taxes 29
<PAGE>
to get more information
For each fund, they also have detailed performance figures, a list of everything
the fund owns, and the fund's financial statements. Shareholders get these
reports automatically. To reduce costs, we mail one copy per household. For more
copies, call 1-800-537-6001.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Zurich or the SEC (see below). Materials you
get from Zurich are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC 450 Fifth Street, N.W., Washington, DC 20549-6009, www.sec.gov,
1-800-SEC-0330.
Fund Name SEC File #
- --------------------------------------------------------------------------------
Zurich YieldWise Money Fund 000-0000
- --------------------------------------------------------------------------------
Zurich YieldWise Government Money Fund 000-0000
- --------------------------------------------------------------------------------
Zurich YieldWise Municipal Money Fund 000-0000
[LOGO]
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.zurichfunds.com
1-800-537-6001
<PAGE>
ZURICH YIELDWISE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
Zurich Yieldwise Money Fund
Zurich Yieldwise Government Fund
Zurich Yieldwise Municipal Money Fund
222 South Riverside Plaza, Chicago, Illinois 60606-5808
(888) ZURICH-1 (987-4241)
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Zurich YieldWise Funds (the "Trust") dated
December 1, 1999. The prospectus may be obtained without charge by calling or
writing the Zurich YieldWise Funds, and is also available along with other
related materials on the SEC's internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS....................................2
OTHER INVESTMENT STRATEGIES AND RISKS.....................3
Government Money Fund......................................5
Muni Money Fund............................................5
Additional Investment Information About the Funds..........8
INVESTMENT MANAGER........................................10
PORTFOLIO TRANSACTIONS....................................12
PURCHASE AND REDEMPTION OF SHARES.........................13
DIVIDENDS AND NET ASSET VALUE.............................13
PERFORMANCE...............................................14
OFFICERS AND TRUSTEES.....................................17
SPECIAL FEATURES..........................................19
SHAREHOLDER RIGHTS........................................20
MASTER/FEEDER STRUCTURE...................................21
APPENDIX -- RATINGS OF INVESTMENTS........................22
The financial statements appearing in the Trust's Annual Report to Shareholders
are incorporated herein by reference. The Trust's Annual Report accompanies this
Statement of Additional Information, and may be obtained without charge by
calling [1-888- ]
<PAGE>
INVESTMENT RESTRICTIONS
The Zurich YieldWise Money Fund (the "Money Fund"), Zurich YieldWise Government
Money Fund (the "Government Money Fund") and Zurich YieldWise Municipal Money
Fund (the "Muni Money Fund") have adopted certain investment restrictions which
cannot be changed without approval by holders of a majority of such Fund's
outstanding voting shares. As defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), this means the lesser of the vote of (a) 67% of the
shares of the Fund present at a meeting where more than 50% of the outstanding
shares of the Fund are present in person or by proxy; or (b) more than 50% of
the outstanding shares of the Fund.
As a matter of fundamental policy, each Fund may not:
(1) Borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(2) Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(3) Concentrate its investments in a particular industry, as the term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
(4) Engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities;
(5) Purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interests therein, except that the Fund reserves
freedom of action to hold and to sell real estate acquired as a result
of the Fund's ownership of securities;
(6) Purchase physical commodities or contracts relating to physical
commodities;
(7) Make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
With regard to restriction #3 of each for the Money Fund, for purposes of
determining the percentage of a the Money Fund's total assets invested in
securities of issuers having their principal business activities in a particular
industry, asset backed securities will be classified separately, based on the
nature of the underlying assets. Currently, the following categories are used:
captive auto, diversified, retail and consumer loans, captive equipment and
business, business trade receivables, nuclear fuel and capital and mortgage
lending.
The Government Money Fund and the Muni Money Fund have no current intention of
making loans as permitted in investment restriction (7) noted above.
If a Fund adheres to a percentage restriction at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
The Funds have adopted the following non-fundamental restrictions, which may be
changed by the Board of Trustees without shareholder approval. Each Fund may
not:
2
<PAGE>
(1) Invest more than 10% of its net assets in illiquid securities;
(2) Write, purchase or sell puts, calls or combinations thereof;
(3) Invest for the purpose of exercising control or management of another
issuer;
In addition, the Zurich YieldWise Money Fund may not:
(1) Purchase more than 10% of any class of voting securities of any issuer;
(2) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the
clearance of transactions;
(3) Invest in real estate limited partnerships.
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Fund may engage or a financial
instrument which a Fund may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Adviser"), in its
discretion, might, but is not required to, use in managing a Fund's assets. The
Adviser may, in its discretion, at any time, employ such practice, technique or
instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Fund, but, to the extent employed, could, from time to time, have a material
impact on the Fund's performance.
The Funds described in this Statement of Additional Information seek to maintain
a net asset value of $1.00 per share.
Other Investment Strategies and Risks
Zurich YieldWise Money Fund ("Money Fund")
The Money Fund seeks maximum current income to the extent consistent with
stability of principal. The Fund pursues its objective by investing exclusively
in the following types of U.S. Dollar denominated money market instruments that
mature in 397 days or less:
o Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.
o Bank certificates of deposit, time deposits or bankers' acceptances of U.S.
banks (including their foreign branches) and Canadian chartered banks
having total assets in excess of $1 billion.
o Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
o Commercial paper, notes, bonds, debentures, participation certificates or
other debt obligations that (i) have received a high-quality short-term
rating by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch Investors
Services, Inc. ("Fitch"), or any other nationally recognized statistical
rating organization as determined by the Securities and Exchange
Commission; or (ii) if unrated, are determined to be at least equal in
quality to one or more of the above ratings in the discretion of the Fund's
investment adviser. Currently, only obligations in the top two short-term
rating categories are considered to be rated high quality. The two highest
short-term rating categories of Moody's, S&P, Duff and Fitch for commercial
paper are Prime-1 and Prime-2; A-1 and A-2; Duff-1 and Duff-2; and F-1 and
F-2, respectively. For a description of these ratings, see
"Appendix--Ratings of Investments" in the Statement of Additional
Information herein.
3
<PAGE>
o Repurchase agreements of obligations that are suitable for investment under
the categories set forth above. Repurchase agreements are discussed below.
Investments by the Money Fund in Eurodollar certificates of deposit issued by
London branches of U.S. banks, or obligations issued by foreign entities,
including foreign banks, involve risks that are different from investments in
securities of domestic branches of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes on
interest payments, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions that might affect payment of
principal or interest. The market for such obligations may be less liquid and,
at times, more volatile than for securities of domestic branches of U.S. banks.
Additionally, there may be less public information available about foreign banks
and their branches. The profitability of the banking industry is dependent
largely upon the availability and cost of funds for the purpose of financing
lending operations under prevailing money market conditions. General economic
conditions as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in banking operations. As a
result of federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amounts they can loan to a single borrower and subject to other regulations
designed to promote financial soundness. However, not all such laws and
regulations apply to the foreign branches of domestic banks. Foreign branches of
foreign banks are not regulated by U.S. banking authorities, and generally are
not bound by accounting, auditing and financial reporting standards comparable
to U.S. banks. Bank obligations held by the Fund do not benefit materially from
insurance from the Federal Deposit Insurance Corporation.
The Money Fund may invest in commercial paper which is issued by major
corporations without registration under the Securities Act of 1933 in reliance
upon the exemption from registration afforded by Section 3(a)(3) thereof. Such
commercial paper may be issued only to finance current transactions and must
mature in nine months or less. Trading of such commercial paper is conducted
primarily by institutional investors through investment dealers, and individual
investor participation in the commercial paper market is very limited.
The Money Fund may also invest in commercial paper issued in reliance upon the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally is
sold to institutional investors such as the Fund who agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors like the Fund through or
with the assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. The Adviser considers the legally
restricted but readily saleable Section 4(2) paper to be liquid; however,
pursuant to procedures approved by the Board of Trustees of the Trust, if a
particular investment in Section 4(2) paper is not determined to be liquid, that
investment will be included within the 10% limitation on illiquid securities
discussed under "Additional Investment Information About the Funds" below. The
Adviser monitors the liquidity of the Fund's investments in Section 4(2) paper
on a continuous basis.
The Fund may invest in high quality participation certificates ("certificates")
representing undivided interests in trusts that hold a portfolio of receivables
from consumer and commercial credit transactions, such as transactions involving
consumer revolving credit card accounts or commercial revolving credit loan
facilities. The receivables would include amounts charged for goods and
services, finance charges, late charges and other related fees and charges.
Interest payable on the certificates may be fixed or may be adjusted
periodically or "float" continuously according to a formula based upon an
objective standard such as the 30-day commercial paper rate. See "Additional
Investment Information About the Funds" below for a discussion of "Variable Rate
Securities." A trust may have the benefit of a letter of credit from a bank at a
level established to satisfy rating agencies as to the credit quality of the
assets supporting the payment of principal and interest on the certificates.
Payments of principal and interest on the certificates would be dependent upon
the underlying receivables in the trust and may be guaranteed under a letter of
credit to the extent of such credit. The quality rating by a rating service of
an issue of certificates is based primarily upon the value of the receivables
held by the trust and the credit rating of the issuer of any letter of credit
4
<PAGE>
and of any other guarantor providing credit support to the trust. The Fund's
investment adviser considers these factors as well as others, such as any
quality ratings issued by the rating services identified above, in reviewing the
credit risk presented by a certificate and in determining whether the
certificate is appropriate for investment by the Fund. Collection of receivables
in the trust may be affected by various social, legal and economic factors
affecting the use of credit and repayment patterns, such as changes in consumer
protection laws, the rate of inflation, unemployment levels and relative
interest rates. It is anticipated that for most publicly offered certificates
there will be a liquid secondary market or there may be demand features enabling
the Fund to readily sell its certificates prior to maturity to the issuer or a
third party. While the Fund may invest without limit in certificates, it is
currently anticipated that such investments will not exceed 25% of the Fund's
assets.
The Money Fund may concentrate 25% or more of its assets in bank certificates of
deposit, time deposits or banker's acceptances of U.S. banks and their domestic
branches in accordance with its investment objective and policies. Accordingly,
the Fund may be more adversely affected by changes in market or economic
conditions and other circumstances affecting the banking industry than it would
be if the Fund's assets were not so concentrated.
Zurich YieldWise Government Money Fund ("Government Money Fund")
The Government Money Fund seeks maximum current income to the extent consistent
with stability of principal. The Fund pursues its objective by investing
primarily in the following securities that mature within 397 days or less:
o U.S. Treasury bills, notes, bonds and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
o Repurchase agreements of the obligations described above.
Some securities issued by U.S. Government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Bank, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Federal National
Mortgage Association, Fannie Mae, Farm Credit System and Student Loan Marketing
Association. Short-term U.S. Government obligations generally are considered to
be the safest short-term investment. The U.S. Government guarantee of the
securities owned by the Fund, however, does not guarantee the net asset value of
its shares, which the Fund seeks to maintain at $1.00 per share. Also, with
respect to securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. Government will provide support to such agencies
or instrumentalities and such securities may involve risk of loss of principal
and interest.
Zurich YieldWise Municipal Money Fund ("Muni Money Fund")
The Muni Money Fund seeks maximum current income that is exempt from regular
federal income taxes to the extent consistent with stability of principal. The
Fund pursues its objective primarily through a professionally managed,
diversified portfolio of short-term high quality tax-exempt municipal
obligations.
Under normal market conditions, at least 80% of the Fund's total assets will be
invested in obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the income from which is
exempt from federal income tax ("Municipal Securities").
Dividends representing net interest income received by the Muni Money Fund on
Municipal Securities will be exempt from regular federal income tax when
distributed to the Fund's shareholders. Such dividend income may be subject to
state and local taxes and the alternative minimum tax. See "Dividends and
Taxes--Muni Money Fund." The Fund's assets will consist of Municipal Securities,
temporary investments
5
<PAGE>
as described below and cash. The Fund considers short-term Municipal Securities
to be those that mature or have remaining maturities of 397 days or less.
The Muni Money Fund will invest in Municipal Securities which at the time of
purchase:
o are rated within the two highest ratings for Municipal Securities (Aaa or
Aa) assigned by Moody's, (AAA or AA) assigned by S&P, (AAA or AA) assigned
by Fitch, or (AAA or AA) assigned by Duff, or any other nationally
recognized statistical rating organization ("NRSRO") as determined by the
Securities and Exchange Commission;
o are guaranteed or insured by the U.S. Government as to the payment of
principal and interest;
o are fully collateralized by an escrow of U.S. Government securities
acceptable to the Adviser;
o have at the time of purchase a Moody's short-term municipal securities
rating of MIG-2 or higher or a municipal commercial paper rating of P-2 or
higher, or S&P's municipal commercial paper rating of A-2 or higher, or
Fitch's municipal commercial paper rating of F-2 or higher, or Duff's
municipal commercial paper rating of Duff-2 or higher, or a rating within
the two highest categories of any other NRSRO as determined by the
Securities and Exchange Commission;
o are unrated, if longer term Municipal Securities of that issuer are rated
within the two highest rating categories by Moody's, S&P, Fitch, Duff or
any other NRSRO as determined by the Securities and Exchange Commission; or
o are determined to be at least equal in quality to one or more of the above
ratings in the discretion of the Adviser.
Municipal Securities generally are classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Fund may purchase tax-exempt
commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's, S&P, Fitch and Duff ratings
outlined above is contained in the Statement of Additional Information. As
indicated under "Dividends and Taxes--Muni Money Fund," the Fund may invest in
"private activity" bonds.
The Muni Money Fund may purchase securities which provide for the right to
resell them to an issuer, bank or dealer at an agreed upon price or yield within
a specified period prior to the maturity date of such securities. Such a right
to resell is referred to as a "Standby Commitment." Securities may cost more
with Standby Commitments than without them. Standby Commitments will be entered
into solely to facilitate portfolio liquidity. A Standby Commitment may be
exercised before the maturity date of the related Municipal Security if the
Fund's investment manager adviser revises its evaluation of the creditworthiness
of the underlying security or of the entity issuing the Standby Commitment. The
Fund's policy is to enter into Standby Commitments only with issuers, banks or
dealers that are determined by the Fund's investment manager adviser to present
minimal credit risks. If an issuer, bank or dealer should default on its
obligation to repurchase an underlying security, the Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. For purposes of valuing the Fund's securities at amortized cost, the
stated maturity of Municipal Securities subject to Standby Commitments is not
changed.
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The Muni Money Fund may purchase high quality Certificates of Participation in
trusts that hold Municipal Securities. A Certificate of Participation gives the
Fund an undivided interest in the Municipal Security in the proportion that the
Fund's interest bears to the total principal amount of the Municipal Security.
These Certificates of Participation may be variable rate or fixed rate with
remaining maturities of one year or less. A Certificate of Participation may be
backed by an irrevocable letter of credit or guarantee of a financial
institution that satisfies rating agencies as to the credit quality of the
Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Fund's Adviser considers these factors as well as
others, such as any quality ratings issued by the rating services identified
above, in reviewing the credit risk presented by a Certificate of Participation
and in determining whether the Certificate of Participation is appropriate for
investment by the Fund. It is anticipated by the Fund's investment manager
adviser that, for most publicly offered Certificates of Participation, there
will be a liquid secondary market or there may be demand features enabling the
Fund to readily sell its Certificates of Participation prior to maturity to the
issuer or a third party. As to those instruments with demand features, the Fund
intends to exercise its right to demand payment from the issuer of the demand
feature only upon a default under the terms of the Municipal Security, as needed
to provide liquidity to meet redemptions, or to maintain a high quality
investment portfolio.
In seeking to achieve its investment objective, the Muni Money Fund may invest
all or any part of its assets in Municipal Securities that are industrial
development bonds. Moreover, although the Fund does not currently intend to do
so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Fund's investment adviser. To the extent that the Fund's
assets are concentrated in Municipal Securities payable from revenues on
economically related projects and facilities, the Fund will be subject to the
risks presented by such projects to a greater extent than it would be if the
Fund's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Muni Money Fund may invest in
taxable "temporary investments" which include:
o obligations of the U.S. Government, its agencies or instrumentalities;
o debt securities rated within the two highest grades by Moody's, S&P, Fitch,
Duff or any other NRSRO as determined by the Securities and Exchange
Commission;
o commercial paper rated in the two highest grades by any of these rating
services;
o certificates of deposit of domestic banks with assets of $1 billion or
more; and
o repurchase agreements of the obligations described above (Repurchase
agreements are discussed below).
Interest income from temporary investments is taxable to shareholders as
ordinary income. Although the Fund is permitted to invest in taxable securities,
it is the Fund's primary intention to generate income dividends that are not
subject to federal income taxes. See "Dividends and Taxes." For a description of
the ratings, see "Appendix--Ratings of Investments."
Municipal Securities that the Muni Money Fund may purchase include, without
limitation, debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be
7
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issued include refunding outstanding obligations, obtaining funds for general
operating expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
federal tax laws place substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds which are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities that mature in or have remaining maturities of
397 days or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds which are
not yet refundable, but for which securities have been placed in escrow to
refund an original municipal bond issue when it becomes refundable. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by a
municipal issuer. The Muni Money Fund may purchase other Municipal Securities
similar to the foregoing, which are or may become available, including
securities issued to pre-refund other outstanding obligations of municipal
issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law which ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
Additional Investment Information About the Funds
In addition to the specific investment objective and policies listed above, each
Fund limits its investments to securities that meet the requirements of Rule
2a-7 under the Investment Company Act of 1940 (the "1940 Act"). See "Determining
Share Price."
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Each Fund may purchase and sell securities on a when-issued or delayed delivery
basis. A when-issued or delayed delivery transaction arises when securities are
bought or sold for future payment and delivery to secure what is considered to
be an advantageous price and yield to the Fund at the time it enters into the
transaction. In determining the maturity of portfolio securities purchased on a
when-issued or delayed delivery basis, the Funds will consider them to have been
purchased on the date when it committed itself to the purchase.
A security purchased on a when-issued basis, like all securities held by the
Funds, is subject to changes in market value based upon changes in the level of
interest rates and investors' perceptions of the creditworthiness of the issuer.
Generally such securities will appreciate in value when interest rates decline
and decrease in value when interest rates rise. Therefore if, in order to
achieve higher interest income, a Fund remains substantially fully invested at
the same time that it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the Fund's assets will
vary from $1.00 per share, since the value of a when-issued security is subject
to market fluctuation and no interest accrues to the purchaser prior to
settlement of the transaction. See "Determining Share Price."
The Funds will only make commitments to purchase securities on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
but the Funds reserve the right to sell these securities before the settlement
date if deemed advisable. The sale of these securities may result in the
realization of gains that are not exempt from federal income tax.
Each Fund may invest in instruments that have interest rates that adjust
periodically or that "float" continuously according to formulae intended to
minimize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate on a Variable Rate Security is ordinarily determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission rules which allow the Fund to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
Each Fund may invest in repurchase agreements, which are instruments under which
a Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which price
is higher than the purchase price), thereby determining the yield during the
Fund's holding period. Maturity of the securities subject to repurchase may
exceed 397 days. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund might incur expenses in enforcing its rights, and
could experience losses, including a decline in the value of the underlying
securities and loss of income.
A Fund will not purchase illiquid securities if, as a result thereof, more than
10% of such Fund's net assets valued at the time of the transaction would be
invested in such securities. If a Fund holds a material percentage of its assets
in illiquid securities, there may be a question concerning the ability of such
Fund to make payment within seven days of the date its shares are tendered for
redemption. Securities and Exchange Commission guidelines provide that the usual
limit on aggregate holdings by a money market fund of illiquid assets is 10% of
its net assets. Each Fund's investment manager monitors holdings of illiquid
securities on an ongoing basis and will take such action as it deems appropriate
to help maintain adequate liquidity.
As a matter of fundamental policy, the Government Money Fund and the Muni Money
Fund may not
9
<PAGE>
borrow money, except as permitted under Federal law. The Money Fund, as a
fundamental policy, may not borrow money except as a temporary measure for
extraordinary or emergency purposes, and then only in an amount up to one-third
of the value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. Any such borrowings by the Money
Fund under this provision will not be collateralized. If for any reason the
current value of the Money Fund's total assets falls below an amount equal to
three times the amount of its indebtedness from money borrowed, the Fund will,
within three days (not including Sundays and holidays), reduce its indebtedness
to the extent necessary. The Money Fund will not borrow for leverage purposes.
INVESTMENT ADVISER
Investment Adviser. Scudder Kemper Investments, Inc. (the "Adviser") 345 Park
Avenue, New York, New York, is the Funds' investment adviser. The Adviser is
approximately 70% owned by Zurich Financial Services, Inc., a newly formed
global insurance and financial services company. The balance of the Adviser is
owned by the Adviser's officers and employees. Pursuant to an investment
management agreement for each Fund, the Adviser acts as each Fund's investment
adviser manages its investments, administers its business affairs, furnishes
office facilities and equipment, provides clerical and administrative services
and permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. The Trust pays
the expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value and maintaining all accounting records related thereto, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Fund and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. Trust expenses generally are allocated
among the Funds on the basis of relative net assets at the time of allocation,
except that expenses directly attributable to a particular Fund are charged to
that Fund.
Each investment management agreement provides that the Adviser shall not be
liable for any error of judgment or of law, or for any loss suffered by the
Funds in connection with the matters to which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.
Each investment management agreement continues in effect from year to year for
each Fund so long as its continuation is approved at least annually by (a) a
majority vote of the trustees who are not parties to such agreement or
interested persons of any such party except in their capacity as trustees of the
Trust, cast in person at a meeting called for such purpose, and (b) by the
shareholders of the Trust or the Board of Trustees. Each agreement may be
terminated at any time upon 60 days notice by either party, or by a majority
vote of the outstanding shares, and will terminate automatically upon
assignment. Additional Funds may be subject to a different agreement.
On September 7, 1998, Zurich Insurance Company ("Zurich") the majority owner of
the Adviser, entered into an agreement with B.A.T. Industries p.l.c. ("B.A.T."),
pursuant to which the financial services business of B.A.T. were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services.
Upon consummation of the transaction, each Fund's existing investment management
agreement with the Adviser was deemed to have been assigned and, therefore,
terminated. The Board of Trustees of each Fund the Trust and the shareholders of
each Fund have approved new investment management agreements with the Adviser,
which are substantially identical to the former investment management agreement,
except for the dates of execution and termination.
For the services and facilities furnished, each Fund pays a monthly investment
management fee on a graduated basis of 1/12 of the annual rate of 0.50% of the
first $215 million of average daily net assets of the Fund, 0.375% of the next
$335 million, 0.30% of the next $250 million and 0.25% of the average daily net
assets thereafter. As a result of the fee waivers and expense absorption than in
effect for fiscal year
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<PAGE>
1999, 1998 and for the period April 17, 1997 (commencement of operations) to
July 31, 1997, the Money Fund paid an investment management fees of $___________
$332,000 and $0, respectively. For the period November 30, 1998 (commencement of
operations) to July 31, 1999, the Government Money Fund paid investment
management fees of $_______. For the period November 30, 1998 (commencement of
operations) to July 31, 1999, the Muni Money Fund paid investment management
fees of $_______. If expense limits had not been in effect the Adviser would
have received investment management fees from the Money Fund of $___________,
$___________ and $__________, for the fiscal year ended July 31, 1999, 1998 and
1997, respectively. If the expense limits had not been in effect for the
Government Fund and Muni Money Fund the Adviser would have received investment
management fees in the amount of $______ and $______ for the fiscal year end
July 31, 1999. The Adviser absorbed operating expenses for the Money Fund,
$_________, $______ and _______ for the fiscal year ended July 31, 1999, 1998
and 1997, respectively. For the Government Fund and Muni Money Fund the Adviser
absorbed operating expenses of $_____ and $_____ respectively for the fiscal
year ended July 31, 1999.
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"), Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of the Funds
and maintaining all accounting records related thereto. Currently, SFAC receives
no fee for its services to the Money Fund; however, subject to Board approval,
at some time in the future, SFAC may seek payment for its services to the Money
Fund under this agreement. The Government Money Fund and the Muni Money Fund pay
SFAC an annual fee equal to 0.0200% of the first $150 million of average daily
net assets, 0.0060% of such assets in excess of $150 million and 0.0035% of such
assets in excess of $1 billion, plus holding and transaction charges for this
service. For the period November 30, 1998 to July 31, 1999, the Government Money
Fund and Muni Money Fund paid accounting fees of $_____ and $_____,
respectively.
Principal Underwriter. Kemper Distributors, Inc. ("KDI"), 222 South Riverside
Plaza, Chicago, Illinois 60606, an affiliate of the Adviser, is the principal
underwriter for shares of the Funds and acts as agent of the Funds in the sale
of their shares. The Funds pay the cost for the prospectus and shareholder
reports to be set in type and printed for existing shareholders, and KDI pays
for the printing and distribution of copies thereof used in connection with the
offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs. Terms of continuation, termination and
assignment under the underwriting agreement are identical to those described
above with regard to the investment management agreement, except that
termination other than upon assignment requires six months notice. KDI receives
no compensation from the Funds as principal underwriter for the Funds' shares
and pays all expenses of distribution of the Funds' shares.
Certain officers or trustees of the Trust are also directors or officers of the
Adviser and KDI as indicated under "Officers and Trustees."
Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, as custodian, has custody of all securities and cash of the Money Funds.
State Street, as custodian, has custody of all securities and cash of the
Government Money Fund and the Muni Money Fund. IFTC and State Street attends to
the collection of principal and income, and payment for and collection of
proceeds bought and sold by the Funds. Pursuant to a services agreement with
Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas
City, Missouri 64105, Kemper Service Company ("KSvC"), an affiliate of the
Adviser, serves as "Shareholder Service Agent." IFTC receives, as transfer
agent, and pays to KSvC annual account fees of a maximum of $8 per account plus
out-of-pocket expense reimbursement. Effective January 1, 1999, this schedule
will was be amended to include a $10 annual account fee, a $5 new account set up
fee, an annual asset based fee of 0.06% of average daily net assets and
out-of-pocket expense reimbursement During the fiscal year ended July 31, 1999,
IFTC remitted shareholder service fees for Money Fund in the amount of
$___________, for Government Money Fund of $___, and for Muni Money Fund of
$________ to KSvC as Shareholder Service Agent .
Independent Auditors and Reports To Shareholders. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial
11
<PAGE>
statements, review certain regulatory reports and the Funds' federal income tax
return, and perform other professional accounting, auditing, tax and advisory
services when engaged to do so by the Funds. Shareholders will receive annual
audited financial statements and semi-annual unaudited financial statements.
Legal Counsel. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Funds.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Adviser.
Portfolio transactions are undertaken principally to pursue the objective of
each Fund in relation to movements in the general level of interest rates, to
invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Fund depending upon the Adviser's ability to
correctly time and execute such transactions. Since a Fund's assets are invested
in securities with short maturities, its portfolio will turn over several times
a year. Securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, so each Fund's portfolio turnover
rate for reporting purposes should generally be zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through its familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities: the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of the receipt of research,
market or statistical information. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for portfolio transactions through Scudder Investor Services, Inc.
("SIS"), a corporation registered as a broker-dealer and a subsidiary of the
Adviser. SIS will place orders on behalf of a Fund with issuers, underwriters or
other brokers and dealers. SIS will not receive any commission, fee or other
remuneration from a Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research
12
<PAGE>
effort since the information must still be analyzed, weighed and reviewed by the
Adviser's staff. Such information may be useful to the Adviser in providing
services to clients other than the Fund and not all such information is used by
the Adviser in connection with the fund. Conversely, such information provided
to the Adviser by broker/dealers through whom other clients of the Adviser
effect securities transactions may be useful to the Adviser in providing
services to a Fund.
The trustees review from time to time whether the recapture for the benefit of a
Fund of some portion of the brokerage commissions or similar fees paid by a Fund
on portfolio transactions is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Funds for such purchases. Purchases
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers will
include the spread between the bid and asked prices.
There are normally no brokerage commissions paid by the Funds for such purchases
and none were paid by the Money Fund, Government Money Fund or Muni Money Fund
since they commenced operations .
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of each Fund are sold at their net asset value next determined after an
order and payment are received in the form described in the Funds' prospectus.
There is no sales charge. The minimum initial investment in any Fund is $25,000
($10,000 for IRAs) and the minimum subsequent investment is $1,000 but such
minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. The Funds may waive the minimum for purchases by
trustees, directors, officers or employees of the Funds or the Adviser and its
affiliates. An investor wishing to open an account should use the account
application form available from the Funds and choose one of the methods of
purchase described in the Funds' prospectus. Since each Fund will be investing
in instruments that normally require immediate payment in Federal Funds (monies
credited to a bank's account with its regional Federal Reserve Bank), each Fund
has adopted procedures for the convenience of its shareholders and to ensure
that each Fund receives investable funds. An order for the purchase of shares
that is accompanied by a check drawn on a foreign bank (other than a check drawn
on a Canadian bank in U.S. Dollars) will not be considered in proper form and
will not be processed unless and until the Fund determines that it has received
payment of the proceeds of the check. The time required for such a determination
will vary and cannot be determined in advance.
Orders for purchase of shares of a Fund received by wire transfer in the form of
Federal Funds will be effected at the next determined net asset value. Shares
purchased by wire will receive (i) that day's dividend if effected at or prior
to the 1:00 p.m. Central time net asset value determination for the Money Fund
and the Government Money Fund and at or prior to the 11:00 a.m. Central time net
asset value determination for the Muni Money Fund otherwise the dividend for the
next business day if effected at the 3:00 p.m. Central time net asset value
determination.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to Zurich
YieldWise Funds: United Missouri Bank of Kansas City, N.A. (ABA #1010-0069-5)
Zurich YieldWise Money Fund:98-7083-881-8, or Zurich Yieldwise Government Money
Fund: 98-7096-453-8 or, Zurich YieldWise Municipal Money Fund:98-7096-4535-4
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Redemption of Shares.
Upon receipt by the Shareholder Service Agent of a request for redemption in
proper form, shares will be redeemed by a Fund at the applicable net asset value
as described in the Funds' prospectus. If processed at 3:00 p.m. Central time,
the shareholders will receive that day's dividend. A shareholder may elect to
use either the regular or expedited redemption procedures. Shareholders who
redeem shares of a Fund will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
The Funds may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for a Fund
to determine the value of its net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of the
Funds' shareholders.
Although it is each Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in part by a distribution of portfolio securities in lieu
of cash, in conformity with the applicable rules of the Securities and Exchange
Commission, taking such securities at the same value used to determine net asset
value, and selecting the securities in such manner as the Board of Trustees may
deem fair and equitable. If such a distribution occurs, shareholders receiving
securities and selling them could receive less than the redemption value of such
securities and in addition could incur certain transaction costs. Such a
redemption would not be as liquid as a redemption entirely in cash. The Trust
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
the Trust is obligated to redeem shares of a Fund solely in cash up to the
lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period
for any one shareholder of record.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
14
<PAGE>
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
Each Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Central time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability. A Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
Each Portfolio currently does not charge the account holder for wire transfers.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above,
or contact the firm through which shares of a Portfolio were purchased. Shares
purchased by check or through certain ACH transactions may not be redeemed by
wire transfer until the shares have been owned for at least 10 days. Account
holders may not use this procedure to redeem shares held in certificate form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("Redemption Checks"). These Redemption Checks may be
made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $1,000
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until a Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Application which is available from each Fund or
firms through which shares were purchased. Redemption Checks should not be used
to close an account since the account normally includes accrued but unpaid
dividends. Each Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of each Fund. In addition, firms may impose minimum balance requirements
in order to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by each
Fund.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Fund reserves the right to terminate or modify this
privilege at any time.
A Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Portfolio shares in excess of the value of a Fund account or in an amount less
than $1,000; when a Redemption Check is presented that would require redemption
of shares that were purchased by check or certain ACH transactions within 10
days; or when "stop payment" of a Redemption Check is requested.
Special Features. Certain firms that offer Shares of a Fund also provide special
redemption features through charge or debit cards and checks that redeem Fund
Shares. Various firms have different charges for their services. Shareholders
should obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
15
<PAGE>
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares of the same Fund unless they elect to
receive cash. Dividends will be reinvested monthly at the net asset value
normally on the 25th of each month if a business day, otherwise on the prior
business day. The Funds will pay shareholders who redeem their entire accounts
all unpaid dividends at the time of redemption not later than the next dividend
payment date.
Each Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of a Fund consists of (a) accrued
interest income plus or minus amortized discount or premium (excluding market
discount for the Muni Money Fund), (b) plus or minus all short-term realized
gains and losses on portfolio assets and (c) minus accrued expenses allocated to
the Fund. Expenses of the Funds are accrued each day. While each Fund's
investments are valued at amortized cost, there will be no unrealized gains or
losses on portfolio securities. However, should the net asset value of a Fund
deviate significantly from market value, the Board of Trustees could decide to
value the portfolio securities at market value and then unrealized gains and
losses would be included in net investment income above.
Net Asset Value. As described in the prospectus, each Fund values its portfolio
instruments at amortized cost, which does not take into account unrealized
capital gains or losses. This involves initially valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
Calculations are made to compare the value of a Fund's investments valued at
amortized cost with market values. Market valuations are obtained by using
actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between the
net asset value per share calculated by reference to market values and a Fund's
$1.00 per share net asset value, or if there were any other deviation that the
Board of Trustees of the Trust believed would result in a material dilution to
shareholders or purchasers, the Board of Trustees would promptly consider what
action, if any, should be initiated. If a Fund's net asset value per share
(computed using market values) declined, or were expected to decline, below
$1.00 (computed using amortized cost), the Board of Trustees of the Trust might
temporarily reduce or suspend dividend payments in an effort to maintain the net
asset value at $1.00 per share. As a result of such reduction or suspension of
dividends or other action by the Board of Trustees, an investor would receive
less income during a given period than if such a reduction or suspension had not
taken place. Such action could result in investors receiving no dividends for
the period during which they held shares and receiving, upon redemption, a price
per share lower than that which they paid. On the other hand, if a Fund's net
asset value per share (computed using market values) were to increase, or were
anticipated to increase, above $1.00 (computed using amortized cost), the Board
of Trustees of the Trust might supplement dividends in an effort to maintain the
net asset value at $1.00 per share.
Taxes. Interest on indebtedness which is incurred to purchase or carry shares of
a mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, the Muni Money
Fund may not be an appropriate investment for persons who are `substantial
users' of facilities financed by industrial development bonds held by the Muni
Money Fund or are `related persons' to such users; such persons should consult
their tax advisers before investing in the Muni Money Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Muni Money
Fund, may be includable in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.
16
<PAGE>
PERFORMANCE
The historical performance calculation for a Fund may be shown in the form of
"yield," "effective yield," "total return," "average annual total return" and,
for the Muni Money Fund only, "tax equivalent yield." These various measures of
performance are described below. The Adviser has agreed to temporarily reduce
its management fees and absorb other operating expenses of the Funds to the
extent specified in the prospectus. See "Investment Adviser." These fee
reductions and expense absorptions will improve the performance results of the
Funds.
Each Fund's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the current yield quotation is based on a seven-day period and is
computed for each Fund as follows. The first calculation is net investment
income per share, which is accrued interest on portfolio securities, plus or
minus amortized discount or premium (excluding market discount for the Muni
Money Fund), less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation.
Each Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)^365/7 - 1.
Average annual total return ("AATR") is found for a specific period by first
taking a hypothetical $1,000 investment ("initial investment") on the first day
of the period and computing the "redeemable value" of that investment at the end
of the period. The redeemable value is then divided by the initial investment,
and this quotient is taken to the Nth root (N representing the number of years
in the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all dividends have been reinvested at
net asset value on the reinvestment dates.
Total return is not calculated according to a standard formula, except when
calculated for the "Financial Highlights" table in the financial statements.
Total return is calculated similarly to AATR but is not annualized. It may be
shown as a percentage or the increased dollar value of the hypothetical
investment over the period.
All performance information shown below is for periods ended July 31, 1999.
<TABLE>
<CAPTION>
Yield Effective Yield AATR AATR Since Total Return Total Return
Fund 7 days 7 days 1 yr. Inception* 1 yr. Since Inception
---- ------ ------ ----- --------- ----- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Money Fund**
Government
Fund**
Muni Money
Fund**
* The Money Fund commenced operations on April 17, 1997. The Government Money
Fund and the Muni Money Fund commenced operations on or about November 30,
1998.
** Without the effect of the fee waiver and expense absorption, these yields
would have been ____% and ___% for the Money Fund, ____% for the Government
Money Fund and _____% for the Muni Money Fund, respectively and the Total
Return and AATR would have been less.
17
<PAGE>
The tax equivalent yield of the Muni Money Fund is computed by dividing that
portion of the Fund's yield (computed as described above) which is tax-exempt by
(one minus the stated federal income tax rate) and adding the result to that
portion, if any, of the yield of the Fund that is not tax-exempt. For additional
information concerning tax-exempt yields, see "Tax-Exempt versus Taxable Yield"
below.
Each Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Fund is held, but also on such matters as Fund
expenses.
As indicated in the prospectus (see "Performance"), the performance of the Funds
may be compared to that of other mutual funds tracked by Lipper Analytical
Services, Inc. ("Lipper"). Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. A Fund's performance also may be compared to other money
market funds reported by IBC Financial Data, Inc.'s Money Fund Report(R) or
Money Market Insight(R), reporting services on money market funds. As reported
by IBC, all investment results represent total return (annualized results for
the period net of management fees and expenses) and one year investment results
are effective annual yields assuming reinvestment of dividends.
As indicated in the prospectus, a Fund's performance also may be compared to
various bank products, including the average rate of bank and thrift institution
money market deposit accounts, interest bearing checking accounts and
certificates of deposit as reported in the BANK RATE MONITOR National Index(TM)
of 100 leading bank and thrift institutions as published by the BANK RATE
MONITOR(TM), N. Palm Beach, Florida 33408. The rates published by the BANK RATE
MONITOR National Index(TM) are averages of the personal account rates offered on
the Wednesday prior to the date of publication by 100 large banks and thrifts in
the top ten Consolidated Standard Metropolitan Statistical Areas.
With respect to money market deposit accounts and interest bearing checking
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the rates
offered for these products take market conditions and competitive product yields
into consideration when set. Bank products represent a taxable alternative
income producing product. Bank and thrift institution deposit accounts may be
insured. Shareholder accounts in the Fund are not insured. Bank passbook savings
accounts compete with money market mutual fund products with respect to certain
liquidity features but may not offer all of the features available from a money
market mutual fund, such as check writing. Bank passbook savings accounts
normally offer a fixed rate of interest while the yield of the Funds fluctuates.
Bank checking accounts normally do not pay interest but compete with money
market mutual fund products with respect to certain liquidity features (e.g.,
the ability to write checks against the account). Bank certificates of deposit
may offer fixed or variable rates for a set term. (Normally, a variety of terms
are available.) Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. In contrast, shares of the Funds are redeemable at the net
asset value (normally, $1.00 per share) next determined after a request is
received.
Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills or notes because such instruments represent alternative income producing
products. Treasury obligations are issued in selected denominations. Rates of
U.S. Treasury obligations are fixed at the time of issuance and payment of
principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Fund's yield will
fluctuate. Also, while each Fund seeks to maintain a net asset value per share
of $1.00, there is no assurance that it will be able to do so.
Tax-Free versus Taxable Yield. You may want to determine which
investment--tax-free or taxable--will provide you with a higher after-tax
return. To determine the taxable equivalent yield, simply divide the
18
<PAGE>
yield from the tax-free investment by the sum of [1 minus your marginal tax
rate]. The tables below are provided for your convenience in making this
calculation for selected tax-free yields and taxable income levels. These yields
are presented for purposes of illustration only and are not representative of
any yield that the Muni Money Fund may generate. Both tables are based upon
current law as to the 1999 federal tax rate schedules.
<TABLE>
<CAPTION>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Under $124,500
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Inco me is Over $124,500*
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $124,500. For a married couple with adjusted
gross income between $186,800 and $309,300 (single between $124,500 and
$247,000), add 0.7% to the above Marginal Federal Tax Rate for each
personal and dependency exemption. The taxable equivalent yield is the
tax-exempt yield divided by: 100% minus the adjusted tax rate. For example,
if the table tax rate is 37.1% and you are married with no dependents, the
adjusted tax rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of
6%, the taxable equivalent yield is about 9.8% (6% / (100% - 38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, the
principal underwriter, or their affiliates, are as follows:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 1530 North State Parkway, Chicago,
Illinois; Chairman, Harnischfeger Industries, Inc. (machinery for the mining and
paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto
Company (agricultural, pharmaceutical and nutritional/food products); formerly,
Vice President, Head of International Operations, FMC Corporation (manufacturer
of machinery and chemicals.
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
THOMAS W. LITTAUER (4/26/55), Trustee and Chairman*, Two International Place,
Boston, Massachusetts; Managing Director, Adviser; formerly, Head of Broker
Dealer Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
20
<PAGE>
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S.
Department of Justice; Director, Bethlehem Steel Corp.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Scudder Kemper.
WILLIAM P. SOMMERS (7/22/33), Trustee, 24717 Harbour View Drive, Ponte Vedra
Beach, Florida; Consultant and Director, SRI Consulting; prior thereto President
and Chief Executive Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information and educational
service provider); prior thereto, Senior Vice President and Director, Booz,
Allen & Hamilton Inc. (management consulting firm); Director, PSI Inc.,
Evergreen Solar, Inc. and Litton Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Adviser.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* Interested persons of the Funds as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated
21
<PAGE>
"interested persons" during the Trust's 1999 fiscal year except that the
information in the last column is for calendar year 1998.
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation Adviser-Managed Funds Paid
Name of Trustee From Trust to Trustees**
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
John W. Ballantine(1)............................
Lewis A. Burnham.................................
Donald L. Dunaway*...............................
Robert B. Hoffman................................
Donald R. Jones..................................
Shirley D. Peterson..............................
William P. Sommers...............................
(1) Appointed to the Board on May 18, 1999.
* Includes deferred fees pursuant to deferred compensation agreements with
the Trust. Deferred amounts accrue interest monthly at a rate equal to the
yield of Zurich Money Funds--Zurich Money Market Fund. As of July 31, 1999,
this amount totaled $____.
** Includes compensation for service during 1998 on the Boards of 26 Kemper
Funds with 43 fund portfolios. Each trustee currently serves as a trustee
of 26 Kemper Funds and 50 fund portfolios.
As of October 31, 1999, the trustees and officers as a group owned less than 1%
of the then outstanding shares of each Fund and no person owned of record more
than 5% of the outstanding shares of any Fund.
SPECIAL FEATURES
Automatic Withdrawal Plan. If you own $10,000 or more of a Fund's shares you may
provide for the payment from your account of any requested dollar amount to be
paid to you or your designated payee monthly, quarterly, semi-annually or
annually. Dividend distributions will be automatically reinvested at net asset
value. A sufficient number of full and fractional shares will be redeemed to
make the designated payment. Depending upon the size of the payments requested,
redemptions for the purpose of making such payments may reduce or even exhaust
the account. Additionally, there is a $1/month small account fee for account
balances under $10,000. The program may be amended on thirty days notice by the
Fund and may be terminated at any time by the shareholder or the Funds. The
minimum automatic withdrawal amount is $1,000 and the shareholder will be
charged a $5.00 fee for each withdrawal.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and can establish your account in any of
the following types of retirement plans:
o Traditional, Roth and Education Individual Retirement Accounts (IRAs) with
IFTC as custodian. This includes Savings Incentive Match Plan for Employees
of Small Employers ("SIMPLE"), IRA accounts and Simplified Employee Pension
Plan (SEP) IRA accounts and prototype documents.
o 403(b) Custodial Accounts also with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum contribution per participant is the lesser of 25% of
compensation or $30,000.
Brochures describing the above plans, as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. The brochures for plans with IFTC as custodian describe the
current fees payable to IFTC for its services as custodian. Investors should
consult with their own tax advisers before establishing a retirement plan.
22
<PAGE>
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees, if a meeting is called for
such purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust or a Fund or a class to the extent and as provided in the
Declaration of Trust; (d) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust, supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision thereof); and (e) such additional matters as may be required by law,
the Declaration of Trust, the By-laws of the Trust, or any registration of the
Trust with the Securities and Exchange Commission or any state, or as the
trustees may consider necessary or desirable. The shareholders also would vote
upon changes in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of his
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust or any Fund or class by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by the Adviser remote and
not material since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
23
<PAGE>
MASTER/FEEDER STRUCTURE
The Board of Trustees has the discretion to retain the current distribution
arrangement for the Funds while investing in a master fund in a master/feeder
fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
24
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2; Prime-1, Prime-2, Duff-1, Duff-2; And F-1, F-2 Commercial Paper
Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by it
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
The rating Duff-1 is the highest commercial paper rating assigned by Duff &
Phelps Inc. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors that are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.
The ratings F-1 and F-2 are the highest commercial paper ratings assigned by
Fitch Investors Services, Inc. Issues assigned a rating of F-1 are regarded as
having the strongest degree of assurance for timely payment. Issues assigned a
rating of F-2 have a satisfactory degree of assurance for timely payment, but
the margin of safety is not as great as for issues assigned an F-1 rating.
MIG-1 and MIG-2 Municipal Notes
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Loans designated MIG-1 are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both. Loans designated MIG-2 are of high quality, with margins
of protection ample although not so large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
25
<PAGE>
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
DUFF & PHELP'S INC. BOND RATINGS
AAA. Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA. High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
FITCH INVESTORS SERVICE, INC. BOND RATINGS
AAA. Highest credit quality. This rating denotes the lowest degree of credit
risk.
AA. Very high credit quality. This rating denotes a very low expectation of
credit risk.
26
<PAGE>
ZURICH YIELDWISE MONEY FUND
PART C.
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
<S> <C> <C>
(a) (a)(1) Declaration of Trust is incorporated herein by reference to
Registrant's Registration Statement on Form N-1A filed on February
5, 1997.
(a)(2) Amendment to Declaration of Trust is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on February 5, 1997.
(a)(3) Amendment to Declaration of Trust is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on February 5, 1997.
(a)(4) Amendment to Declaration of Trust is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on November 25, 1998.
(b) By-Laws are incorporated herein by reference to Registrant's
Registration Statement on Form N-1A filed on March 28, 1997.
(c) (c)(1) Specimen Share Certificate is incorporated herein by reference to
Registrant's Registration Statement on Form N-1A filed on March 28,
1997.
(c)(2) Establishment and Designation of New Series is incorporated herein
by reference to Registrant's Registration Statement on Form N-1A
filed on November 25, 1998.
(d) (d)(1) Investment Management Agreement for Zurich Yieldwise Money Fund,
dated September 7, 1998, is filed herein.
(d)(2) Investment Management Agreement for Zurich Yieldwise Government
Money Fund, dated November 30, 1998, is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on November 25, 1998.
(d)(3) Investment Management Agreement for Zurich Yieldwise Municipal
Money Fund, dated November 30, 1998, is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on November 25, 1998.
(e) (e)(1) Underwriting Agreement for Zurich Yieldwise Money Fund, dated
December 31, 1997, is incorporated herein by reference to
Registrant's Registration Statement on Form N-1A filed on November
25, 1998.
Part C - Page 1
<PAGE>
(e)(2) Underwriting Agreement for Zurich Yieldwise Government Money Fund,
dated September 7, 1998, is incorporated herein by reference to
Registrant's Registration Statement on Form N-1A filed on November
25, 1998.
(e)(3) Underwriting Agreement for Zurich Yieldwise Municipal Money Fund,
dated September 7, 1998, is incorporated herein by reference to
Registrant's Registration Statement on Form N-1A filed on November
25, 1998.
(f) Inapplicable.
(g) (g)(1) Custodian Agreement for Zurich Yieldwise Municipal Money Fund and
Zurich Yieldwise Government Money Fund is filed herein.
(g)(2) Amendment to Custodian Agreement for Zurich Yieldwise Money Fund
is filed herein.
(h) (h)(1) Agency Agreement is incorporated by reference to Registrant's
Registration Statement on Form N-1A filed on March 28, 1997.
(h)(2) Fund Accounting and Service Agreement on behalf of Zurich Yieldwise
Money Fund, dated December 31, 1997, is incorporated herein by
reference to Registrant's Registration Statement on Form N-1A filed
on November 25, 1998.
(h)(3) Fund Accounting and Service Agreement on behalf of Zurich Yieldwise
Government Money Fund, dated September 7, 1998, is incorporated
herein by reference to Registrant's Registration Statement on Form
N-1A filed on November 25, 1998.
(h)(3) Fund Accounting and Service Agreement on behalf of Zurich Yieldwise
Municipal Money Fund, dated September 7, 1998, is incorporated
herein by reference to Registrant's Registration Statement on Form
N-1A filed on November 25, 1998.
(i) Legal Opinion to be filed by subsequent amendment.
(j) Consent of Independent Auditors to be filed by subsequent amendment.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Inapplicable.
(o) Inapplicable.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Part C - Page 2
<PAGE>
Item 25. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 26. Business or Other Connections of Investment Adviser
Scudder Kemper Investments, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this Item 26.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Part C - Page 3
<PAGE>
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President and Secretary, Scudder Brokerage Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd.+
Cornelia M. Small Director and Vice President, Scudder Kemper Investments, Inc.**
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc.###
President and Director, Scudder, Stevens & Clark Overseas Corporation oo
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc.x
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg,
R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman,
British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
Item 27. Principal Underwriters
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Funds.
Part C - Page 4
<PAGE>
(b) Information on the officers and directors of Kemper Distributors,
Inc., principal underwriter for the Registrant is set forth below. The principal
business address is 222 South Riverside Plaza, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
James L. Greenawalt President None
Thomas W. Littauer Director, Chief Executive Officer Vice President
Kathryn L. Quirk Director, Secretary, Chief Legal Vice President
Officer & Vice President
James J. McGovern Chief Financial Officer & Vice None
President
Linda J. Wondrack Vice President & Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, Investors
Fiduciary Trust Company ("IFTC"), 801 Pennsylvania Avenue, Kansas City, Missouri
64105 or, in the case of records concerning transfer agency functions, at the
offices of IFTC and of the shareholder service agent, Kemper Service Company,
811 Main Street, Kansas City, Missouri 64105.
Item 29. Management Services
Part C - Page 5
<PAGE>
Not applicable.
Item 30. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom
a prospectus is delivered a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
Part C - Page 6
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 22th day
of September, 1999.
Zurich Yieldwise Funds
By /s/ Mark S. Casady
-----------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 22, 1999 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Mark S. Casady September 22, 1999
- --------------------------------------
Mark S. Casady President
/s/ Thomas W. Littauer September 22, 1999
- --------------------------------------
Thomas W. Littauer Chairman and Trustee
/s/ John W. Ballantine September 22, 1999
- --------------------------------------
John W. Ballantine Trustee
/s/ Lewis A. Burnham September 22, 1999
- --------------------------------------
Lewis A. Burnham* Trustee
/s/ Donald L. Dunaway September 22, 1999
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman September 22, 1999
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones September 22, 1999
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson September 22, 1999
- --------------------------------------
Shirley D. Peterson* Trustee
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William P. Sommers September 22, 1999
- --------------------------------------
William P. Sommers* Trustee
/s/ Cornelia M. Small September 22, 1999
- --------------------------------------
Cornelia M. Small Trustee
/s/ John R. Hebble September 22, 1999
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Philip J. Collora
--------------------------------------
Philip J. Collora**
** Philip J. Collora signs this
document pursuant to powers of
attorney contained in
Post-Effective Amendment No. 44 to
the Registration Statement filed
September 30, 1998 and filed
herewith.
2
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L.
Quirk, Caroline Pearson, and Philip J. Collora and each of them, any of whom may
act without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Zurich YieldWise Funds.
Signature Title Date
- ---------- ----- ----
/s/ John W. Ballantine Trustee September 22, 1999
- ---------------------------
<PAGE>
File No. 333-21187
File No. 811-8047
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
PRE-EFFECTIVE AMENDMENT NO. 5
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 6
----
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
ZURICH YIELDWISE FUNDS
<PAGE>
INDEX TO EXHIBITS
(d)(1)
(g)(1)
(g)(2)
Exhibit (d)(1)
INVESTMENT MANAGEMENT AGREEMENT
Zurich YieldWise Money Fund
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Zurich YieldWise Money Fund
Ladies and Gentlemen:
ZURICH YIELDWISE MONEY FUND (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized Zurich YieldWise Money Fund (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the
"ByLaws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue
<PAGE>
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 to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement
2
<PAGE>
which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
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 .50 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 $215,000,000, the fee payable for that month based on the portion
of the average of such values in excess of $215,000,000 shall be 1/12 of .375 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $550,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $550,000,000
shall be 1/12 of .30 of 1 percent of such portion; and provided that, for any
calendar month during which the average of such values exceeds $800,000,000, the
fee payable for that month based on the portion of the average of such values in
excess of $800,000,000 shall be 1/12 of .25 of 1 percent of such portion; over
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
3
<PAGE>
the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or
4
<PAGE>
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 September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Zurich YieldWise
Money Fund" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided
5
<PAGE>
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, or in a manner which would cause the Fund to fail to comply with the
requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
ZURICH YIELDWISE MONEY FUND, on behalf
of Zurich YieldWise Money Fund
By: /s/ Mark Casady
-----------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ S.R. Beckwith
----------------------------------
Treasurer
6
Ex. (g)(1)
CUSTODIAN CONTRACT
between
ZURICH YIELDWISE FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Employment of Custodian and Property to be Held By It........1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States..........2
2.1 Holding Securities..................................2
2.2 Delivery of Securities..............................2
2.3 Registration of Securities..........................4
2.4 Bank Accounts.......................................5
2.5 Availability of Federal Funds.......................5
2.6 Collection of Income................................5
2.7 Payment of Fund Monies..............................6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased................................7
2.9 Appointment of Agents...............................7
2.10 Deposit of Securities in U.S. Securities System.....7
2.11 Fund Assets Held in the Custodian's
Direct Paper System.................................8
2.12 Segregated Account..................................9
2.13 Ownership Certificates for Tax Purposes ...........10
2.14 Proxies............................................10
2.15 Communications Relating to Portfolio Securities....10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside the United States.....................10
3.1 Appointment of Foreign Sub-Custodians..............10
3.2 Assets to be Held..................................11
3.3 Foreign Securities Depositories....................11
3.4 Agreements with Foreign Banking Institutions.......11
3.5 Access of Independent Accountants of the Fund......11
3.6 Reports by Custodian...............................11
3.7 Transactions in Foreign Custody Account............12
3.8 Liability of Foreign Sub-Custodians................12
3.9 Liability of Custodian.............................12
3.10 Reimbursement for Advances.........................13
3.11 Monitoring Responsibilities........................13
3.12 Branches of U.S. Banks.............................13
3.13 Tax Law............................................14
<PAGE>
TABLE OF CONTENTS
-----------------
Page
4. Payments for Sales or Repurchases or Redemptions
of Shares ....................................................14
5. Proper Instructions...........................................14
6. Actions Permitted without Express Authority...................15
7. Evidence of Authority.........................................15
8. Duties of Custodian with Respect to the Books of Account
and Calculations of Net Asset Value and Net Income............16
9. Records.......................................................16
10. Opinion of Fund's Independent Accountants.....................16
11. Reports to Fund by Independent Public Accountants.............16
12. Compensation of Custodian.....................................17
13. Responsibility of Custodian...................................17
14. Effective Period, Termination and Amendment...................18
15. Successor Custodian...........................................19
16. Interpretive and Additional Provisions....................... 19
17. Additional Funds..............................................20
18. Massachusetts Law to Apply....................................20
19. Prior Contracts...............................................20
20. Shareholder Communications Election...........................20
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Zurich YieldWise Funds, a business trust
organized and existing under the laws of The Commonwealth of Massachusetts and
having its principal place of business at 222 South Riverside Plaza, Chicago,
Illinois 60606 (the "Fund"), and State Street Bank and Trust Company, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110 (the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently intends to offer shares in two series,
Zurich YieldWise Government Fund and Zurich YieldWise Municipal Money Fund (such
series together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with Article 17, being herein
referred to as the "Portfolio(s)");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto do hereby agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
of America ("domestic securities") and securities it desires to be held outside
the United States of America ("foreign securities") pursuant to the provisions
of the Fund's declaration of trust (the "Declaration of Trust"). The Fund on
behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and
cash of the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Fund on behalf of the Portfolio and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Article 5 of this Contract), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians located in the
United States of America, including any state or political subdivision thereof
and any territory over which its political sovereignty extends (the "United
States" or "U.S."), but only in accordance with an applicable vote by the board
of trustees of the Fund (the "Board of Trustees") on behalf of the applicable
Portfolio(s) and provided that the Custodian shall
<PAGE>
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property to be held by
it in the United States including all domestic securities owned by such
Portfolio other than (a) securities which are maintained in a "U.S.
Securities System" (as such term is defined in Section 2.10 of this
Contract) and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Custodian's Direct
Paper System pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio and held by the Custodian or
in a U.S. Securities System account of the Custodian, which account
shall not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for its customers ("U.S. Securities
System Account") or in the Custodian's Direct Paper book-entry system
account, which account shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for its
customers ("Direct Paper System Account") only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio, which
may be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
2
<PAGE>
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that, in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's U.S. Securities System Account,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding
3
<PAGE>
escrow or other arrangements in connection with transactions
by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information related to the Portfolio (the
"Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the executive committee thereof
signed by an officer of the Fund and certified by the Fund's
Secretary or Assistant Secretary specifying the securities of
the Portfolio to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize reasonable efforts only to
(i) timely collect income due the Fund on such securities and (ii)
notify the Fund of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account
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<PAGE>
established and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940, as amended. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
banking department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940, as amended (the "Investment Company Act") and that each such bank
or trust company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be approved
by vote of a majority of the Board of Trustees. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States-registered securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to domestic bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Collection of income due each Portfolio on
domestic securities loaned pursuant to the provisions of Section 2.2
(10) shall be the responsibility of the Fund; the Custodian will have
no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data in its possession as may
be necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Portfolio is properly
entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in
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<PAGE>
the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a U.S. Securities System, in
accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management
fees, accounting fees, transfer agent fees, legal fees and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the executive committee thereof signed by an
officer of the Fund and certified by the Fund's Secretary or
an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of
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<PAGE>
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act to
act as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
(the "SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies (a "U.S.
Securities System") in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the Portfolio in
a U.S. Securities System provided that such securities are
represented in a U.S. Securities System Account;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for domestic securities purchased for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio;
the Custodian shall transfer securities sold for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the U.S. Securities System for the account of the Portfolio;
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<PAGE>
4) The Custodian shall provide the Fund on behalf of the
Portfolio(s) with any report obtained by the Custodian on the
U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the U.S. Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
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<PAGE>
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio; and
6) Upon the reasonable request of the Fund, the Custodian shall
provide the Fund with any report on the Direct Paper System's
system of internal accounting controls which had been prepared
as of the time of such request.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
a U.S. Securities System Account by the Custodian pursuant to Section
2.10 hereof (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered Contract
Market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of this clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or
of the executive committee thereof signed by an officer of the Fund and
certified by the Fund's Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall
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<PAGE>
promptly deliver to the Fund on behalf of the Portfolio such proxies,
all proxy soliciting materials and all notices relating to such
securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three (3) business days prior to the date on which
the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
----------------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto (the "foreign sub-custodians"). Upon
receipt of Proper Instructions, together with a certified resolution of
the Board of Trustees, the Custodian and the Fund on behalf of the
Portfolio(s) may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such foreign sub-custodians for
maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
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3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership of the assets of
each Portfolio will be freely transferable without the payment of money
or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Custodian
on behalf of its customers; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of Portfolio securities and other assets and
advices or notifications of any transfers of securities to or from each
custodial account maintained by a foreign banking institution for the
Custodian on behalf of its customers indicating, as to securities
acquired for a Portfolio, the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Portfolio(s) held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
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(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund on behalf of the Portfolio, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Portfolio has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
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3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund (during the month of June) information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the SEC is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the local currency
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
Portfolio assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States. It shall
be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares of that Portfolio issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund on behalf of each Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
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From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. If given pursuant to procedures to be agreed upon by the
Custodian and the Fund, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
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7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per share of the
outstanding Shares of each Portfolio or, if directed in writing to do so by the
Fund on behalf of the Portfolio(s), shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Prospectus and shall advise the Fund and the Transfer Agent daily of the total
amount of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Prospectus.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the SEC. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by each Portfolio and held
by the Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
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10. Opinion of Fund's Independent Accountants
-----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A and N-SAR or other annual reports to the SEC and with respect to any
other SEC requirements.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof
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with respect to sub-custodians located in the United States (except as
specifically provided in Section 3.9) and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by Section 3.12 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from, or caused by, the direction of or authorization by the
Fund to maintain custody or any securities or cash of the Fund in a foreign
country including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement) for the benefit of a
Portfolio, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of a particular Securities System by such Portfolio, as required
by Rule 17f-4 under the Investment Company Act and that the Custodian shall not
with respect to a Portfolio act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of the Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian
or (ii)
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immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Trustees,
the Custodian shall, upon termination, deliver to such successor custodian at
the offices of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System. If no such successor custodian shall
be appointed, the Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees, deliver at the offices of the Custodian
and transfer such securities, funds and other properties in accordance with such
vote. In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act, doing
business in Boston, Massachusetts, or New York, New York, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each applicable Portfolio
and to transfer to an account of such successor custodian all of the securities
of each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both
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parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to Zurich YieldWise Government Money Fund and Zurich YieldWise
Municipal Money Fund with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the assets of the Portfolio(s).
20. Shareholder Communications Election
-----------------------------------
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
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YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of November, 1999.
ATTEST ZURICH YIELDWISE FUNDS
By: /s/ Linda J. Wondrack
- ---------------------- ---------------------------
Name: Name:
Title:
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Marc L. Parsons By: /s/ Ronald E. Logue
- ------------------------- ---------------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Vice Chairman
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Exhibit (g)(2)
ZURICH YIELDWISE FUNDS
222 South Riverside Plaza
Chicago, Illinois 60606
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Re: Zurich YieldWise Funds
----------------------
Gentlemen:
This is to advise you that Zurich YieldWise Funds (the "Fund") has established
one (1) new series of shares to be known as Zurich YieldWise Money Fund. In
accordance with the Additional Funds provision of Section 17 of the Custodian
Contract dated November 30, 1998 between the Fund and State Street Bank and
Trust Company, the Fund hereby requests that you act as Custodian for the new
series under the terms of the contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Fund and retaining one copy for your
records.
Zurich YieldWise Funds,
By: /s/ Mark Casady
---------------------------
Title: President
Agreed to as of April 19, 1999.
State Street Bank and Trust Company,
By: /s/ Ronald E. Logue
--------------------------------
Title: Vice Chairman
